INLAND RETAIL REAL ESTATE TRUST INC, 424B1, 1999-11-04

INLAND RETAIL REAL ESTATE TRUST INC
424B1, 1999-11-04
REAL ESTATE INVESTMENT TRUSTS

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Inland Retail Real Estate Trust, Inc.
Sticker Supplement

This Sticker Supplement No. 7 dated November 2, 1999 to our Prospectus dated
February 11, 1999 summarizes Supplement No. 7 which updates information in the
"Real Property Investments," "Plan of Distribution," "Principal Stockholders,"
"Investment Objectives and Policies," "Distribution Reinvestment and Share
Repurchase Programs," "Summary of the Organizational Documents," "Management,"
"Experts," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Prior Performance of our Affiliates" sections of
our Prospectus and also supplements the financial statements and Prior
Performance Tables (Appendix A) included in the Prospectus. This Sticker
Supplement No. 7 supersedes Sticker Supplements Nos. 4 (which Sticker Supplement
4 superseded Sticker Supplements Nos. 1, 2 and 3), 5 and 6 dated August 2,
September 15 and October 6, 1999, respectively. Any word that is capitalized in
this Sticker Supplement but not defined has the same meaning as in our
Prospectus.

Plan of Distribution
As of October 27, 1999, we had sold 4,380,402 shares resulting in gross
proceeds of $43,804,020. Inland Securities Corporation, an affiliate of our
Advisor, serves as dealer manager of this Offering and is entitled to receive
selling commissions and certain other fees, as discussed further in our
Prospectus. As of October 27, 1999, we have incurred $4,161,382 of commissions
and fees payable to Inland Securities Corporation, which will result in our
receipt of $39,642,638 of net proceeds from the sale of those 4,380,402 shares.
An additional 24,043 shares have been sold pursuant to our Distribution
Reinvestment Program as of October 27, 1999, for which we have received
additional net proceeds of $228,408. We also pay an affiliate of our Advisor
fees to manage and lease our properties. As of September 30, 1999, we have
incurred and paid property management fees of $100,519, of which $92,822 were
retained by an affiliate of our Advisor. Our Advisor may also receive an annual
asset management fee of not more than 1% of our average invested assets, to be
paid quarterly. As of the end of the quarter ending September 30, 1999, we had
not paid or incurred any asset management fees. We may pay expenses associated
with property acquisitions of up to .5% of the money that we raise in this
Offering but in no event will we pay acquisition expenses on any individual
property that exceeds 6% of its purchase price. Acquisition expenses totaling
$1,138,043 are included in the purchase prices we paid for our properties
purchased through October 1999. As of October 27, 1999, we had invested
approximately $28,760,000 in properties that we purchased for an aggregate
purchase price of approximately $109,470,000, and after expenditures for
organization and offering expenses and acquisition expenses and establishing
appropriate reserves, we had net offering proceeds of approximately $8,600,000
available for investment in additional properties.

SUPPLEMENT NO. 7
DATED NOVEMBER 2, 1999
TO THE PROSPECTUS DATED FEBRUARY 11, 1999
OF INLAND RETAIL REAL ESTATE TRUST, INC.

We are providing this Supplement No. 7 to you in order to supplement our
Prospectus. This Supplement updates information in the "Real Property
Investments," "Plan of Distribution," " Principal Stockholders," "Investment
Objectives and Policies," "Distribution Reinvestment and Share Repurchase
Programs," "Summary of the Organizational Documents," "Management," "Experts,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Prior Performance of our Affiliates" sections of our
Prospectus and also supplements the financial statements and Prior Performance
Tables (Appendix A) included in the Prospectus. This Supplement No. 7 expands
upon, supplements, modifies or supersedes certain information contained in the
Prospectus and must be read in conjunction with our Prospectus. This
Supplement No. 7 supersedes Supplements Nos. 4 (which Supplement No. 4
superseded Supplements Nos. 1, 2 and 3 dated May 10, June 10 and July 8, 1999,
respectively), 5 and 6 dated August 2, September 15, and October 6, 1999,
respectively. Any word that is capitalized in this Supplement but not defined
has the same meaning as in our Prospectus.

Real Property Investments

Countryside Shopping Center, Naples, Florida

On October 26, 1999, we purchased a shopping center known as Countryside
Shopping Center, containing 73,965 gross leasable square feet, by acquiring the
interests of Inland Southeast Investment Corporation and Inland Southeast
Acquisitions Corp. (collectively the "Countryside Affiliated Partners"), both
of which are affiliates of our Advisor, in Inland Southeast Countryside Limited
Partnership. The Inland Southeast Countryside Limited Partnership owns the
entire fee simple interest in Countryside Shopping Center.

Countryside Shopping Center is located at the southwest corner of Santa Barbara
Boulevard and Radio Road in Naples, Florida. Naples is approximately 185 miles
south of Tampa and approximately 105 miles west of Miami.

The Inland Southeast Countryside Limited Partnership purchased Countryside
Shopping Center on March 31, 1998 from an unaffiliated third party. The
$8,595,602 we paid for this property represents all of the acquisition costs
and a prorated portion of the financing costs incurred by the Countryside
Affiliated Partners in connection with their acquisition and financing of the
property as of the date of our purchase of their interests. Our acquisition
cost is approximately $116 per square foot of leasable space, which consists of
the following:

* Purchase Price.......................... $ 8,400,000
* Acquisition costs to third parties...... 96,253
* Financing costs to an Inland affiliate.. 45,356
* Financing costs to third parties........ 53,993

Total.......... $ 8,595,602
=============

-1-

We paid a total of $1,860,818 to the Countryside Affiliated Partners since the
outstanding balance of the mortgage loan and certain prorations were credited
against the purchase price. That amount, together with $282,814 provided by
the Countryside Affiliated Partners (for a total of $2,143,632), was paid to
Inland Mortgage Investment Corporation, an Inland affiliated company, as
payment in full of a promissory note evidencing a loan made to the Countryside
Affiliated Partners in connection with their purchase in March 1998 of this
property. The promissory note provided for payment of interest only at the
rate of 10.9% per annum.

In evaluating this property as a potential acquisition, we considered a variety
of factors including location, demographics, tenant mix, price per square foot,
occupancy and the fact that overall rental rates at the shopping center are
comparable to market rates. We believe that the shopping center is located
within a vibrant economic area. We did not consider any other factors
materially relevant to the decision to acquire this property.

We do not anticipate making any significant repairs and improvements to this
property over the next few years. However, if we were to make any repairs or
improvements, the tenants would be obligated to pay a substantial portion of
any monies spent pursuant to the provisions of their respective leases.

We believe that this property is well located, has acceptable roadway access,
attracts high-quality tenants, is well maintained and has been professionally
managed. This property will be subject to competition from similar shopping
centers within its market area, and its economic performance could be affected
by changes in local economic conditions.

We purchased this property subject to a mortgage and a collateral assignment of
rents and leases in favor of SouthTrust Bank, National Association, which
secure a promissory note having a principal balance of $6,720,000 as of the
date of our acquisition of the property. The promissory note requires monthly
payments of interest only at a floating rate of 1.75% over a LIBOR related
index and is due on March 31, 2001. We may prepay the note either in whole or
in part at any time without payment of any premium or penalty, except as
follows. At any one time after we have paid amounts necessary to reduce the
principal balance to 60% or less of the appraised value of the property, we may
elect to change the interest rate to either a floating rate of 1.6% over a
LIBOR related index, or to a fixed rate which would be equal to 1.6% in excess
of the average weekly yield of U.S. Treasury Securities having a term ending on
March 31, 2001. If we elect to have the fixed rate apply to the note, then any
amount prepaid must include a prepayment premium equal to 1% of the amount
prepaid.

Countryside Shopping Center, which was built in 1997, consists of a one-story,
multi-tenant, retail facility, consisting of two separate buildings. As of
October 26, 1999, this property was 98% leased. Tenants leasing more than 10%
of the total square footage currently include Winn-Dixie Stores, Inc., a
supermarket, and Promedco of Southwest Florida, Inc., a medical and health care
center. The leases with these tenants require the tenants to pay base annual
rent on a monthly basis as follows:

-2-

Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Winn-Dixie Stores,
Inc. 51,261 69.30 8.00 05/1997 04/2017
Options (1) 8.00 05/2017 04/2042

Promedco of Southwest
Florida, Inc. 10,725 14.50 18.00 08/1997 07/2002
19.00 08/2002 07/2004
20.00 08/2004 07/2007
Options (2) 20.51 08/2007
to 25.00 07/2017

(1) There are five successive five-year renewal options at the same base rent
per square foot per annum.

(2) There are two successive five-year renewal options. The base rent per
square foot increases by $.50 per square foot each year of the option term.

For federal income tax purposes, our depreciable basis in this property will be
approximately $7,478,000. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.
Real estate taxes for 1998 (the most recent tax year for which information is
generally available) were $67,117. Real estate taxes for 1999 are expected to
be approximately $72,000.

On October 26, 1999, a total of 72,765 square feet was leased to seven tenants
at this property. The following tables set forth certain information with
respect to our leases with those tenants:

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (1) (Sq. Ft.) Ends Options ($) ($)
(1)
------ ---------- ----- ------- ----------- -----------
Winn-Dixie Stores,
Inc. 51,261 04/17 5/5 yr. 410,088 8.00
Promedco of Southwest
Florida, Inc. 10,725 07/07 2/5 yr. 193,050 18.00
Blockbuster
Videos, Inc. 6,000 04/02 3/5 yr. 102,000 17.00
Ettore Mancini 1,200 03/02 1/3 yr. 21,600 18.00
Mailboxes, Etc. 1,200 08/02 1/5 yr. 22,920 19.10
Mama Panetti's Inc. 1,200 12/02 1/5 yr. 22,248 18.54
John Rogers Jr.
Dry Cleaners 1,179 07/02 1/5 yr. 22,920 19.44
Vacant 1,200
Other (2)

-3-

(1) Each tenant also pays its proportionate share of real estate taxes,
insurance and common area maintenance costs. In addition, Winn-Dixie
Stores, Inc. pays, as additional rent, a percentage of gross sales in
excess of a prescribed amount.

(2) Touchless Laser Car Wash occupies an outlot and is connected into the
shopping center's water system. We bill it quarterly for its water usage,
but it does not pay rent or anything else to us since we do not own the
outlot. Coin Star Communications, Inc. provides payphones in the shopping
center. Coin Star Communications, Inc. pays a monthly percentage rent of
30% of its sales.

<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases (1)
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

1999 - - - 790,007 - - -

2000 - - - 797,514 - - -

2001 - - - 800,285 - - -

2002 5 10,779 197,855 708,294 18.36 14.57 24.72

2003 - - - 613,863 - - -

2004 - - - 624,588 - - -

2005 - - - 624,588 - - -

2006 - - - 624,588 - - -

2007 1 10,725 214,500 535,213 20.00 14.50 34.34

2008 - - - 410,088 - - -

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received an appraisal which states that is was prepared in conformity with
the requirements of the Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Standards of Professional Appraisal
Practice of the Appraisal Institute, by an independent appraiser who is a member
of the Appraisal Institute. The appraisal reported a fair market value for
Countryside Shopping Center, as of August 27, 1999, of $8,650,000. Appraisals
are estimates of value and should not be relied on as a measure of true worth or
realizable value.

Bartow Marketplace, Cartersville, Georgia

On September 30, 1999, we purchased an existing shopping center known as Bartow
Marketplace located on approximately 46.66 acres and containing 375,829 gross
leasable square feet. Bartow Marketplace is located on Georgia Highway 20,
near the intersection of US Highway 41 and Georgia Highway 411 in Cartersville,
Georgia. Cartersville is located approximately 35 miles northwest of downtown
Atlanta.

-4-

We purchased Bartow Marketplace from an unaffiliated third party. Our total
acquisition cost, including expenses, was $24,496,029. This amount may
increase by additional costs which have not yet been finally determined. We
expect any additional costs to be immaterial. Our acquisition cost is
approximately $65 per square foot of leasable space, which consists of the
following:

* Purchase Price.......................... $ 24,326,600
* Acquisition costs to third parties...... 84,429
* Financing costs to an Inland affiliate.. 35,000
* Financing costs to third parties........ 50,000

Total.......... $ 24,496,029
=============

We purchased this property with the proceeds of a new first mortgage loan in
the amount of $18,375,000 from SouthTrust Bank, National Association, secured
by deeds to secure debt and security agreement and a collateral assignment of
rents and leases. The loan is evidenced by two promissory notes. One
promissory note is in the principal amount of $13,475,000, requires monthly
payments of interest only at a floating rate per annum of 1.5% over a LIBOR
related index, is due on September 30, 2004 and may be prepaid at any time
prior to maturity without penalty. However, the note provides that we may
elect to pay interest at a fixed rate equal to the greater of 7.75% or 2% in
excess of the rate being paid on U.S. Treasury Securities with a maturity date
closest to September 30, 2004 at the time of exercise of the option. If this
election is made, then the note may be prepaid in whole or in part at any time
prior to maturity with a penalty equal to 1% of the amount prepaid. The other
note is in the principal amount of $4,900,000, requires monthly payments of
interest only at a floating rate per annum of 1.5% over a LIBOR related index,
is due on September 30, 2000 and may be prepaid at any time prior to maturity
without penalty. We or any of our affiliates are required to maintain deposit
accounts with SouthTrust Bank, National Association beginning January 1, 2000;
and by June 30, 2000, we must maintain an average collected demand deposit
balance or average overnight repurchase agreement balances of not less than
$2,000,000. In the event this condition is not met, the applicable interest
rate on both notes shall be increased by .0025% from the time this occurs and
throughout the remaining term of the loan.

-5-

Bartow Marketplace, which was built in 1995, consists of a single-story, multi-
tenant retail center. As of September 30, 1999, this property was 100% leased.
Tenants leasing more than 10% of the total square footage currently include
Wal-Mart, a discount department store, and Lowe's Home Centers, a home
furnishing store. The leases with these tenants require the tenants to pay
base annual rent on a monthly basis as follows:

Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------

Wal-Mart 204,170 54.44 5.41 10/1995 10/2015
Options (1) 5.41 11/2015 10/2035

Lowe's Home
Centers 130,497 34.79 6.03 10/1995 10/2015
Option 1 6.63 11/2015 10/2020
Option 2 7.30 11/2020 10/2025
Option 3 8.03 11/2025 10/2030
Option 4 8.83 11/2030 10/2035
Option 5 9.71 11/2035 10/2040
Option 6 10.68 11/2040 10/2045

(1) There are four successive five-year renewal options at the same base rent
per square foot per annum.

For federal income tax purposes, our depreciable basis in this property will be
approximately $18,372,000. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.
Real estate taxes for 1998 (the most recent tax year for which information is
generally available) were $22,410. Wal-Mart and Lowe's are located on
separately assessed parcels for real estate tax purposes and pay their own tax
bills. Real estate taxes for 1999 are expected to be approximately $22,410.

On September 30, 1999, a total of 375,067 square feet was leased to 17 tenants
at this property. The following tables set forth certain information with
respect to our leases with those tenants:

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (1) (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Wal-Mart 204,170 10/15 4/5 yr. 1,104,560 5.41
Lowe's Home Centers 130,497 10/15 6/5 yr. 786,897 6.03
Fashion Bug (2) 12,000 01/06 6/5 yr. 90,000 7.50
The Sport Shoe 4,800 03/01 - 61,200 12.75
Gold & Diamond
Exchange (2) 1,200 08/06 2/5 yr. 16,872 14.06
Dollar Tree 3,000 03/00 - 36,750 12.25
Payless Shoesource 3,000 05/06 2/5 yr. 36,750 12.25
Fast Rental 2,800 11/00 2/5 yr. 33,600 12.00
Hickory Hams 2,800 03/01 2/5 yr. 35,700 12.75

-6-

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Sally Beauty
Supply 1,800 02/01 1/5 yr. 19,800 11.00
Gorin's Cafe &
Grill 1,800 05/01 2/5 yr. 22,950 12.75
V. Nail Salon 1,200 12/00 - 16,068 13.39
Mailboxes, Etc. 1,200 12/00 1/5 yr. 15,600 13.00
Team Personnel
Services 1,200 01/01 - 15,756 13.13
Hair Cuttery 1,200 03/01 - 17,304 14.42
Tele-Dynamics 1,200 11/01 - 16,044 13.37
New Ming Moon 1,200 08/04 1/5 yr. 16,800 14.00

(1) Each tenant also pays its proportionate share of real estate taxes, (except
for Wal-Mart and Lowe's Home Centers, as noted above), insurance and common
area maintenance costs. In addition, Lowe's Home Centers, Fashion Bug, The
Sport Shoe, Gold & Diamond Exchange, Dollar Tree, Payless Shoesource,
Hickory Hams, Sally Beauty Supply, Gorin's Cafe & Grill and Hair Cuttery
pay, as additional rent, a percentage of gross sales in excess of a
prescribed amount.

(2) Gold & Diamond Exchange is expanding into 2,400 square feet of space
currently occupied by Fashion Bug (which will downsize by a like amount of
square footage). Fashion Bug will continue to pay its current rental of
$7,500 per month until November 2, 1999 at which time its rent shall reduce
automatically to $6,000 per month (reflecting the downsizing from 12,000 to
9,600 square feet). Gold & Diamond Exchange shall continue paying its
current rental in the amount of $1,406 per month through the 45th day after
the Landlord's delivery of the expansion space (i.e., 2,400 additional
square feet taken from Fashion Bug) at which time its rental shall
automatically increase to $4,218 per month.

-7-

1999 - - - 2,349,211 - - -

2000 4 8,200 102,663 2,334,979 12.52 2.19 4.37

2001 7 14,800 194,368 2,139,697 13.13 3.95 8.32

2002 - - - 2,080,499 - - -

2003 - - - 2,081,051 - - -

2004 1 1,200 18,912 2,074,747 15.76 .32 .91

2005 - - - 2,062,139 - - -

2006 3 16,200 170,682 1,950,133 10.54 4.32 8.28

2007 - - - 1,891,457 - - -

2008 - - - 1,891,457 - - -

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received an appraisal which states that it was prepared in conformity with
the requirements of the Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Standards of Professional Appraisal
Practice of the Appraisal Institute, by an independent appraiser who is a member
of the Appraisal Institute. The appraisal reported a fair market value for
Bartow Marketplace, as of August 31, 1999, of $24,500,000. Appraisals are
estimates of value and should not be relied on as a measure of true worth or
realizable value.

Bridgewater Marketplace, Orlando, Florida

On September 7, 1999, we purchased an existing shopping center known as
Bridgewater Marketplace located on approximately 7.7 acres and containing
58,050 gross leasable square feet. Bridgewater Marketplace is located at the
southwest corner of the intersection of State Road 50 and Bridgeway Boulevard
in Orlando, Florida.

-8-

We purchased Bridgewater Marketplace from an unaffiliated third party. Our
total acquisition cost, including expenses, was $6,093,855. This amount may
increase by additional costs which have not yet been finally determined. We
expect any additional costs to be immaterial. Our acquisition cost is
approximately $105 per square foot of leasable space, which consists of the
following:

* Purchase Price.......................... $ 5,975,000
* Acquisition costs to third parties...... 54,288
* Financing costs to an Inland affiliate.. 23,900
* Financing costs to third parties........ 40,667

Total.......... $ 6,093,855
===========

We purchased this property subject to a mortgage, security agreement and a
collateral assignment of rents and leases in favor of SouthTrust Bank, National
Association, which secures two promissory notes which were amended at the time
of closing to reflect an aggregate principal indebtedness of $4,780,000. One
promissory note, as amended, is in the principal amount of $2,987,500, requires
monthly payments of interest only at a floating rate per annum of 1.75% over a
LIBOR related index, is due on September 7, 2006 and may be prepaid at any time
prior to maturity without penalty. The other note, as amended, is in the
principal amount of $1,792,500, requires monthly payments of interest only at a
floating rate per annum of 1.75% over a LIBOR related index, is due on
September 7, 2000 and may be prepaid at any time prior to maturity without
penalty.

-9-

Bridgewater Marketplace, which was built in 1998, consists of a single-story,
multi-tenant retail center. As of September 7, 1999, this property was 97%
leased. Approximately 5,300 square feet of the center still needs to be
finished into three smaller tenant spaces, and the funds required for this
tenant finish work have been escrowed by the seller. The seller has also
escrowed funds to cover base rent and recoverable expenses for 1,850 square
feet of vacant space for one year, and for leased but unoccupied spaces for the
periods until the tenants for those spaces are required to begin paying rent.
The only tenant leasing more than 10% of the total square footage currently is
Winn-Dixie, a supermarket. The lease with this tenant requires the tenant to
pay base annual rent on a monthly basis as follows:

Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------

Winn-Dixie 44,000 75.80 8.30 12/1998 12/2018
Options (1) 8.30 01/2019 12/2118

(1) There are five successive 20 year renewal options at the same base rent per
square foot per annum.

For federal income tax purposes, our depreciable basis in this property will be
approximately $5,274,000. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.
Real estate taxes for 1998 (the most recent tax year for which information is
generally available) were $13,435. As Bridgewater Marketplace was under
development during 1998, the property is subject to reassessment for real estate
taxes for 1999 and subsequent years. Real estate taxes for 1999 are expected to
be approximately $70,000.

On September 7, 1999, a total of 56,250 square feet was leased to 11 tenants at
this property. The following tables set forth certain information with respect
to our leases with those tenants:

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (1) (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Winn-Dixie 44,000 12/18 5/20 yr. 365,200 8.30
A Slice of New York 2,000 06/04 1/5 yr. 30,000 15.00
Shanghai Restaurant 1,600 06/08 - 24,000 15.00
Subway 1,500 06/04 3/5 yr. 24,000 16.00
Lori's Little Pets 1,450 09/04 - 21,750 15.00
Luxury Hair Salon 1,200 03/03 - 18,000 15.00
Allstate Insurance 900 04/02 2/1 yr. 13,500 15.00
Jackson Hewitt 900 07/02 1/3 yr. 13,500 15.00
Community Cleaners 900 01/04 2/5 yr. 12,600 14.00
Polo Nails 900 03/04 - 13,500 15.00
A Touch of Bronze 900 03/04 1/5 yr. 13,500 15.00
Vacant 1,800

(1) Each tenant also pays its proportionate share of real estate taxes,
insurance and common area maintenance costs. In addition, Winn-Dixie pays,
as additional rent, a percentage of gross sales in excess of a prescribed
amount.

-10-

1999 - - - 498,925 - - -

2000 - - - 552,677 - - -

2001 - - - 556,263 - - -

2002 2 1,800 30,150 548,592 16.75 3.10 5.42

2003 1 1,200 20,400 522,125 17.00 2.07 3.72

2004 6 7,650 127,825 450,871 17.11 10.68 24.48

2005 - - - 390,800 - - -

2006 - - - 391,600 - - -

2007 - - - 392,400 - - -

2008 1 1,600 27,200 378,800 17.00 2.76 6.93

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received an appraisal which states that it was prepared in conformity with
the requirements of the Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Code of Professional Ethics of the
Appraisal Institute, by an independent appraiser who is a member of the
Appraisal Institute. The appraisal reported a fair market value for Bridgewater
Marketplace, as of July 27, 1999, of $6,100,000. Appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

Lake Olympia Square, Ocoee, Florida

On September 1, 1999, we purchased a shopping center known as Lake Olympia
Square, containing 85,776 gross leasable square feet and an adjacent outparcel,
by acquiring the interests of Inland Southeast Investment Corporation and Inland
Southeast Acquisitions Corp. (collectively the "Lake Olympia Affiliated
Partners"), both of which are affiliates of our Advisor, in Inland Southeast
Lake Olympia Limited Partnership and Inland Southeast Lake Olympia Outparcel
Limited Partnership (collectively the "Lake Olympia Property Partnerships").
The Lake Olympia Property Partnerships own the entire fee simple interest in
Lake Olympia Square.

-11-

Lake Olympia Square is located at the southwest intersection of Silver Star Road
and Clarke Road in Ocoee, Florida. Ocoee is located three miles west of the
Orlando, Florida city limits.

The Lake Olympia Property Partnerships purchased Lake Olympia Square on June 24,
1998 from an unaffiliated third party. The $9,873,627 we paid for this property
represents the total costs incurred by the Lake Olympia Affiliated Partners in
connection with their acquisition and financing of the property as of the date
of our purchase of their interests. Such costs consist of the following:

* Purchase Price.......................... $ 9,732,045
* Acquisition costs to third parties...... 80,106
* Financing costs to an Inland affiliate.. 46,281
* Financing costs to third parties........ 15,195

Total.......... $ 9,873,627
===========

Our acquisition cost is approximately $115 per square foot of leasable space.
We paid a total of $3,967,847 to the Lake Olympia Affiliated Partners, since the
outstanding balance of the mortgage loan and certain prorations were credited
against the purchase price. That amount, together with $205,310 provided by the
Lake Olympia Affiliated Partners (for a total of $4,173,157), was paid to Inland
Mortgage Investment Corporation, an Inland affiliated company, as payment in
full of two promissory notes evidencing loans made to the Lake Olympia
Affiliated Partners in connection with their purchase in June 1998 of this
property. The promissory notes provided for payments of interest only at the
rate of 10.9% per annum.

We do not anticipate making any significant repairs and improvements to this
property over the next few years. However, if we were to make any repairs or
improvements, the tenants would be obligated to pay a substantial portion of any
monies spent pursuant to the provisions of their respective leases.

We purchased this property subject to a mortgage and a collateral assignment of
rents and leases in favor of LaSalle National Bank, as trustee for Morgan
Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series
1997-WF1 (the "Bank") , securing an indebtedness evidenced by a promissory note
(the "Note") held by the Bank in the original principal amount of $6,200,000.
Interest on the unpaid principal of the Note accrues at the rate of 8.25% per
annum. Principal and interest are payable on the first day of each month, in
installments of $50,978. The principal balance of the Note was $5,932,943 as of
the date of closing, and, provided all payments are made as scheduled, the
balance due on the maturity date, which is on April 1, 2007, will be $4,669,258.
At any time after the third anniversary of the date of the Note (i.e., March 26,
2000), and upon giving the holder of the Note 30 days prior written notice, the
principal amount and accrued interest may be prepaid with a prepayment penalty
which varies but in no event is less then 1% of the amount of principal prepaid.

-12-

Lake Olympia Square, which was built in 1995, consists of a one-story, multi-
tenant retail building. As of September 1, 1999, this property was 96% leased.
Tenants leasing more than 10% of the total square footage currently include
Winn-Dixie. a supermarket, and Tutor Time Child Care Systems, a childcare
facility. The leases with these tenants require the tenants to pay base annual
rent on a monthly basis as follows:

Tutor Time Child
Care Systems 10,000 11.66 12.00 Currently 01/31/07
Options (2) 12.00+ 02/01/07 01/31/17

(1) There are five successive five-year renewal options at the same base rent
per square foot per annum.

(2) There are two successive five-year renewal options with the base rent per
square foot per annum increasing according to increases in the CPI.

For federal income tax purposes, our depreciable basis in this property will be
approximately $7,306,484. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.
Real estate taxes for 1998 (the most recent tax year for which information is
generally available) were $126,363.

On September 1, 1999, a total of 82,450 square feet was leased to 18 tenants at
Lake Olympia Square. The following tables set forth certain information with
respect to our leases with those tenants:

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (1) (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------

Winn-Dixie 44,000 06/15 5/5 yr. 297,000 6.75
Tutor Time Child
Care Systems 10,000 01/07 2/5 yr. 120,000 12.00
Froggers Restaurant 6,000 10/06 2/5 yr. 115,175 19.20
Movie Gallery 5,000 08/01 2/3 yr. 61,250 12.25
Countryside Home
Loans 2,290 10/01 2/3 yr. 28,000 12.23
Lake Olympia Dental 1,800 09/00 1/5 yr. 33,738 18.74
Beneficial Finance 1,600 12/05 1/5 yr. 22,400 14.00
First Choice
Restaurant 1,500 09/05 2/5 yr. 23,500 15.67
Sylvan Learning
Center 1,260 10/06 1/5 yr. 19,734 15.66

-13-

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Harrison
Chiropractic 1,200 01/02 2/5 yr. 18,540 15.45
Mailboxes, Etc. 1,200 09/00 1/5 yr. 17,547 14.62
Subway 1,200 12/03 3/5 yr. 18,000 15.00
First Class
Cleaners 900 09/00 2/5 yr. 14,175 15.75
Hair Cuttery 900 09/01 1/5 yr. 14,700 16.33
H & R Block 900 04/02 2/3 yr. 14,625 16.25
Orlando Sentinel 900 11/99 5/1 yr. 14,127 15.70
The Preppy Puppy 900 10/01 1/3 yr. 13,500 15.00
Tan Bodies & Nails 900 09/00 1/5 yr. 13,160 14.62
Vacant 3,326

1999 1 900 14,127 853,280 15.70 1.05 1.57

2000 4 4,800 80,213 843,163 20.57 4.55 9.40

2001 4 9,090 120,650 767,495 13.27 10.60 14.31

2002 2 2,100 34,050 649,060 16.21 2.45 4.44

2003 1 1,200 19,139 616,705 15.95 1.40 2.95

2004 - - - 598,674 - - -

2005 2 3,100 46,371 598,674 14.96 3.61 7.75

2006 2 7,260 135,304 552,304 18.64 8.46 22.60

2007 1 10,000 120,000 417,000 12.00 11.66 21.73

2008 - - - 297,000 - - -

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received an appraisal which states that it was prepared in conformity with
the requirements of the Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Standards of Professional Appraisal
Practice of the Appraisal Institute, by an independent appraiser who is a member
of the Appraisal Institute. The appraisal reported a fair market value for Lake
Olympia Square, as of August 27, 1999, of $10,225,000. Appraisals are estimates
of value and should not be relied on as a measure of true worth or realizable
value.

-14-

Boynton Commons, Boynton Beach, Florida

On July 27, 1999, we purchased an existing 210,772 gross leasable square foot
shopping center known as Boynton Commons by acquiring the interests of two
companies affiliated with our Advisor, Inland Southeast Investment Corporation
and Inland Southeast Acquisition Corp. (collectively, the "Boynton Commons
Affiliates"), in Inland Boynton Investment, L.L.C. and Inland Boynton
Acquisitions, L.L.C., respectively. Those two limited liability companies are
the general partners of Boynton Beach Development Associates (the "Boynton
Commons Property Partnership"), which is a general partnership that owns the
entire fee simple interest in Boynton Commons.

Boynton Commons is located on the southwest corner of North Congress Avenue and
Old Boynton Road, in Boynton Beach, Palm Beach County, Florida.

Inland Boynton Investment, L.L.C. and Inland Boynton Acquisitions, L.L.C.
purchased the interests of the former general partners of the Boynton Commons
Property Partnership on March 22, 1999 from unaffiliated third parties. The
$30,563,440.84 we paid for this property represents the total costs incurred by
the Boynton Commons Affiliates as of July 27, 1999 in connection with their
purchase, through Inland Boynton Investment, L.L.C and Inland Boynton
Acquisitions, L.L.C., of the general partnership interests in the Boynton
Commons Property Partnership. Such costs consist of the following paid by the
Boynton Commons Affiliates:

* Purchase Price.......................... $30,250,000
* Acquisition costs to third parties...... 67,165
* Financing costs to an Inland affiliate.. 137,767
* Financing costs to third parties........ 108,508

Total.......... $30,563,440
============

Our acquisition cost is approximately $145 per square foot of leasable space.
We paid a total of $6,262,193 to the Boynton Commons Affiliates, since the
outstanding balance of the first mortgage loan and certain prorations were
credited against the purchase price. That entire amount, plus an additional
$346,371 provided by the Boynton Commons Affiliates, was paid to Inland Mortgage
Investment Corporation, an Inland affiliated company, as payment in full of two
promissory notes evidencing loans made to the Boynton Commons Affiliates in
connection with their purchase in March 1999 of this property. The promissory
notes provided for the payment of interest only at the rate of 10.9% per annum.

We do not anticipate making any significant repairs and improvements to this
property over the next few years. However, if we were to make any repairs or
improvements, the tenants would be obligated to pay a substantial portion of any
monies spent pursuant to the provisions of their respective leases.

-15-

We purchased this property subject to a first mortgage and a collateral
assignment of rents and leases in favor of SouthTrust Bank, National
Association, which secures two promissory notes in the aggregate principal
amount of $24,200,000, which we reduced to $22,922,580 concurrently with the
acquisition. One promissory note is in the principal amount of $15,125,000,
requires monthly payments of interest only at the fixed rate of 7.21% per annum
and is due March 19, 2006. The other note which currently has an outstanding
principal balance of $7,797,580 requires monthly payments of interest only at a
floating rate per annum of 1.75% over a LIBOR related index and is due March 19,
2000.

Boynton Commons, which is situated on approximately 23 acres and was built in
1998, consists of two one-story, multi-tenant retail buildings, one single
tenant stand alone building and three outlot buildings. As of July 27, 1999,
this property was 91% leased. Tenants leasing more than 10% of the total square
footage currently include The Sports Authority, a sporting goods store; Bed,
Bath & Beyond, a home furnishings store; Barnes & Noble, a display and retail
sale and/or rental of books, magazines and other media store, and PetSmart, a
pet and pet accessory retail store. The leases with these tenants require the
tenants to pay base annual rent on a monthly basis as follows:

Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
The Sports
Authority 42,972 20.39 8.00 03/98 03/13
Option 1 10.00 04/13 03/18
Option 2 11.00 04/18 03/23
Option 3 12.00 04/23 03/28

Bed, Bath
& Beyond 37,559 17.82 10.50 05/98 04/08
11.50 05/08 01/14
Option 1 12.50 02/14 01/19
Option 2 13.50 02/19 01/24
Option 3 14.50 02/24 01/29

Barnes & Noble 27,000 12.81 15.00 10/97 12/02
16.25 01/03 12/07
17.50 01/08 02/13
Option 1 19.00 03/13 02/18
Option 2 21.00 03/18 02/23
Option 3 23.00 03/23 02/28

-16-

Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Petsmart 22,486 10.67 10.75 06/98 02/04
11.00 03/04 02/09
11.50 03/09 01/14
Option 1 12.25 02/14 01/19
Option 2 13.00 02/19 01/24
Option 3 13.75 02/24 01/29
Option 4 14.50 02/29 01/34
Option 5 15.25 02/34 01/39

For federal income tax purposes, our depreciable basis in this property will be
approximately $21,865,000. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.
Real estate taxes for 1998 (the most recent tax year for which information is
generally available) were $190,685. Real estate taxes for 1999 are expected to
be approximately $400,000. Since this property was under development during
1998, it is subject to reassessment for real estate taxes for 1999 and
subsequent years.

On July 27, 1999, a total of 192,188 square feet was leased to 13 tenants at
this property. The following tables set forth certain information with respect
to the leases with these tenants as of July 27, 1999:

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Barnes & Noble 27,000 02/13 3/5 yr. 405,000 15.00
Petsmart 22,486 01/14 5/5 yr. 241,732 10.75
The Sports
Authority 42,972 03/13 3/5 yr. 343,776 8.00
Bed, Bath & Beyond 37,559 01/14 3/5 yr. 394,370 10.50
Party City 12,000 01/09 2/5 yr. 174,000 14.50
Pak Mail Centers 1,096 11/03 1/3 yr./ 27,400 25.00
1/2 yr.
Father & Son
Restaurants 1,900 12/03 1/5 yr. 47,500 25.00
The Hasty Mortgage
Corporation 1,520 10/03 - 38,000 25.00
Gianna Christine
Salon & Day Spa 3,200 06/04 2/5 yr. 83,200 26.00
The Mens Warehouse 5,000 07/08 2/5 yr. 100,000 20.00
Old Navy 15,400 06/08 1/5 yr. 170,000 11.04
Walgreen Co. 15,930 08/58 - 254,880 16.00
Tony Roma's Famous
For Ribs 6,125 03/08 3/5 yr. 80,000 13.06
Vacant 18,584

(1) Each tenant also pays its proportionate share of real estate taxes,
insurance, management fees and common area maintenance costs. In addition,
Party City, The Hasty Mortgage Corporation, Gianna Christine Salon and Day
Spa, Old Navy, Bed, Bath & Beyond, Walgreens and Tony Roma's Famous For
Ribs pay, as additional rent, a percentage of gross sales in excess of a
prescribed amount.

-17-

1999 - - - 2,322,651 - - -

2000 - - - 2,370,712 - - -

2001 - - - 2,369,745 - - -

2002 - - - 2,378,433 - - -

2003 3 4,516 112,900 2,409,686 25.00 2.14 4.75

2004 1 3,200 83,200 2,276,824 26.00 1.52 3.45

2005 - - - 2,228,152 - - -

2006 - - - 2,228,152 - - -

2007 - - - 2,228,152 - - -

2008 3 26,525 350,000 2,093,542 13.20 12.58 15.71

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received an appraisal which states that it was prepared in conformity with
the requirements of the Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Standards of Professional Appraisal
Practice of the Appraisal Institute, by an independent appraiser who is a
member of the Appraisal Institute. The appraisal reported a fair market value
for Boynton Commons, as of July 17, 1999, of $30,750,000. Appraisals are
estimates of value and should not be relied on as a measure of true worth or
realizable value.

Town Center Commons, Kennesaw, Georgia

On July 1, 1999, we purchased approximately 8 acres improved with 72,108 gross
leasable square feet of an existing 159,758 square foot shopping center known
as Town Center Commons by acquiring the interests of Inland Southeast
Investment Corporation and Inland Southeast Acquisition Corp. (collectively,
the "Town Center Affiliates"), both of which are affiliates of our Advisor, in
Inland Southeast Town Center Limited Partnership (the "Town Center Property
Partnership"). The Town Center Property Partnership owns the entire fee simple
interest in only the 72,108 gross leasable square feet of Town Center Commons
we purchased and has no ownership interest in the other 87,650 square foot
portion of the shopping center. The portion of Town Center Commons in which we
have no ownership interest consists of an 80,000 square foot Galyan's
department store and a 7,650 square foot The Shane Company jewelry store in two
separate buildings. The portion of Town Center Commons that we own will be
referred to in this Supplement as "Our Portion of Town Center Commons" or "this
Property" and the entire shopping center will be referred to as "Town Center
Commons".

-18-

Town Center Commons is located west of I-75 on Ernest Barrett Parkway in
Kennesaw, Georgia, and is approximately 25 miles northwest of downtown Atlanta.

The Town Center Property Partnership purchased Our Portion of Town Center
Commons on April 13, 1999 from an unaffiliated third party. The $9,656,381 we
paid for this Property represents the total costs of the Town Center Affiliates
as of the date of our purchase of their interests. Such costs consists of the
following paid by the Town Center Affiliates:

* Purchase Price.......................... $9,494,000
* Acquisition costs to third parties...... 76,923
* Financing costs to an Inland affiliate.. 47,458
* Financing costs to third parties........ 38,000

Total.......... $9,656,381
===========

Our acquisition cost is approximately $134 per square foot of leasable space.
We paid a total of $1,919,737 to the Town Center Affiliates, since the
outstanding balance of the mortgage loans and certain prorations were credited
against the purchase price. Of such amount, $1,914,757 was paid to Inland
Mortgage Investment Corporation, an Inland affiliated company, as payment in
full of a promissory note evidencing a loan made to the Town Center Affiliates
in connection with the purchase in April 1999 of this Property. The promissory
note provided for the payment of interest only at the rate of 10.9% per annum.

In evaluating this Property as a potential acquisition, we considered a variety
of factors including location, demographics, tenant mix, price per square foot,
occupancy and the fact that overall rental rates at the shopping center are
comparable to market rates. We believe that the shopping center is located
within a vibrant economic area. The Company did not consider any other factors
materially relevant to the decision to acquire this Property.

We do not anticipate making any significant repairs and improvements to this
Property over the next few years. However, if we were to make any repairs or
improvements, the tenants would be obligated to pay a substantial portion of
any monies spent pursuant to the provisions of their respective leases.

We believe that this Property is well located, has acceptable roadway access,
attracts high-quality tenants, is well maintained and has been professionally
managed. This Property will be subject to competition from similar shopping
centers within its market area, and its economic performance could be affected
by changes in local economic conditions.

We purchased this Property subject to two mortgages and a collateral assignment
of rents and leases in favor of SouthTrust Bank, National Association, which
secure promissory notes in the aggregate principal amount of $7,600,000, which
we reduced to $7,258,000 concurrently with the acquisition. One promissory
note is in the principal amount of $4,750,000, requires monthly payments of
interest only at the fixed rate of 7% per annum and is due on April 13, 2006.
Payment of all or part of this note before maturity requires a prepayment
premium initially equal to 2% of the amount being prepaid, but declining to 1
1/2% during the sixth, and 1% in the seventh, loan years. The other note
requires monthly payments of interest only at a floating rate per annum of
1.75% over a LIBOR related index, is due on April 13, 2000 and may be paid at
any time prior to maturity without penalty.

-19-

Our Portion of Town Center Commons, which was built in 1998, consists of two
one-story, multi-tenant retail buildings. As of July 1, 1999, this Property
was 96% leased. Tenants leasing more than 10% of the total square footage
currently include JC Penney Home Store, a home furnishings store, and Baptist
Book Store, a religious retail store. The leases with these tenants require
the tenants to pay base annual rent on a monthly basis as follows:

Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ---------- ---------- ----------- ----------- ---------
JC Penney Home
Store 42,728 59.26 10.50 11/98 10/03
11.50 11/03 10/08
Option 1 12.75 11/08 10/13
Option 2 14.00 11/13 10/18
Option 3 15.25 11/18 10/23

Baptist Book
Store 7,800 10.82 16.00 01/99 07/03
17.25 08/03 09/08
Option 1 18.57 10/08 09/13
Option 2 20.03 10/13 09/18

As of July 1, 1999, Town Center Commons continues to be managed by Trammell Crow
Company.

For federal income tax purposes, our depreciable basis in this Property will be
approximately $6,362,589. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.
Real estate taxes for the year ended 1998 (the most recent tax year for which
information is generally available) were $44,436. Since this property was under
development during 1998, it is subject to reassessment for real estate taxes for
1999 and subsequent years.

On September 30, 1999, a total of 72,108 square feet was leased to 11 tenants at
this Property. The following tables set forth certain information with respect
to our leases at this Community Center with these tenants as of September 30,
1999:

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
JC Penney Home
Store 42,728 10/08 3/5 yr. 448,644 10.50
Baptist Book Store 7,800 09/08 2/5 yr. 124,800 16.00
Original Mattress
Factory 4,600 12/03 1/3 yr. 87,400 19.00
Bikes USA, Inc. 4,800 03/04 2/5 yr. 91,200 19.00
Nu Age Nutrition 1,040 03/04 - 19,760 19.00

-20-

Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Town Center Nails 1,040 03/03 - 19,760 19.00
Powertel 1,300 02/04 - 24,700 19.00
Master Portrait 1,300 03/04 1/5 yr. 24,700 19.00
Accustaff 1,500 02/04 - 28,500 19.00
Gondolier Pizza 3,000 04/04 2/5 yr. 57,000 19.00
Atlantic Billiard
Corp. 3,000 08/04 1/5 yr. 48,000 16.00

(1) Each tenant also pays its proportionate share of real estate taxes,
insurance, common area maintenance costs and management fees. In addition,
Baptist Book Store, Original Mattress Factory, Bikes USA, Inc., Nu Age
Nutrition, Town Center Nails, Powertel and Gondolier Pizza pay, as
additional rent, a percentage of gross sales in excess of a prescribed
amount.

1999 - - - 942,464 - - -

2000 - - - 978,164 - - -

2001 - - - 981,864 - - -

2002 - - - 988,754 - - -

2003 2 5,640 114,580 980,044 20.32 7.82 11.59

2004 7 15,940 304,800 690,222 19.12 22.11 31.10

2005 - - - 625,922 - - -

2006 - - - 625,922 - - -

2007 - - - 625,922 - - -

2008 2 50,528 625,922 510,389 12.39 70.07 100.00

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

We received an appraisal which states that it was prepared in conformity with
the requirements of the Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Code of Professional Ethics and the
Standards of Professional Appraisal Practice of the Appraisal Institute, by an
independent appraiser who is a member of the Appraisal Institute. The
appraisal reported a fair market value for Our Portion of Town Center Commons,
as of June 3, 1999, of $9,750,000. Appraisals are estimates of value and
should not be relied on as a measure of true worth or realizable value.

-21-

Merchants Square Shopping Center, Zephyrhills, Florida

On June 4, 1999, we purchased Merchants Square Shopping Center by acquiring the
interests of the Merchants Square Affiliated Partners, affiliates of our
Advisor, in the Merchants Square Property Partnership. This shopping center is
located at the intersection of U.S. 301 North and Pretty Pond Road in
Zephyrhills, Florida and is described in detail in our Prospectus. We
purchased Merchants Square for $5,742,042, which represents the total costs
incurred by the Merchants Square Affiliated Partners in connection with their
acquisition and financing of this property as of June 4, 1999. This price
represents approximately $77 per square foot of leasable space. A total of
$1,496,500 was paid to the Merchants Square Affiliated Partners, since the
outstanding balance of the first mortgage loan and certain prorations were
credited against the purchase price.

Merchants Square, built in 1993, is comprised of a one-story, multi-user
retail facility. Merchants Square contains 74,849 leasable square feet. As of
June 4, 1999, Merchants Square was 100% leased.

In evaluating Merchants Square as a potential acquisition, we considered a
variety of factors including location, demographics, tenant mix, price per
square foot, occupancy and the fact that overall rental rates are comparable to
market rates. We believe that Merchants Square is located within a vibrant
economic area. We did not consider any other factors materially relevant to
the decision to acquire this property.

We do not anticipate making any significant repairs and improvements to
Merchants Square over the next few years. However, if we were to make any
repairs or improvements, the tenants would be obligated to pay a substantial
portion of any monies spent pursuant to the provisions of their respective
leases.

Two tenants, Kash 'N Karry, a supermarket, and Fashion Bug, a clothing store,
each lease more than 10% of the total gross leasable area of the property. The
leases with these tenants require the tenants to pay base annual rent on a
monthly basis as follows:

Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Kash 'N Karry 47,955 64 6.70 05/28/93 05/27/13
Options (1) 6.70 05/28/13 05/27/43

Fashion Bug 9,040 12 8.00 04/01/93 01/31/04
Options (2) 8.50 02/01/04
to 9.50 01/31/19

(1) There are six successive five-year renewal options at the same base rent per
square foot per annum.

(2) There are three successive five-year renewal options. The base rent per
square foot increases by $.50 per square foot for each option.

For federal income tax purposes, our depreciable basis in Merchants Square will
be approximately $4,750,000. When we calculate depreciation expense, for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.

-22-

On June 4, 1999, a total of 74,849 square feet was leased to 13 tenants at
Merchants Square. The following tables set forth certain information with
respect to our leases with these 13 tenants as of June 4, 1999:

Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Kash N' Karry 47,955 05/13 6/5 yr. 321,299 6.70
Fashion Bug 9,040 01/04 3/5 yr. 72,320 8.00
Dollar Tree 3,320 06/00 4/4 yr. 33,001 9.94
Payless Shoe Source 2,800 03/03 2/5 yr. 26,600 9.50
Beef O'Bradys 2,030 06/02 - 21,912 10.79
L.G. Edwards
Insurance 2,000 05/03 - 23,500 11.75
Sally Beauty Supply 1,600 04/03 - 17,600 11.00
Cuts, Curls & Color 1,200 05/02 - 15,108 12.59
Dr. Baldridge 1,120 07/03 2/5 yr. 14,112 12.60
Postal Zone 1,197 01/01 2/3 yr. 11,970 10.00
Concire Centers 1,009 04/01 - 11,604 11.50
Nabers Jewelers 1,000 04/00 - 12,600 12.60
Bingham Realty 578 04/01 - 5,780 10.00

Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases (1)
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

1999 - - - 587,406 - - -

2000 2 4,320 45,601 562,608 10.56 5.77 7.76

2001 3 2,784 29,354 519,345 10.54 3.72 5.22

2002 2 3,230 37,122 492,733 11.49 4.32 7.15

2003 4 7,520 81,812 424,159 10.88 10.05 16.60

2004 1 9,040 72,320 327,326 8.00 12.08 17.05

2005 - - - 321,299 - - -

2006 - - - 321,299 - - -

2007 - - - 321,299 - - -

2008 - - - 321,299 - - -

(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.

</TABLE>

-23-

We received an appraisal which states that it was prepared in conformity with
the requirements of the Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Standards of Professional Appraisal
Practice of the Appraisal Institute, by an independent appraiser who is a
member of the Appraisal Institute. The appraisal reported a fair market value
for Merchants Square, as of December 10, 1998, of $5,800,000. Appraisals are
estimates of value and should not be relied on as a measure of true worth or
realizable value.

On October 22, 1999, we exercised our one-time right to prepay, without
penalty, a portion of the outstanding principal indebtedness owed to First
Union National Bank and secured by a first mortgage on the Merchants Square
property. We paid $1,100,000 to First Union, reducing the outstanding
principal balance of the indebtedness to $3,167,437 and reducing the interest
rate from 7.5% per annum to 7.25% per annum. Payments of interest only at the
new rate will be due monthly commencing November 1, 1999 through and including
November 1, 2003. Starting on December 1, 2003, payments of principal and
interest, based on a 360 month amortization schedule, will be due monthly with
the entire outstanding balance due on November 1, 2008.

Lake Walden Square, Plant City, Florida

On May 3, 1999, we purchased Lake Walden Square by acquiring the interests of
the Lake Walden Affiliated Partners, affiliates of our Advisor, in the Lake
Walden Property Partnership. This shopping center is located at the northwest
and southwest corners of Alexander Road and State Route 39 in Plant City,
Florida. We purchased Lake Walden Square for approximately $14,539,000, which
represents the total costs incurred by the Lake Walden Affiliated Partners in
connection with their acquisition and financing of this property as of May 3,
1999. In addition, we paid transfer fees of $10,500 to the first mortgage
lender. This price represents approximately $57 per square foot of leasable
space.

Lake Walden Square, built in 1992, is comprised of two one-story multi-tenant
retail facilities. Lake Walden Square contains 256,155 leasable square feet.
As of May 3, 1999, Lake Walden Square was 93% leased.

In evaluating Lake Walden Square as a potential acquisition, we considered a
variety of factors including location, demographics, tenant mix, price per
square foot, occupancy and the fact that overall rental rates are comparable to
market rates. We believe that Lake Walden Square is located within a vibrant
economic area. We did not consider any other factors materially relevant to
the decision to acquire this property. Initially, we had planned on purchasing
the Merchants Square Shopping Center, described in our Prospectus, as our first
acquisition. However, due to restrictions of the first mortgage lender on the
Lake Walden Square property, we had to purchase Lake Walden Square prior to May
4, 1999.

We do not anticipate making any significant repairs and improvements to Lake
Walden Square over the next few years. However, if we were to make any repairs
or improvements, the tenants would be obligated to pay a substantial portion of
any monies spent pursuant to the provisions of their respective leases.

-24-

Three tenants, Kash N' Karry, a supermarket, KMart, a discount department store
and Carmike Cinemas, a movie theatre, each lease more than 10% of the total
gross leasable area of the property. The leases with these tenants require the
tenants to pay base annual rent on a monthly basis as follows:

Base Rent
Per Square
Foot Per
Approx. % of Total Annum Lease Term
Lessee GLA Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
Kash N' Karry 46,300 18 6.75 03/01/92 03/31/12
Options (1) 6.75 04/01/12 03/31/42

KMart 91,266 36 4.20 03/01/82 03/31/17
Options (2) 4.20 04/01/17 05/31/67

Carmike Cinemas 25,899 10 8.31 03/20/92 03/31/07
Option 1 9.31 04/01/07 03/31/12
Option 2 9.81 04/01/12 03/31/17
Option 3 10.31 04/01/17 03/31/22

(1) There are six successive five-year renewal options at the same base
rent per square foot per annum.
(2) There are ten successive five-year renewal options at the same base
rent per square foot per annum.

For federal income tax purposes, our depreciable basis in Lake Walden Square
will be approximately $11,203,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 and 15 years,
respectively.

On May 3, 1999, a total of 237,070 square feet was leased to 29 tenants at Lake
Walden Square. The following tables set forth certain information with respect
to our leases with these 29 tenants as of May 3, 1999:

Approx. Current Rent per Square
GLA Lease Renewal Annual Rent Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Kash N' Karry 46,300 03/12 6/5 yr. 312,525 6.75
KMart 91,266 03/17 10/5 yr. 383,317 4.20
Carmike Cinemas 25,899 03/07 3/5 yr. 215,220 8.31
Bookland 4,050 09/00 - 25,000 6.17
Amscot Insurance 1,400 06/01 1/5 yr. 14,000 10.00
Best Brands Plus 3,084 06/01 - 33,369 10.82
Mailboxes, Etc. 1,120 07/02 1/5 yr. 15,680 14.00
Crescent Jewelers 1,300 08/01 1/5 yr. 14,300 11.00
Queen Nails 1,300 12/99 - 14,066 10.82
Sally Beauty Supply 1,600 02/03 - 16,800 10.50
GTE Phone Mart 2,400 12/00 1/3 yr. 24,600 10.25
Simply Fashions 2,800 05/00 - 24,059 8.59
The Associates 1,600 07/03 1/5 yr. 14,400 9.00
Fantastic Sams 1,200 02/00 1/5 yr. 15,276 12.73
Aamco Transmissions 4,800 01/03 2/5 yr. 34,800 7.25

-25-

Approx. Current Rent per Square
GLA Lease Renewal Annual Rent Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Domino's Pizza 1,295 03/02 2/5 yr. 11,007 8.50
Spec's Music and
Movies 6,000 02/02 1/5 yr. 72,000 12.00
Dr. Longabach 1,600 09/00 1/3 yr. 16,800 10.50
Hao-Hao Chinese
Restaurant 3,120 06/01 - 40,560 13.00
U.S. Army 1,600 07/01 - 12,000 7.50
Sam's Mens Shop 2,950 12/03 - 19,175 6.50
Tampa Tribune 6,277 02/03 2/3 yr. 31,385 5.00
Cici's Pizza 3,605 07/08 1/5 yr. 39,294 10.90
Dollar Tree 6,800 06/03 2/5 yr. 38,091 5.60
Home Choice 4,000 05/03 1/5 yr. 32,000 8.00
Advance America 1,600 11/01 1/3 yr. 16,000 10.00
Woody's Bar-B-Que 3,804 06/02 2/5 yr. 76,742 20.17
Boston Market 3,000 08/04 3/5 yr. 48,000 16.00
Checkers 1,300 07/22 - 42,986 33.07
Vacant 19,085

<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Approx. Base Total Per Square Building GLA Rent
GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring by Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases (1)
December 31, Expiring (Sq. Ft.) ($) ($) ($) ($) ($)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

1999 1 1,300 14,066 1,653,453 10.82 .55 .85

2000 4 12,050 105,735 1,615,661 8.77 5.08 6.39

2001 7 12,104 135,047 1,502,314 11.16 5.11 8.36

2002 4 12,219 179,388 1,323,883 14.68 5.15 11.94

2003 7 28,027 198,802 1,146,316 7.09 11.82 15.02

2004 1 3,000 57,005 1,056,248 19.00 1.27 4.97

2005 - - - 1,018,599 - - -

2006 - - - 1,020,139 - - -

2007 1 25,899 228,170 850,598 8.81 10.92 22.37

2008 1 3,605 43,260 777,164 12.00 1.52 5.09

(1) No assumptions were made regarding the releasing of expired leases. It is the opinion
of our management that the space will be released at market rates, at the time of releasing.

</TABLE>

We received an appraisal which states that it was prepared in conformance with
the requirements of the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal Institute and the Uniform
Standards of Professional Appraisal Practice of the Appraisal Foundation, by an
independent appraiser who is a member in good standing of the American Institute
of Real Estate Appraisers which reported a fair market value for Lake Walden
Square, as of January 15, 1999, of $14,923,000. Appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

-26-

Potential Property Acquisitions

We are currently considering a potential property acquisition. This property
has recently been acquired by affiliates of our Sponsor, with the intention to
keep this property available for acquisition by us until we receive sufficient
net proceeds from this Offering to be able to acquire it. If we purchase this
property from the affiliates, we will pay the affiliates an amount equal to
their acquisition cost. Our decision to acquire this property will generally
depend upon:

* our receipt of an acceptable appraisal and environmental report;

* no material adverse change occurring in the property, the tenants or in
the local economic conditions; and

* our receipt of sufficient net proceeds from this Offering to make such
acquisition.

Other properties may be identified in the future that we acquire before or
instead of this property. We cannot guarantee that we will complete this
proposed acquisition. A short description of the property being considered
follows:

Casselberry Commons Shopping Center, Casselberry, Florida

Casselberry Commons Shopping Center was constructed in 1973 and fully renovated
in 1998. It is a single-story retail center containing 227,664 leasable square
feet. The center has 39 tenant spaces. Tenants occupying more than 10,000
square feet each include Publix, Ross Dress for Less, Dockside Imports, Service
Merchandise Select, Beall's Outlet and Mae's Fabrics. National tenants include
Fashion Bug, Blockbuster Video, LensCrafters, Shoe World, Radio Shack, Sally
Beauty Supply, Dollar Tree, HCA Pharmacy and Burger King. The identified
tenants account for approximately 80% of the property's total leasable square
footage.

As of the date of this Supplement, the acquisition cost of this property to the
affiliates is approximately $17,700,000. This amount may increase by
additional costs incurred by the affiliates which have not yet been finally
determined. We expect any additional costs to be immaterial.

-27-

Plan of Distribution

Update

This offering of shares commenced on February 11, 1999. As of May 3, 1999 we
had accepted subscriptions for the minimum offering of 200,000 shares or
$2,000,000. As of October 27, 1999, we had sold 4,380,402 shares resulting in
gross proceeds of $43,804,020. Inland Securities Corporation, an affiliate of
our Advisor, serves as dealer manager of this Offering and is entitled to
receive selling commissions and certain other fees, as discussed further in our
Prospectus. As of October 27, 1999, we have incurred $4,161,382 of commissions
and fees payable to Inland Securities Corporation, which will result in our
receipt of $39,642,638 of net proceeds from the sale of those 4,380,402 shares.
An additional 24,043 shares have been sold pursuant to our Distribution
Reinvestment Program as of October 27, 1999, for which we have received
additional net proceeds of $228,408. We also pay an affiliate of our Advisor
fees to manage and lease our properties. As of September 30, 1999, we have
incurred and paid property management fees of $100,519, of which $92,822 were
retained by an affiliate of our Advisor. Our Advisor may also receive an
annual asset management fee of not more than 1% of our average invested assets,
to be paid quarterly. As of the end of the quarter ending September 30, 1999,
we had not paid or incurred any asset management fees. We may pay expenses
associated with property acquisitions of up to .5% of the money that we raise
in this Offering but in no event will we pay acquisition expenses on any
individual property that exceeds 6% of its purchase price. Acquisition
expenses totaling $1,138,043 are included in the purchase prices we paid for
our properties purchased through October 1999. As of October 27, 1999, we had
invested approximately $28,760,000 in properties that we purchased for an
aggregate purchase price of approximately $109,470,000, and after expenditures
for organization and offering expenses and acquisition expenses and
establishing appropriate reserves, we had net offering proceeds of
approximately $8,600,000 available for investment in additional properties.

Principal Stockholders

On October 15, 1999, the Macomb County Retirement System, 10 North Main, 12th
Floor, County Building, Mt. Clemens, Michigan 48043, was issued 789,473.68 of
our shares. Such shares represent approximately 18% of our 4,380,402 shares
issued and outstanding as of October 27, 1999.

Investment Objectives and Policies

Distributions

We have decided to begin paying distributions on a monthly basis.
Distributions were paid at the level of $.70 per share per annum through June
1999.

The Distribution level was increased to $.73 per share per annum, effective
July 1, 1999, beginning with the distribution paid on August 7, 1999.

The Distribution level was increased to $.75 per share per annum, effective
November 1, 1999, beginning with the distribution to be paid on December 7,
1999.

-28-

Distribution Reinvestment and Share Repurchase Programs

Share Repurchase Program

The Share Repurchase Program ("SRP") may, subject to certain restrictions,
provide eligible Stockholders with limited, interim liquidity by enabling them
to sell shares back to us. The prices at which shares may be sold back to us
are as follows:

* During the Offering period at $9.05 per share (a reduction of $0.95 from
the $10 Offering price per share, reflecting the elimination of selling
commissions and the Marketing Contribution and Due Diligence Expense
Allowance);

* During the 12 months following the end of the Offering period at $9.25
per share;

* During the next 12 months at $9.50 per share;

* During the next 12 months at $9.75 per share; and

* Thereafter, at the greater of: (i) $10 per share; or (ii) a price equal
to 10 times our "funds available for distribution" per weighted average
share outstanding for the prior calendar year.

A Stockholder must have beneficially held the shares for at least one year prior
to offering them for sale to us through the SRP.

We will make repurchases under the SRP, if requested, at least once quarterly on
a first-come, first-served basis. Subject to funds being available, we will
limit the number of shares repurchased during any calendar year to one half of
one percent (0.5%) of the weighted average number of shares outstanding during
the prior calendar year. Funding for the SRP will come exclusively from
proceeds we receive from the sale of shares under our Distribution Reinvestment
Plan and such other operating funds, if any, as the Board, at its sole
discretion, may reserve for this purpose.

The Board, at its sole discretion, may choose to terminate the SRP after the end
of the Offering period, or reduce the number of shares purchased under the SRP,
if it determines that the funds allocated to the SRP are needed for other
purposes, such as the acquisition, maintenance or repair of properties, or for
use in making a declared distribution. A determination by the Board to
eliminate or reduce the SRP will require the unanimous affirmative vote of the
Independent Directors.

We cannot guarantee that the funds set aside for the SRP will be sufficient to
accommodate all requests made each year. If no funds are available for the SRP
when repurchase is requested, the Stockholder may: (i) withdraw the request; or
(ii) ask that we honor the request at such time, if any, when funds are
available. Such pending requests will be honored on a first-come, first-served
basis.

There is no requirement that Stockholders sell their shares to us. The SRP is
only intended to provide interim liquidity for Stockholders until a liquidity
event occurs, such as the listing of the shares on a national securities
exchange, inclusion of the shares for quotation on a national market system, or
our merger with a listed company. No assurance can be given that any such
liquidity event will occur.

-29-

Shares we purchase under the SRP will be canceled, and will have the status of
authorized but unissued shares. Shares we acquire through the SRP will not be
reissued unless they are first registered with the SEC under the Securities Act
and under appropriate state securities laws or otherwise issued in compliance
with such laws.

If we terminate, reduce or otherwise change the SRP, we will send a letter to
Stockholders informing them of the change, and disclose the changes in quarterly
reports filed with the SEC on Form 10-Q.

Summary of the Organizational Documents

Stockholders' Meetings

We have entered into an agreement with Inland Real Estate Investment
Corporation, our Sponsor, which provides that Inland Real Estate Investment
Corporation will pay for the reasonably estimated cost to prepare and mail a
notice to our stockholders of any special meeting of stockholders requested by
the stockholders. This will obviate the necessity of our stockholders or us
paying for such cost.

Management

Directors and Executive Officers of the Company

Due to unexpected requirements on her time, Kelly Tucek has resigned as our
Treasurer and Chief Financial Officer. Barry Lazarus, our President, Chief
Operating Officer and Affiliated Director, has been elected by our Board of
Directors to the additional offices of Treasurer and Chief Financial Officer.

-30-

Experts

The Historical Summary of Gross Income and Direct Operating Expenses of Lake
Walden Square for the year ended December 31, 1998, the Historical Summary of
Gross Income and Direct Operating Expenses of Merchants Square Shopping Center
for the year ended December 31, 1998, the Historical Summary of Gross Income
and Direct Operating Expenses of Town Center Commons for the period from
January 1, 1999 through March 31, 1999, the Historical Summary of Gross Income
and Direct Operating Expenses of Boynton Commons Shopping Center for the year
ended December 31, 1998, the Historical Summary of Gross Income and Direct
Operating Expenses of Lake Olympia Square for the year ended December 31, 1998,
the Historical Summary of Gross Income and Direct Operating Expenses of
Bridgewater Marketplace for the period from January 1, 1999 through June 30,
1999, the Historical Summary of Gross Income and Direct Operating Expenses of
Bartow Marketplace for the year ended December 31, 1998, and the Historical
Summary of Gross Income and Direct Operating Expenses of Countryside Shopping
Center for the year ended December 31, 1998, have been included in this
Supplement and in our Post Effective Amendment No. 2 to the Registration
Statement on Form S-11, in reliance upon the reports of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The consolidated
Balance Sheet of Inland Retail Real Estate Trust, Inc. as of September 18,
1998, the Historical Summary of Gross Income and Direct Operating Expenses of
Lake Walden Square for the year ended December 31, 1997, the Historical Summary
of Gross Income and Direct Operating Expenses of Lake Olympia Square for the
year ended December 31, 1997, and the Historical Summary of Gross Income and
Direct Operating Expenses of Merchants Square Shopping Center for the year
ended December 31, 1997 have been incorporated by reference herein, in reliance
upon the reports of KPMG LLP, independent certified public accountants, and
upon the authority of said firm as experts in accounting and auditing.

-31-

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
within the meaning of the Federal Private Securities Litigation Reform Act of
1995. These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements. These
factors include, among other things, limitations on the area in which we may
acquire properties; risks associated with borrowings secured by properties;
competition for tenants and customers; federal, state or local regulations;
adverse changes in general economic or local conditions; competition for
property acquisitions with third parties that have greater financial resources
than we do; inability of lessees to meet financial obligations; uninsured
losses; risks of failing to qualify as a REIT; and potential conflicts of
interest between ourselves and our affiliates including the Advisor.

Liquidity and Capital Resources

We were formed on September 3, 1998 to acquire and manage a diversified
portfolio of real estate, primarily multi-tenant shopping centers. It is
anticipated that we will initially focus on acquiring properties in the
southeastern states, primarily Florida, Georgia, North Carolina and South
Carolina. We may also acquire single-user retail properties in locations
throughout the United States, certain of which may be sale and leaseback
transactions, net leased to creditworthy tenants. On February 11, 1999, we
commenced the Offering of 50,000,000 shares at a price of $10 per share and of
4,000,000 shares at a price of $9.50 per share which may be distributed
pursuant to our Distribution Reinvestment Program ("the DRP"). Inland Retail
Real Estate Advisory Services, Inc. is our Advisor. As of June 30, 1999,
subscriptions for a total of 1,397,818 shares had been received from the
public, which includes 20,000 shares issued to the Advisor. In addition, we
distributed 2,153 shares pursuant to our DRP. The Advisor has guaranteed
payment of all public offering expenses (excluding selling commissions, the
marketing contribution and the due diligence expense allowance) in excess of
5.5% of the Gross Offering Proceeds or all organization and offering expenses
(including such selling expenses) which together exceeds 15% of the Gross
Offering Proceeds.

We will provide the following programs to facilitate investment in the shares
and to provide limited liquidity for Stockholders until such time as a market
for the shares develops:

The distribution reinvestment program will allow stockholders who purchase
shares pursuant to the Offering to automatically reinvest distributions by
purchasing additional shares. Such purchases will not be subject to selling
commissions or the marketing contribution and due diligence expense allowance
and will be sold at a price of $9.50 per share.

The Share Repurchase Program will, subject to certain restrictions, provide
existing stockholders with limited, interim liquidity by enabling them to sell
shares back to us. See "Distribution Reinvestment and Share Repurchase
Programs - Share Repurchase Program" in this Supplement for the prices at which
shares may be sold back to us. Shares purchased by us will not be available
for resale.

-32-

Cash Flows From Operating Activities

Net cash provided by operating activities generated $200,170 for the six months
ended June 30, 1999. This is due primarily to the operations on the two
properties acquired during May and June, 1999.

Cash Flows From Investing Activities

Cash flows used in investing activities were utilized primarily for the
purchase of two properties.

Cash Flows From Financing Activities

For the six months ended June 30, 1999, we generated $12,897,642 of cash flows
from financing activities. This was due primarily to proceeds raised of
$13,778,175 from the sale of shares for the six months ended June 30, 1999. Our
cash flow from financing activities was partially offset by an increase in the
cash used to pay costs associated with selling shares for the six months ended
June 30, 1999. For the six months ended June 30, 1999, we paid offering costs
totaling $800,618. In addition, we also paid distributions for the six months
ended June 30, 1999 of $52,855 and paid loan fees of $10,499 for the six months
ended June 30, 1999.

The Advisor has guaranteed payment of all public offering expenses (excluding
selling commissions, the marketing contribution and the due diligence expense
allowance fee) in excess of 5.5% of the Gross Offering Proceeds or all
organization and offering expenses (including such selling expenses) which
together exceed 15% of the Gross Offering Proceeds. As of June 30, 1999,
organizational and offering costs totaling $3,285,726 did exceed these
limitations, however we anticipate that these costs will not exceed these
limitations upon completion of the Offering. Any excess amounts at the
completion of the Offering will be reimbursed by the Advisor.

Results of Operations

Through June 30, 1999, the Advisor had advanced a total of approximately
$2,385,000 to us for costs incurred with the Offering. As of June 30, 1999,
approximately $1,100,000 remained unpaid.

Rental income, additional rental income, property operating expenses, mortgage
interest and depreciation are all a result of the operations from the two
properties acquired during the quarter ended June 30, 1999.

-33-

Funds from Operations

One of our objectives is to provide cash distributions to stockholders from
cash generated by our operations. Cash generated from operations is not
equivalent to our net operating income as determined under GAAP. Due to
certain unique operating characteristics of real estate companies, the National
Association of Real Estate Investment Trusts ("NAREIT"), an industry trade
group, has promulgated a standard known as "Funds from Operations" or "FFO" for
short, which it believes more accurately reflects the operating performance of
a REIT such as ours. As defined by NAREIT, FFO means net income computed in
accordance with GAAP, less extraordinary, unusual and non-recurring items,
excluding gains (or losses) from debt restructuring and sales of properties
plus depreciation and amortization and after adjustments for unconsolidated
partnership and joint ventures in which the REIT holds an interest. We have
adopted the NAREIT definition for computing FFO because management believes
that, subject to the following limitations, FFO provides a basis for comparing
our performance and operations to those of other REITs. The calculation of FFO
may vary from entity to entity since capitalization and expense policies tend
to vary from entity to entity. Items which are capitalized do not impact FFO,
whereas items that are expensed reduce FFO. Consequently, the presentation of
FFO by us may not be comparable to other similarly titled measures presented by
other REITs. FFO is not intended to be an alternative to "Net Income" as an
indicator of our performance nor to "Cash Flows from Operating Activities" as
determined by GAAP as a measure of our capacity to pay distributions. FFO and
funds available for distribution are calculated as follows:

June 30,
1999

Net loss..................................... $ (6,089)
Depreciation................................. 87,819

Funds from operations (1).................... 81,730

Principal amortization of debt............... (16,561)
Deferred rent receivable (2)................. (9,645)
Acquisition costs expenses (3)............... 11,443

Funds available for distribution............. $ 66,967
============

(1)FFO does not represent cash generated from operating activities
calculated in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. FFO should not be considered as an alternative
to net income as an indicator of our operating performance or as an alternative
to cash flow as a measure of liquidity.

(2)Certain tenant leases contain provisions providing for stepped rent
increases. GAAP requires us to record rental income for the period of
occupancy using the effective monthly rent, which is the average monthly rent
for the entire period of occupancy during the term of the lease.

-34-

(3)Acquisition costs expenses include costs and expenses relating to the
acquisition of properties. These costs are estimated to be up to .5% of the
Gross Offering Proceeds and are paid from the Proceeds of the Offering.

The following table lists the approximate physical occupancy levels for our
properties as of the end of each quarter during 1999. N/A indicates the
property was not owned by us at the end of the quarter.

1999
at at at at
Properties 03/31 06/30 09/30 12/31

Lake Walden Square N/A 93%
Plant City, FL

Merchants Square N/A 100%
Zephyrhills, FL

Year 2000 Issues

General

Many computer operating systems and software applications were designed such
that the year 1999 is the maximum date that can be processed accurately. In
conducting business, we rely on computers and operating systems provided by
equipment manufacturers, and also on application software developed internally
and, to a limited extent, by outside software vendors. We have assessed our
vulnerability to the so-called "Year-2000 Issue" with respect to our equipment
and computer systems.

State of Readiness

We have identified the following three areas for "Year-2000" compliance efforts:

Business Computer Systems: The majority of our information technology systems
were developed internally and include accounting, lease management, investment
portfolio tracking, and tax return preparation. We have rights to the source
code for these applications and employ programmers who are knowledgeable
regarding these systems. We have conducted tests of our internal systems to
determine year 2000 compliance, and these tests have demonstrated that we should
not experience any significant adverse effects to our business as a result of
the Year-2000 Issue. We do not anticipate any material costs relating to our
business computer systems regarding year 2000 compliance since our critical
hardware and software systems use four digits to represent the applicable year.
Therefore, we are not currently planning any independent testing of our critical
systems; however, should additional facts present themselves that would make it
prudent for us to have independent testing conducted, we will do so. We do use
various computers, so-called "PC's", that may run software that may not use four
digits to represent the applicable year. We have tested the PC hardware to
determine year 2000 compliance, and the results of these tests have demonstrated
that we should not experience any significant adverse effects to our business as
a result of the Year-2000 Issue. It should be noted that such PC's are
incidental to our critical systems.

-35-

Tenants and Suppliers: We have surveyed proposed tenants, suppliers and other
parties with whom we intend to do a significant amount of business to identify
our potential exposure in the event such parties are not year 2000 compliant.
The survey consists of a questionnaire sent to the significant tenants and
suppliers of the properties initially intended to be acquired by us. We are in
the process of reviewing the responses to the questionnaires. Since this method
involves parties over which we have no control, such as public utility
companies, it is difficult, at best, to judge the status of the outside
companies' year 2000 compliance. We will be working closely with all suppliers
of goods and services in an effort to minimize the impact of the failure of any
supplier to become year 2000 compliant by December 31, 1999. Currently, we are
not aware of any material impact on our business, operations or financial
condition due to year 2000 non-compliance by any one of our proposed tenants or
suppliers.

Non-Information Technology Systems: In the operation of our properties, we will
acquire equipment with embedded technology such as microcontrollers, which
operate heating, ventilation, and air conditioning systems, fire alarms,
security systems, telephones and other equipment utilizing time-sensitive
technology. We have evaluated our potential exposure and costs if such non-
information technology systems are not year 2000 compliant and do not expect any
costs or exposure to be material.

Year 2000 Costs

As of June 30, 1999, our Advisor and its affiliates estimate that costs to
achieve year 2000 compliance will not exceed $100,000 for all such affiliates.
However, as of June 30, 1999, our Advisor and its affiliates anticipate that
only approximately 3% of these costs will be directly allocated to and paid by
us. The balance of the year 2000 compliance costs, approximately 97%, will be
paid by the Advisor and its affiliates. Total year 2000 compliance costs
incurred by such affiliates through June 30, 1999 are estimated at approximately
$5,000.

Year 2000 Risks

The most reasonable likely worst case scenario for us with respect to the year
2000 non-compliance of our business computer systems would be the inability to
access information which could result in the failure to issue financial reports.
The most reasonable likely worst case scenario for us with respect to year 2000
non-compliance of our tenants is failure to receive rental income which could
result in us being unable to meet cash requirements for monthly expenses and
distributions. However, we are permitted to borrow funds to meet distribution
requirements. The most reasonable likely worst case scenario for us with
respect to the year 2000 non-compliance of our suppliers is the failure to
supply necessary utilities; including, but not limited to heating, as a result
of a malfunctioning of non-information technology systems in some of our
properties.

Contingency Plan

We have formulated a contingency plan which will includes printing copies of all
computer records during December 1999 to ensure that such records are not lost
in the event that our internal computer systems become inoperative due to year
2000 non-compliance.

-36-

Prior Performance of Our Affiliates

Prior Investment Programs

During the 10-year period ending September 30, 1999, TIGI Affiliated
Companies have sponsored one REIT, six public real estate equity programs, one
private real estate equity program, and nine private placement mortgage and
note programs, which have in the aggregate raised in excess of $709,300,000
from approximately 33,796 investors. During that 10-year period, those public
real estate equity programs raised $145,075,520 from 13,880 investors; the
private real estate equity program raised $2,275,000 from 85 investors; the
private placement mortgage and note programs raised $22,641,000 from 545
investors; and IREC, a REIT sponsored by IREIC (one of the TIGI Affiliated
Companies), has raised $567,339,000 which includes amounts raised through the
Distribution Reinvestment Program, net of shares repurchased through its share
repurchase program, from approximately 20,000 investors. IREC has investment
objectives and policies similar to us and has invested principally in
Neighborhood Centers, except however, IREC invests principally in a
geographical area (a radius of 400 miles from Oak Brook, Illinois) different
than most of our Primary Geographical Area of Investment. See "--Publicly
Registered Real Estate Investment Trust--Inland Real Estate Corporation" below
in this Section. Our investment objectives and policies are similar to those of
several of the prior investment programs sponsored by TIGI Affiliated Companies
which have owned and operated retail properties. However, the vast majority of
the other investment programs sponsored by TIGI Affiliated Companies were
dissimilar from ours in that the programs owned apartment properties, pre-
development land and whole or partial interests in mortgage loans.

The information in this Section and in the Prior Performance Tables
included in this Supplement as Appendix A shows relevant summary information
concerning real estate programs sponsored by the TIGI Affiliated Companies, the
purpose of which is to provide information on the prior performance of these
programs so that potential investors may evaluate the experience of the TIGI
Affiliated Companies in sponsoring such programs. The following discussion is
intended to briefly summarize the objectives and performance of the prior
programs and to disclose any material adverse business developments sustained
by them.

Summary Information

The table below provides certain summarized information concerning prior
programs sponsored by TIGI Affiliated Companies for the 10-year period ending
September 30, 1999, and is qualified in its entirety by reference to the
foregoing introductory discussion and the detailed information appearing in the
Prior Performance Tables in Appendix A of this Supplement. Investors should not
construe inclusion of the succeeding tables, which cover the 10-year period
ending September 30, 1999, as implying in any manner that we will have results
comparable to those reflected in the tables; because the yield and cash
available and other factors could be substantially different for our
properties. Investors should note that by acquiring our shares, they will not
be acquiring any interests in any prior programs.

-37-

<TABLE>
<CAPTION>
PRIOR PUBLIC PRIOR PRIVATE
PRIOR REAL ESTATE REAL ESTATE EQUITY
REIT EQUITY AND MORTGAGE AND NOTE
PROGRAM PROGRAMS PROGRAMS
-------------- --------------- ---------------------
<S> <C> <C> <C>
Number of programs sponsored......................... 1 6 10
Aggregate amount raised from investors............... $ 567,339,000 $ 145,075,520 $ 24,916,000
Approximate aggregate number of investors............ 20,000 13,880 630
Number of properties purchased....................... 113 77 7
Aggregate cost of properties (1)..................... $ 896,619,000 $ 119,292,939 $ 1,951,930
Number of mortgages/notes............................ 0 7 517
Principal amount of mortgages/notes.................. 0 $ 2,302,064 $ 22,584,000
Percentage of properties (based on cost) that were:
Commercial--
Retail........................................... 85.6% 1.9% 0.0%
Single-user retail net-lease..................... 14.4% 7.1% 0.0%
Nursing homes.................................... 0.0% 6.3% 0.0%
Offices.......................................... 0.0% 0.0% 0.0%
Industrial....................................... 0.0% 0.0% 0.0%
Health clubs..................................... 0.0% 3.8% 0.0%
Mini-storage..................................... 0.0% 0.0% 0.0%
Total commercial............................... 100.0% 19.1% 0.0%
Multi-family residential........................... 0.0% 3.4% 0.0%
Land............................................... 0.0% 77.5% 100.0%

Percentage of properties (based on cost) that were:
Newly constructed (within a year of acquisition)... 15.8% 0.0% 0.0%
Existing........................................... 84.2% 100.0% 0.0%
Construction....................................... 0.0% 0.0% 0.0%
Number of properties sold............................ 0 16 5
31.7%(2)
Number of properties exchanged....................... 0 0 0
Number of mortgages/notes repaid..................... 0 7 274

(1) Includes purchase price and acquisition fees and expenses.

(2) Based on costs of the properties sold and costs capitalized subsequent to acquisition at September 30,
1999, not including portions of land parcels.

</TABLE>

-38-

Of the programs included in the above table, the REIT and two of the six
real estate equity programs have investment objectives similar to ours. Those
programs represent approximately 81% of the aggregate amount raised from
investors, approximately 64% of the aggregate number of investors,
approximately 61% of the properties purchased, and approximately 91% of the
aggregate cost of the properties.

During the three years prior to December 31, 1998, IREC purchased 79
commercial properties. Upon written request, any potential investor may
obtain, without charge, a copy of Table VI filed with the SEC in Part II of our
Registration Statement of which this Supplement is a part, which provides more
detailed information concerning these acquisitions. See "Additional
Information."

Publicly Registered Real Estate Investment Trust

Inland Real Estate Corporation ("IREC")--On October 14, 1994, IREC
commenced an initial public offering (the "Initial Offering") of 5,000,000
shares of common stock at $10 per share. As of July 24, 1996, IREC had received
subscriptions for a total of 5,000,000 shares, thereby completing the Initial
Offering. On July 24, 1996, IREC commenced an offering of an additional
10,000,000 shares of common stock (the "Second Offering") at $10 per share. As
of July 10, 1997, IREC had received subscriptions for a total of 10,000,000
shares, thereby completing the Second Offering. On July 14, 1997, IREC
commenced an offering of an additional 20,000,000 shares of common stock (the
"Third Offering") at $10 per share. As of March 19, 1998, IREC had received
subscriptions for a total of 20,000,000 shares, thereby completing the Third
Offering. On April 7, 1998, IREC commenced an offering of an additional
25,000,000 shares (the "Fourth Offering") at $11 per share. As of December 31,
1998, the Fourth Offering was terminated and IREC had received subscriptions
for a total of 16,642,397 shares from the Fourth Offering. In addition, as of
September 30, 1999, IREC had issued 3,825,312 shares of common stock through
its Distribution Reinvestment Program. As of September 30, 1999, IREC had
repurchased 497,875 shares of common stock through its Share Repurchase
Program. As a result, IREC's gross offering proceeds totaled approximately
$567,339,000 for all of such offerings, including amounts raised through the
Distribution Reinvestment Program, net of shares repurchased through its Share
Repurchase Program, as of September 30, 1999. IREC's objective is to purchase
Neighborhood Centers and Community Centers located within an approximate 400-
mile radius of its headquarters in Oak Brook, Illinois, to provide, at a
minimum, cash distributions on a quarterly basis and to provide a hedge against
inflation through capital appreciation. IREC may also acquire single-user
retail properties throughout the United States. It is IREC's intention,
whenever possible, to acquire properties free and clear of permanent mortgage
indebtedness by paying the entire purchase price of each property in cash or
shares of IREC's stock, although, IREC does, in certain instances, utilize
borrowings to acquire properties. As of September 30, 1999, the properties
owned by IREC were generating sufficient cash flow to cover operating expenses
plus pay a monthly cash distribution of $0.89 per share.

IREC has placed financing totaling approximately $422,300,000 on 101 of
its 113 properties as of September 30, 1999. IREC's 113 properties, a total
investment of approximately $896,619,000 at September 30, 1999, were purchased
with proceeds received from the above described offerings of shares of its
common stock and financings. Through September 30, 1999, cash distributions
have totaled $89,458,600, all of which were from operating cash flow. In the
opinion of IREIC, IREC is substantially meeting its investment objective for
cash flow.

-39-

Publicly Registered Limited Partnerships

Inland Monthly Income Fund II, L.P. ("Monthly Income Fund II")--The
offering period for Monthly Income Fund II began August 4, 1988 and ended
August 4, 1990. The objectives were to invest in improved residential, retail,
industrial and other income-producing properties on an all-cash basis to
provide monthly cash distributions of at least 8% per annum through the first
five years of the partnership and to provide a hedge against inflation through
capital appreciation.

Monthly Income Fund II raised $25,323,569 from more than 2,100 investors
and purchased five properties, a net-leased Wholesale Club retail property in
Indiana, a net-leased health club in Ohio, a net-leased nursing center in
Illinois, a net-leased retail store in Arizona and the Euro-Fresh Market Plaza
(formerly Eagle Plaza), a Neighborhood Center in Illinois, for a total
acquisition cost of $21,224,542. Through September 30, 1999, cash distributions
have been maintained at or above an 8% level and on an accrual basis have
totaled $449.67 per $500 unit or $22,526,636, including $18,131,071 from
operations and an additional $4,395,565 which constitutes the net proceeds from
the sale of the Wholesale Club.

In January 1991, Monthly Income Fund II sold its Wholesale Club property
in Indiana for $4,400,000. Net sales proceeds of $4,395,565 were distributed to
investors in February 1991. The property was purchased by Monthly Income Fund
II in December 1988 for $3,427,278, which included acquisition fees of $275,013
and acquisition costs of $9,265. The gain on sale for financial reporting
purposes was $847,467, which is net of selling expenses and commissions.

In the opinion of IREIC, the partnership is meeting its investment
objective to provide a minimum 8% cash distribution and has, through an early
and profitable sale of the Wholesale Club, achieved capital appreciation on 16%
of the partnership's investment in properties.

Inland Real Estate Growth Fund II, L.P. ("Growth Fund II")--The offering
period for Growth Fund II began September 21, 1987 and ended September 21,
1989. The objectives were to invest in improved residential, retail, industrial
and other income-producing properties on a moderately leveraged basis for
capital appreciation through increases in property values, tax-sheltered
quarterly cash distributions and the build-up of equity through reduction of
mortgage indebtedness.

-40-

Growth Fund II raised $4,038,250 from 336 investors and purchased two
properties, a multi-family residential property in Illinois and a health club
in Ohio. These properties were purchased for a total acquisition cost of
$5,615,826. The health club is currently approximately 60% financed with 40%
equity. Cash distributions to limited partners through September 30, 1999
totaled $1,171.71 per $1,000 unit or $4,654,412, including $983,641 from
operations and $3,670,771 as a return of capital from the sale of the multi-
family residential property in Illinois as 18 individual six-unit apartment
buildings. All 18 of the six-unit buildings were sold to third-party buyers on
an installment basis for from $245,334 to $250,000 per building or a total of
$4,261,895 (net of selling expenses). Growth Fund II's cost basis in the
buildings was $4,112,195. The partnership extended financing to buyers to allow
buyers to make monthly interest payments to Growth Fund II for a period of not
more than seven to ten years, at which time the balance of the purchase price
would be due. However, as of December 31, 1995, 13 of the installment sale
loans had been prepaid in full and five had been substantially pre-paid. In
addition, since 1994 the limited partners have continued to receive double
digit returns on their remaining invested capital. The remaining $80,000 owed
on these loans, which were secured by second mortgages, was paid in full on
June 5, 1998. In the opinion of IREIC, the sale of the multi-family property as
individual six-unit apartment buildings has resulted in modest capital
appreciation within a short holding period. IREIC is evaluating strategies to
sell the partnership's remaining asset (the health club in Ohio) and bring the
partnership to a profitable conclusion.

Inland Land Appreciation Fund, L.P. ("Land Fund I")--The offering period
for Land Fund I began October 12, 1988 and ended October 6, 1989. The
objectives were to invest in pre-development land on an all-cash basis and
realize appreciation of such land upon resale. Land Fund I raised $30,001,000
from 3,425 investors and purchased 25 land parcels, all in suburban counties
surrounding Chicago, Illinois, for an aggregate purchase price of $25,187,069.
As of September 30, 1999, Land Fund I has had multiple sales transactions
involving all or portions of 17 parcels which generated $21,392,063 in net
sales proceeds, including notes receivable of $8,552,935. Land Fund I's cost
basis in the land parcels sold was $16,237,573 resulting in a gain, net of
selling expenses and commissions, of $5,154,490 for financial reporting
purposes. In the opinion of IREIC, the partnership is currently meeting its
investment objectives and has, through completed sales transactions, realized
significant capital appreciation on the assets sold. Cash distributions to
limited partners through September 30, 1999 totaled $9,422,838, all from the
sale of land parcels.

Inland Land Appreciation Fund II, L.P. ("Land Fund II")--The offering
period for Land Fund II began October 25, 1989 and ended October 24, 1991. The
objectives were to invest in pre-development land on an all-cash basis and
realize appreciation of such land upon resale.

-41-

Land Fund II raised $50,476,170 from 5,055 investors and purchased, with
the net proceeds available for investment, 27 land parcels and two buildings,
all in suburban counties surrounding Chicago, Illinois, for an aggregate
purchase price of $41,314,301. As of September 30, 1999, Land Fund II has had
multiple sales transactions involving all or portions of 11 parcels which
generated $21,996,147 in net sales proceeds, including notes receivable of
$2,750,000. Land Fund II's cost basis in the land parcels sold was $13,982,763
resulting in a gain, net of selling expenses and commissions, of $8,013,384 for
financial reporting purposes. In the opinion of IREIC, the partnership is
currently meeting its investment objectives and has, through completed sales
transactions, realized significant capital appreciation on the assets sold.
Cash distributions to limited partners through September 30, 1999 totaled
$11,836,753 including $11,115,753 from sales and $721,000 from operations.

Inland Capital Fund, L.P. ("Land Fund III")--The offering period for Land
Fund III began December 13, 1991 and ended August 23, 1993. The objectives were
to invest in pre-development land on an all-cash basis and realize appreciation
of such land upon resale.

Land Fund III raised $32,399,282 from 2,683 investors and purchased, with
the net proceeds available for investment, 18 land parcels, one of which
included a house and several outbuildings, for an aggregate purchase price of
$25,945,989. As of September 30, 1999, Land Fund III has had multiple sales
transactions involving the house and portions of eight parcels which generated
$10,123,303 in net sales proceeds, including notes receivable of $1,083,366.
Land Fund III's cost basis in the land parcels sold was $6,149,194 resulting in
a gain, net of selling expenses and commissions, of $3,974,109 for financial
reporting purposes. In the opinion of IREIC, the partnership is currently
meeting its investment objectives and has, through completed sales
transactions, realized significant capital appreciation on the assets sold.
Cash distributions to limited partners through September 30, 1999 totaled
$8,831,124, all from the sale of land parcels.

Inland Mortgage Investors Fund III ("Mortgage Fund III")--The offering
period for Mortgage Fund III began January 9, 1989 and ended January 9, 1991.
The objectives were to make or acquire loans secured by mortgages on improved
income-producing properties, to provide investors with quarterly cash
distributions of at least 8% per annum for the first five years of the
partnership and to maximize cash distributions over the life of the partnership
by participating in capital appreciation and increased cash flows of properties
securing the partnership's loans.

Mortgage Fund III raised $2,837,249 from 281 investors and originally
funded seven mortgages totaling $2,302,064 between October 1990 and June 1992.
On December 30, 1998, the partnership terminated. Cash distributions to limited
partners through December 30, 1998 totaled $3,601,917, including $874,292 from
operations, $306,874 in supplemental capital contributions from the general
partner in order to meet the 8% per annum distribution requirement and
$2,420,751 as a return of capital from the repayment of mortgage loans
receivable and prepayment penalties.

-42-

Private Partnerships

Since inception and through September 30, 1999 (including the programs
described below under "--Private Placement Real Estate Equity Program," and "--
Private Placement Mortgage and Note Programs," in this Section), Affiliates of
Inland have sponsored 514 private placement limited partnerships which have
raised more than $524,201,000 from approximately 17,000 investors and invested
in properties for an aggregate price of more than $1 billion in cash and notes.
Of the 522 properties purchased, 93% have been in Illinois. Approximately 90%
of the funds were invested in apartment buildings, 6% in shopping centers, 2%
in office buildings and 2% in other properties. Including sales to Affiliates,
305 partnerships have sold their original property investments. Officers and
employees of IREIC and its Affiliates invested more than $17,000,000 in these
private placement limited partnerships.

From 1990 and through September 30, 1999, investors in Inland's private
partnerships have received total distributions in excess of $207,629,000,
consisting of cash flow from partnership operations, interest earnings, sales
and refinancing proceeds and cash received during the course of property
exchanges. Following a proposal by the former corporate general partner, which
was an Affiliate of TIGI, investors in 301 private partnerships voted in 1990
to make IREIC the corporate general partner for those partnerships.

Beginning in December 1993 and continuing into the first quarter of 1994,
investors in 101 private limited partnerships for which IREIC is the general
partner received letters from IREIC informing them of the possible opportunity
to sell the 66 apartment properties owned by those partnerships to a to-be-
formed REIT (the "Apartment REIT") in which Affiliates of IREIC would receive
stock and cash and the limited partners would receive cash. In connection
therewith, the underwriters for the Apartment REIT subsequently advised IREIC
to sell to a third party its management and general partner's interests in
those remaining limited partnerships not selling their apartment properties to
the Apartment REIT (approximately 30% of the Inland-sponsored limited
partnerships owning apartment buildings). The prospective third-party buyers of
IREIC's interests in the remaining partnerships, however, would make no
assurance to support those partnerships financially. As a result, in a March
1994 letter from IREIC, investors were informed of IREIC's decision not to go
forward with the formation of the Apartment REIT. Following this decision, two
investors filed a complaint in April 1994 in the Circuit Court of Cook County,
Illinois, Chancery Division, purportedly on behalf of a class of other unnamed
investors, alleging that IREIC had breached its fiduciary responsibility to
those investors whose partnerships would have sold apartment properties to the
Apartment REIT. The complaint sought an accounting of information regarding the
Apartment REIT matter, an unspecified amount of damages and the removal of
IREIC as general partner of the partnerships that would have participated in
the sale of properties to the Apartment REIT. In August 1994, the court granted
IREIC's motion to dismiss, finding that plaintiffs lacked standing to bring
this case individually. Plaintiffs were granted leave to file an amended
complaint. Thereafter, in August 1994, six investors filed an amended
complaint, purportedly on behalf of a class of other investors, and
derivatively on behalf of six limited partnerships of which IREIC is the
general partner. The derivative counts sought damages from IREIC for alleged
breach of fiduciary duty and breach of contract, and assert a right to an
accounting. IREIC filed a motion to dismiss in response to the amended
complaint. The suit was dismissed in March 1995 with prejudice. The plaintiffs
filed an appeal in April 1996. After the parties briefed the issue, arguments
were heard by the Appellate Court in February 1997. In September 1997, the
Appellate Court affirmed the trial court decision in favor of IREIC.

-43-

Private Placement Real Estate Equity Program

Wisconsin Capital Land Fund, L.P., an Illinois limited partnership
("Wisconsin Land Fund"), was formed in October 1992. The objectives were to
invest in pre-development land in the Madison, Wisconsin area on an all-cash
basis and realize appreciation of such land upon resale. The offering period
for units in this privately offered partnership began in October 1992 and ended
on June 14, 1993 with the maximum amount, $2,275,000, raised. Seven parcels of
land in the Madison, Wisconsin, area were purchased with the proceeds of the
offering.

Parcel 5, which consists of 63 improved lots in the Village of Mount
Horeb, Wisconsin, has had 44 lot sales since 1995 for total gross sales
proceeds of $1,717,600. Nineteen remaining lots continue to be marketed for
sale. On October 1, 1997, Parcel 6, located in Windsor, Wisconsin, was sold for
$566,597, which amount was 191% of the original parcel capital. Investors
received a $375,000 distribution from this sale.

On March 19, 1998, parcels 3 and 7 were sold for a total of $2,150,000, of
which $1,900,000 was returned in cash to investors. On January 5, 1999,
Parcels #1 and #4 were sold for $1,325,000 and investors received a $1,137,500
cash distribution. To date, investors have received $1,500 for every $1,000
invested.

As of September 30, 1999, the partnership's remaining assets consist of
parcel 1 and the 19 remaining lots in parcel 5.

Intervest Midwest Real Estate Corporation, of which Barry L. Lazarus (our
President, Chief Operating Officer, Treasurer, Chief Financial Officer and an
Affiliated Director) is President, currently provides property zoning,
development and disposition services to this partnership. See "Management-
- -Directors and Executive Officers of the Company."

Private Placement Mortgage And Note Programs

During 1992 and in 1993, IREIC or its Affiliates sponsored nine private
placement securities offerings, including seven mortgage and note programs,
which are described below.

Triple Security Fund, L.P., an Illinois limited partnership, was formed in
May 1992. The principal investment objectives of the partnership were to invest
in participations in third-party mortgage loans owned by an Affiliate of IREIC
and thereby return investors' capital within five years, and to provide a 10%
annual return on invested capital during the life of the partnership. The
return of capital and the 10% annual return were guaranteed by IREIC. The
offering period for interests in this privately offered partnership began in
May 1992 and ended in June 1992 with the maximum amount of $3,000,000 raised.
All of the offering proceeds were used to invest in participations in 14
wraparound mortgage loans and first mortgage loans, secured by condominium,
multi-family residential and commercial properties located in the Chicago
metropolitan area. Limited partners received their first monthly cash
distribution in July 1992. Cash distributions to limited partners through
September 30, 1996 totaled $4,294,216, including $1,226,419 from operations,
subsidy income of $67,797 from IREIC, pursuant to the guarantee for that
program, and $3,000,000 was a return of capital resulting from a payoff by the
Affiliate. This partnership was completed in 1996.

-44-

10% Income Fund, L.P., an Illinois limited partnership offering
investments in promissory notes, was formed in May 1992. The offering period
for the purchase of notes began in May 1992 and ended in June 1992 with the
maximum amount of $2,000,000 raised. Notes with a term of five years and
providing a 10% annual return for the first four years and 10.5% in the fifth
year were issued by the partnership. The return of capital to noteholders and
the specified annual returns were guaranteed by IREIC. 10% Income Fund, L.P.
invested in loans made to an Affiliate of IREIC, which were secured by
collateral assignments of third-party mortgage loans owned by the Affiliate.
Noteholders received their first monthly interest distribution in July 1992.
Cash distributions to noteholders through November 30, 1996 totaled $2,878,335,
of which $861,051 was interest earnings, $17,284 was from working capital
reserves, and $2,000,000 was a return of capital resulting from a payoff by the
Affiliate. This partnership was completed in 1996.

9% Income Junior Mortgage Fund, L.P., an Illinois limited partnership, was
formed in July 1992. The principal investment objectives of the partnership
were to invest in third-party junior mortgage loans owned by an Affiliate of
Inland and thereby return investors' capital within six years, and to provide a
9% annual return on invested capital during the life of the partnership. The
return of capital and the 9% annual return were guaranteed by IREIC. The
offering period for interests in this privately offered partnership began in
July 1992 and ended in September 1992 with the maximum amount of $1,000,000
raised. All of the offering proceeds were used to invest in third-party junior
mortgage loans owned by the Affiliate, secured by condominium, multi-family
residential and commercial properties located in the Chicago metropolitan area.
Limited partners received their first monthly cash distribution in September
1992. Cash distributions through October 30, 1998 totaled $1,512,765.31 of
which $512,765.31 was interest earnings and $1,000,000 was a return of capital.
This partnership was completed in October of 1998.

Inland Employee Appreciation Fund, L.P., an Illinois limited partnership
offering investments in promissory notes, was formed in December 1992. The
offering period for the purchase of Notes began in December 1992 and ended in
February 1993 with the maximum amount of $400,000 raised. Notes were offered
only to Illinois residents who were employees of IREIC and its Affiliates.
Notes with a term of four years and providing 10% annual interest were issued
by the partnership. The return of capital to noteholders and the specified
annual return was guaranteed by IREIC. Inland Employee Appreciation Fund, L.P.
invested in a loan made to an Affiliate of IREIC, which was secured by
collateral assignments of third-party investor loans owned by the Affiliate.
Noteholders received their first monthly interest distribution in March 1993.
Cash distributions through May 31, 1996 totaled $502,198, of which $99,769 was
interest earnings and $2,429 was subsidy income from IREIC, pursuant to the
guarantee for that program. The balance of $400,000 was a return of capital.
This partnership was completed in 1996.

9% Monthly Cash Fund, L.P., an Illinois limited partnership offering
investments in promissory notes to accredited investors, was sponsored by IREIC
in February 1993. The offering period for this program began February 1, 1993
and ended on May 17, 1993, when the maximum amount of $4,000,000 was raised.
Notes maturing August 1, 1999 and providing a 9% annual return were issued by
the partnership. 9% Monthly Cash Fund, L.P. invested in loans made to an
Affiliate of IREIC secured by collateral assignments of third party mortgage
loans owned by the Affiliate. The return of capital to noteholders and the 9%
annual return are guaranteed by IREIC. Cash distributions through September 30,
1999 totaled $6,291,146, of which $2,291,146 was interest earnings and
$4,000,000 was a return of capital. The partnership was completed in August of
1999.

-45-

9% Monthly Cash Fund II, L.P., an Illinois limited partnership offering
investments in promissory notes to accredited investors, with investment
objectives identical to those of 9% Monthly Cash Fund, L.P., was sponsored by
IREIC in April 1993. The offering period for this program began April 5, 1993
and ended July 23, 1993, with the maximum amount of $4,000,000 raised. Notes
maturing February 1, 2000 and providing a 9% annual return were issued by the
partnership. 9% Monthly Cash Fund II, L.P. has invested in a loan made to an
Affiliate of IREIC, secured by collateral assignments of third-party mortgage
loans owned by the Affiliate. The return of capital to noteholders and the 9%
annual return are guaranteed by IREIC. Cash distributions through September 30,
1999 totaled $2,266,833, all of which consisted of interest earnings.

IMC Note Issue #2 1993, offering investments in promissory notes was
sponsored by Inland Mortgage Corporation, an Illinois corporation and an
Affiliate of IREIC ("IMC"), in July 1993. The offering period for this program
began August 25, 1993 and closed on June 13, 1994 after raising $6,800,000.
Notes maturing December 31, 2003, providing for interest at the rate of 8% per
annum and 100% return of principal guaranteed by IREIC, were issued by IMC.
Proceeds of the offering have been used to invest in a mortgage loan secured by
an apartment property in Manchester, New Hampshire, owned by an Affiliate of
IREIC. Investors may also receive additional interest, dependent on the future
sale of the property. An initial distribution to investors of escrow interest,
totaling $13,685, was made in November 1993. Cash distributions through
September 30, 1999 totaled $3,109,552, of which $3,090,096 was interest
earnings and $19,456 was a subsidy from IREIC pursuant to the guarantee for
that program.

Inland Condominium Financing Fund, L.P., an Illinois limited partnership
offering investment in promissory notes, was sponsored by IREIC in December
1993. The offering period for this program began December 15, 1993 and closed
on June 30, 1994. This partnership offered notes in the principal amount of
$1,031,000 maturing July 1, 2001, with interest at the rate of 10% per annum
and 100% return of principal guaranteed by IREIC. The proceeds of the offering
were used to make unsecured loans to limited partnerships which are Affiliates
of IREIC, for the purposes of paying expenses relating to the conversion of
apartment properties owned by those partnerships to condominiums, and
conducting condominium unit sales and other partnership expenses. Cash
distributions began in March 1994. Distributions through November 17, 1997
totaled $1,411,617, of which $380,617 was interest earnings and $1,031,000 was
a return of capital. This partnership was completed in 1997.

Inland Junior Mortgage Fund, L.P., an Illinois limited partnership
offering private placement securities, was sponsored by an Affiliate of IREIC
in August 1988. The offering period for this program ended in May 1989 with
$410,000 raised. All of the proceeds available for investment were used to
purchase 82 second mortgages owned by Inland Mortgage Investment Corporation
("IMIC"), one of the TIGI Affiliated Companies, which were secured
predominantly by condominium units located in the Chicago metropolitan area. In
February 1996, 20 limited partners exercised their put option and IMIC bought
their interests. Cash distributions through January 28, 1997 totaled $541,156,
including $131,156 from interest earnings and $410,000 as a return of capital.
This partnership was completed in 1997.

-46-

Loan Modifications and Work-Outs

Between 1990 and December 31, 1997, 37 Inland-sponsored partnerships
owning 24 properties ceased making debt service payments to unaffiliated
lenders which held the underlying financing on the properties. These actions
were taken with the objective of reducing or restructuring the debt to levels
commensurate with the levels of performance of the operating properties. In the
case of six of these partnerships, namely 14 W. Elm Limited Partnership, 1445
North State Parkway Limited Partnership, 5600 Sheridan Limited Partnership,
5630 Sheridan Limited Partnership, 6030 Sheridan Limited Partnership and Oak
Brook Commons Limited Partnership, the original asset of each of these
partnerships was transferred to a new partnership which was 100% owned by the
old partnership. IREIC believed that the new partnerships were better
positioned to accomplish a work-out with the lender. In connection with the
transfers of three of these properties to the new partnerships discussed above,
the lender holding the first mortgages on these properties filed a separate
proceeding against the general partner and its Affiliates, claiming contractual
interference and other allegations. This complaint was withdrawn as part of a
final settlement reached with the lender in February 1993.

Each of these new partnerships filed for financial reorganization in
federal court. In addition, 1036 N. Dearborn Limited Partnership also filed for
financial reorganization in federal court. All of these filings for
reorganization were an extension of negotiations with the lenders, with the
objective of reducing or restructuring the debt on the properties owned by the
partnerships. In the case of the filing for reorganization by each of the new
partnerships owned by 1445 North State Parkway Limited Partnership, 5600
Sheridan Limited Partnership and 5630 Sheridan Limited Partnership, the
reorganization proceedings were dismissed after each lender approved a tax-
deferred exchange transaction between the new partnership and an unaffiliated
third party. The general partner of the 1036 North Dearborn Limited Partnership
was able to purchase the debt encumbering that property at a discount from the
lender and the filing for reorganization of that partnership was dismissed. The
1036 North Dearborn property was subsequently refinanced with a third-party
lender and then sold to a third party.

The new partnerships owned by the 14 W. Elm, 6030 Sheridan and Oak Brook
Commons Limited Partnerships participated with the general partner and its
affiliates and with 16 other affiliated limited partnerships, all of whose
properties were subject to first-mortgage loans from the same third-party
lender, in a settlement agreement with that lender. Under the terms of the
settlement agreement, the 16 other affiliated limited partnerships (none of
which were in default on their mortgage loans) provided additional security to
the lender with respect to each of their loans by transferring administration
of property tax escrow accounts to the lender. The transfer of the escrow
accounts had no financial impact on the 16 partnerships. Five of the 16 other
partnerships also obtained favorable loan modifications from the lender.

-47-

In the case of the new partnership owned by the 14 W. Elm Limited
Partnership, the lender cooperated in a tax-deferred exchange of the
partnership's real estate asset. That partnership assigned its interest in its
property, subject to the existing indebtedness, to an unaffiliated third party
in exchange for an assignment of the unaffiliated third party's interest in
another property, subject to indebtedness in a principal amount similar to that
on the 14 W. Elm property. This transaction was accomplished with the objective
of avoiding the creation of any current income tax liability to the partnership
or its limited partners. As a result of this tax-deferred exchange, the 14 W.
Elm Limited Partnership owns a net-lease commercial property secured by a long-
term lease with a creditworthy tenant. The debt service on the indebtedness
used to acquire the exchange property is in the form of fully amortizing
payments over the term of the store lease, with the net-lease payments received
from the tenant equal to the required debt service payments. The possibility of
cash flow distributions to the limited partners is, therefore, precluded.
However, the expectation exists for equity accumulation through the
amortization of the loan and, therefore, a distribution to the limited partners
upon the disposition of the exchange property. IREIC believes that the limited
partners of the 14 W. Elm Limited Partnership are in a better position to
realize a return of their capital investment through the ultimate disposition
of the exchange property.

In the case of the new partnership owned by the Oak Brook Commons Limited
Partnership, the lender acquired the property through foreclosure and the
general partner has supplied the Oak Brook Commons Limited Partnership with a
new property, an ownership interest in a retail store in Marshall, Minnesota,
leased on a Triple-Net Lease Basis by Wal-Mart Stores, Inc.

In the case of the new partnership owned by the 6030 Sheridan Limited
Partnership, the lender agreed to permit a tax-deferred exchange of the
partnership's property, similar to that completed by the 14 W. Elm Limited
Partnership and subsequently the lender sold its mortgage to an unaffiliated
party who then acquired the property. The new partnership acquired a
replacement property similar to that acquired by the 14 W. Elm Limited
Partnership, which property was then conveyed to the 6030 Sheridan Limited
Partnership.

Of the original partnerships discussed above, Mr. Daniel L. Goodwin, a
Director and Chairman and President of Inland, and a Director of IREIC, served
as individual general partner of all but the Oak Brook Commons Limited
Partnership, in which Mr. G. Joseph Cosenza, a Director and a Vice Chairman of
Inland, served as individual general partner. Prior to the filing for
reorganization, and as part of the strategy thereof, Mr. Cosenza relinquished
his position as individual general partner of the Oak Brook Commons Limited
Partnership and Mr. Goodwin did the same for all except the 1036 N. Dearborn
Limited Partnership, for which he continues to serve as individual general
partner. These actions were taken upon the advice of counsel to reduce the
chances of delay in the reorganization efforts. The corporate general partner
of each partnership has elected to continue the business of each of the
partnerships in which the individual general partner relinquished his position.

-48-

Four of the 37 Inland-sponsored partnerships described in the first
paragraph of this section owned four adjacent office buildings in Park Ridge,
Illinois. These four operating partnerships were, in turn, owned by 21 other
Inland-sponsored partnerships which had sold their original real estate assets
and reinvested a portion of the proceeds from those sales in ownership units in
the four operating partnerships. During 1991, the lenders which held the first
mortgages encumbering the four office buildings acquired the deeds to the
properties in lieu of foreclosure. The four operating partnerships were
subsequently liquidated. The general partner of the 21 partnerships which had
owned the four operating partnerships arranged for the transfer to each of the
21 partnerships of certain ownership interests in five net-lease commercial
properties having long-term leases with Creditworthy Tenants. The debt service
on the indebtedness used to acquire the commercial properties consists of
principal and interest payments which fully amortize the indebtedness over the
term of the store leases, with the net-lease payments received from the tenants
equal to the required debt service payments. The possibility of cash flow
distributions to the limited partners in the 21 partnerships is, therefore,
precluded. However, the expectation exists for equity accumulation through the
amortization of the loan and, therefore, a future distribution to the limited
partners upon the disposition of the commercial properties. The 21 partnerships
experienced minimal adverse tax consequences from the liquidation of the four
operating partnerships and their receipt of the ownership interests in the
commercial properties. IREIC believes that the limited partners of the 21
partnerships are now positioned to realize a return of their capital investment
through the ultimate disposition of the commercial properties.

In the case of the 900 DeWitt and the Hoffman Ridge Limited Partnerships,
two of the 37 limited partnerships mentioned in the first paragraph of this
section, tax-deferred exchanges of the partnerships' properties were
accomplished, in the same manner as described above. The partnerships acquired
net-lease commercial properties. Subsequent to the exchanges, the 900 DeWitt
and Hoffman Ridge properties were acquired by the first-mortgage lenders whose
loans were secured by those properties.

In the case of the Park Colony Limited Partnership, one of the 37 limited
partnerships mentioned in the first paragraph of this section, the partnership
defaulted on a loan secured by a second mortgage against the Park Colony
property. The lender which owned the second-mortgage loan purchased the
position of the lender which had funded the first mortgage loan secured by the
property. The lender then sold the debt, at a substantial discount, to an
Affiliate of the general partner of Park Colony Limited Partnership, and all
legal actions associated with the loan default were dismissed. The partnership
then refinanced the debt at the lower principal amount, retiring the debt owned
by the Affiliate. IREIC believes that this debt reduction is of significant
benefit to the partnership, which is now better positioned to realize its
investment objectives.

In 1990, the Inland New England Limited Partnership, acting as nominee for
14 Florida limited partnerships which own the Sunset Ridge Apartments in
Manchester, New Hampshire, ceased making payments on the bond financing for
that property, which bonds were issued by the New Hampshire Housing Finance
Authority. In August 1993, an Affiliate of the general partner for those
partnerships purchased the bonds and the interests of two savings and loan
associations which had acted as bond credit-enhancers, at a substantial
discount. The partnerships which own the property obtained refinancing funds to
pay off the bonds and the amounts due to the Affiliate under the credit-
enhancement instruments for approximately the discounted price paid by the
Affiliate.

-49-

In April 1993, the West Haven Limited Partnership ceased making payments
on the first mortgage loan for that partnership's property. The general partner
attempted to negotiate with the lender to modify the terms of the loan to a
level commensurate with the operating performance of the West Haven property,
but no agreement was reached. A tax-deferred exchange was accomplished and the
partnership acquired an interest in a net-lease commercial property. The West
Haven property was subsequently acquired by the lender whose loan was secured
by a first mortgage against the property.

In the case of the other partnerships referred to in the first paragraph
of this section, subsequent to the acquisition of net-leased commercial
properties via tax-deferred exchanges, the Townsgate, Riverdale, Northwoods and
Bridgeview properties were acquired by the first-mortgage lenders whose loans
were secured by the properties. The Covington Associates and Westbrooke Limited
Partnerships' tax-deferred exchange property, Townsgate II, was acquired by the
first mortgage lender and the two partnerships acquired net-lease commercial
properties via second tax-deferred exchanges. In the case of the Bensenville
Industrial Limited Partnership, subsequent to the acquisition of a replacement
net-lease commercial property, the Bensenville property was acquired by the
first-mortgage lender whose loan was secured by the property.

In addition to the above-described developments, the corporate general
partner of the Walton Place Limited Partnership and the Barrington Lakes
Limited Partnership settled litigation with the lenders for the properties
which resulted in the transfer of the properties and an agreement to make cash
settlements by the partnerships to the lenders. In each case, the litigation
resulted after the partnership ceased making debt service payments in an effort
to bring about a renegotiation of the terms of the financing. The lenders
agreed to permit a tax-deferred exchange of the partnerships' respective
properties.

In January 1995, the Timberlake Limited Partnership ceased making payments
on the first mortgage loan for that partnership's property. IREIC attempted to
negotiate with the lender to modify the terms of the loan to a level
commensurate with the operating performance of the Timberlake property, but no
agreement was reached. During August 1996, IREIC initiated a tax-deferred
exchange whereby the partnership acquired an interest in a net-lease commercial
property prior to the Timberlake property being acquired by the lender whose
loan was secured by a first mortgage against the property.

In October 1996, two limited partnerships owning contiguous apartment
buildings in south suburban Chicago ceased making payments on their respective
HUD-insured first mortgage loans. The Chateaux Versailles and Marsailles
Limited Partnerships, through their general partner, were attempting to
negotiate with HUD, as mortgagee, to modify the terms of the loans to levels
commensurate with the operating performance of the properties. As of June 30,
1999, an agreement had been reached with HUD and mortgage payments have been
resumed by the partnerships.

-50-

Effects of Property Exchanges on Investors

The Inland Organization has used a strategy of tax-deferred property
exchanges to mitigate the adverse effects of 1986 tax law changes and the
weakening of apartment markets in the late 1980s on Inland's tax-shelter
private partnerships and investors in those partnerships. The loss of deficit-
producing properties to foreclosure would otherwise have resulted in the loss
of investors' capital, as well as substantial income tax liability for those
investors. Through the exchange program, deficit-producing apartment properties
have been disposed of, net-leased retail properties have been acquired, and
most tax liability continues to be deferred. Gradually, through the
amortization of debt secured by the new, net-leased properties owned by these
partnerships, the partnerships and their investors are rebuilding equity which
may be realized upon the future sale or refinancing of these properties. One of
the primary investment objectives of these tax-shelter partnerships, the
deferral of tax liability, continues to be met to a significant degree.
However, no cash flow is being received by the investors in these partnerships.
In addition, the tax- deferred exchanges have extended the expected term of
these tax-shelter partnerships. If and when the net-leased properties are sold
or refinanced, there is no assurance that investors will realize any profit or
a complete return of capital. Because the duration of these partnerships has
been extended, when the net-leased properties are sold or refinanced, the
annual rate of appreciation realized by investors, if any, will be less than if
the tax law had not been changed and apartment markets had not declined in the
late 1980s.

Additional Information

Except for re-acquisitions of previously owned properties upon default by
the purchaser, the transfer of a defaulted loan, the tax-deferred property
exchanges and the disputes with lenders described herein, there have been no
further major adverse business developments or conditions experienced by these
prior partnerships which would be material to investors in our shares.

Upon written request, any potential investor may obtain, without charge,
the most recent Annual Report on Form 10-K filed with the SEC by any public
program sponsored by any of the Inland Affiliated Companies which has reported
to the SEC within the last 24 months. Copies of any exhibits to such Annual
Reports shall be provided, upon request, for a reasonable fee.

Summary Tables

The following summary tables set forth certain information concerning prior
programs discussed above through September 30, 1999.

Land Fund I, Land Fund II, Land Fund III, and Wisconsin Land Fund were
formulated as pure capital appreciation investments. No current return (i.e.:
from rents or interest) was contemplated or available as capital was invested
in non-income producing vacant land parcels. Distributions are received on an
irregular basis, only as a result of a sale of the vacant land parcels. These
distributions consist of both the return of the invested capital amount
allocated to the purchase of the parcel or parcels sold plus the profit on the
involved parcels as measured by the sale price (net of costs of the sale) minus
the fully loaded purchase price (allocated capital). The method of measuring
return on investment to date is on a sold parcel-by-parcel basis, as follows:

-51-
<TABLE>
<CAPTION>

FULLY LOADED AVERAGE ANNUAL
PURCHASE PRICE RETURN ON ALLOCATED
NET SALES (ALLOCATED NET PROFITS CAPITAL (GROSS
PRICES CAPITAL ON GROSS RETURN % RETURN %/AVERAGE
OF PARCELS OF PARCELS SOLD = PARCELS SOLD (NET PROFIT/ NUMBER OF YEARS OF
FUND SOLD TO DATE LESS TO DATE) TO DATE ALLOCATED CAPITAL) CAPITAL INVESTED)
- ------------------------- -------------- ---- ---------------- --- -------------- ------------------ ---------------------

<S> <C> <C> <C> <C> <C>
Land Fund I............. $20,042,063 $14,928,847 $ 5,113,216 34% 3.40%

Land Fund II............ 20,481,400 12,973,143 7,508,257 58% 6.40%

Land Fund III........... 9,534,612 5,775,086 3,759,526 65% 9.30%

Wisconsin Land Fund..... 4,041,597 1,908,945 1,700,045 89% 11.87%

CUMULATIVE DISTRIBUTIONS TO LIMITED PARTNERS
----------------------------------------------------------- RETURN ON
CAPITAL = RETURN OF + RETURN ON INVESTMENT
RAISED TOTAL INVESTMENT INVESTMENT PER YEAR
------------- ------------- ------------ ------------- ----------

Monthly Income Fund II...... $ 25,323,569 $ 22,109,662 $ 4,395,565 $ 17,714,097 8.00%

Growth Fund II.............. 4,038,250 4,654,412 3,670,771 983,641 5.11%

Mortgage Fund III........... 2,837,249 3,601,917 2,420,751 1,181,166 6.25%

Triple Security Fund, L.P... 3,000,000 4,294,216 3,000,000 1,294,216 10.00%

Employee Appreciation
Fund, L.P.*............... 400,000 502,198 400,000 102,198 10.00%
Inland Junior Mortgage
Fund, L.P.*............... 410,000 541,156 410,000 131,156 6.97%
Inland Condominium
Financing Fund, L.P..... 1,031,000 1,411,617 1,031,000 380,617 10.00%
10% Income Fund, L.P........ 2,000,000 2,878,335 2,000,000 878,335 10.00%
9% Income Junior Mortgage
Fund, L.P.*............. 1,000,000 1,512,708 1,000,000 512,708 9.00%
9% Monthly Cash Fund, L.P... 4,000,000 6,291,146 4,000,000 2,291,146 9.00%
9% Monthly Cash Fund II, L.P 4,000,000 2,266,833 0 2,266,833 9.00%
IMC Note Issue #2 1993...... 6,800,000 3,109,552 0 3,109,552 8.00%

* Returns of Capital prior to Final Distribution.

</TABLE>

-52-

Index to Financial Statements
Page
-----
Inland Retail Real Estate Trust, Inc.:

Consolidated Financial Statements (unaudited) at June 30, 1999...... F- 1

Notes to Consolidated Financial Statements (unaudited)
at June 30, 1999.................................................. F- 7

Pro Forma Consolidated Balance Sheet (unaudited)
at June 30, 1999.................................................. F-15

Notes to Pro Forma Consolidated Balance Sheet (unaudited)
at June 30, 1999.................................................. F-17

Pro Forma Consolidated Statement of Operations (unaudited)
for the six months ended June 30, 1999............................ F-20

Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the six months ended June 30, 1999............................ F-22

Pro Forma Consolidated Statement of Operations (unaudited)
for the year ended December 31, 1998.............................. F-25

Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the year ended December 31, 1998.............................. F-27

Lake Walden Square:

Independent Auditors' Report........................................ F-33

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-34

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-35

Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-37

Notes to Historical Summary of Gross Income and Direct Operating
Expenses (unaudited) for the six months ended June 30, 1999....... F-38

F-i

Merchants Square Shopping Center:

Independent Auditors' Report........................................ F-39

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-40

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-41

Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-43

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the six months
ended June 30, 1999............................................... F-44

Town Center Commons:

Independent Auditors' Report........................................ F-45

Historical Summary of Gross Income and Direct Operating Expenses
for the period from January 1, 1999 through March 31, 1999........ F-46

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the period from January 1, 1999 through
March 31, 1999.................................................... F-47

Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-49

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the six months ended
June 30, 1999..................................................... F-50

Boynton Commons Shopping Center:

Independent Auditors' Report........................................ F-51

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-52

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-53

Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-55

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the six months
ended June 30, 1999............................................... F-56

F-ii

Lake Olympia Square:

Independent Auditors' Report........................................ F-57

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-58

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-59

Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-61

Notes to Historical Summary of Gross Income and Direct Operating
Expenses (unaudited) for the six months ended June 30, 1999....... F-62

Bridgewater Marketplace:

Independent Auditors' Report........................................ F-63

Historical Summary of Gross Income and Direct Operating Expenses
for the period from January 1, 1999 through June 30, 1999......... F-64

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the period from January 1, 1999
through June 30, 1999............................................. F-65

Bartow Marketplace:

Independent Auditors' Report........................................ F-68

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-69

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-70

Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-72

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the six months
ended June 30, 1999............................................... F-73

F-iii

Countryside Shopping Center:

Independent Auditors' Report........................................ F-74

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-75

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-76

Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-78

Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the six months
ended June 30, 1999............................................... F-79

F-iv

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Consolidated Balance Sheet

June 30, 1999
(unaudited)

Assets
------
Investment Properties:
Land............................................ $ 3,998,887
Building and site improvements.................. 16,282,139
------------
20,281,026
Less accumulated depreciation................... 86,618
------------
Net investment properties......................... 20,194,408

Cash and cash equivalents......................... 7,403,226
Restricted cash................................... 232,711
Accounts and rents receivable..................... 263,166
Real estate and insurance escrow deposits......... 328,343
Furniture and equipment (net of accumulated
depreciation of $1,201 at June 30, 1999)........ 10,804
Loan fees (net of accumulated amortization of
$199 at June 30, 1999).......................... 10,300
Other assets...................................... 43,961
------------
Total assets...................................... $28,486,919
============

See accompanying notes to consolidated financial statements.

F-1

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Consolidated Balance Sheet

June 30, 1999
(unaudited)

Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Liability for subscriptions received............ $ 232,711
Accounts payable................................ 86,673
Accrued offering costs to Affiliates............ 1,118,932
Accrued offering costs to non-affiliates........ 1,266,176
Accrued interest payable to non-affiliates...... 90,969
Accrued real estate taxes....................... 138,650
Distributions payable........................... 66,296
Security Deposits............................... 54,567
Mortgages payable............................... 14,379,884
Unearned income................................. 19,336
Other liabilities............................... 2,480
Due to Affiliates............................... 361,036
------------
Total liabilities............................. 17,817,710
------------
Minority interest in partnership................ 2,000

Stockholders' Equity:
Preferred Stock, $.01 par value, 10,000,000
shares authorized, none outstanding............ -
Common stock, $.01 par value, 100,000,000 Shares
authorized; 1,399,971 issued and outstanding.. 13,980
Additional paid-in capital (net of costs of
offering of $3,185,726 at June 30, 1999
amount to Affiliate)........................... 10,778,469
Accumulated distributions in excess of
net income.................................... (125,240)
------------
Total Stockholders' Equity.................... 10,667,209
------------

Commitments and contingencies

Total liabilities and stockholders' equity........ $28,486,919
============

See accompanying notes to consolidated financial statements.

F-2

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Consolidated Statements of Operations

For the three and six months ended June 30, 1999
(unaudited)

Three and Six months
ended
June 30, 1999
------------------
Income:
Rental income..................................... $ 379,788
Additional rental income.......................... 226,698
Interest income................................... 35,592
------------
642,078
Expenses: ------------
Professional services to Affiliates............... 10,242
Professional services to non-affiliates........... 29,033
General and administrative to Affiliates.......... 40,186
General and administrative expenses to
non-affiliates.................................. 39,704
Property operating expenses to Affiliates......... 17,194
Property operating expenses to non-affiliates..... 255,656
Mortgage interest to Affiliates................... 1,445
Mortgage interest to non-affiliates............... 155,246
Acquisition costs expensed........................ 11,443
Depreciation...................................... 87,819
Amortization...................................... 199
------------
648,167
------------
Net loss............................................ $ (6,089)
============

Net loss per weighted average common stock
shares outstanding, basic and diluted (517,231
for the six months ended June 30, 1999)........... $ (.01)
============

See accompanying notes to consolidated financial statements.

F-3

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Consolidated Statement of Stockholders' Equity

June 30, 1999
(unaudited)

Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
---------- ----------- ------------ ------------
Balance at
December 31, 1998......... $ 200 199,800 - 200,000

Net loss.................... - - (6,089) (6,089)

Distributions declared
($.23 for the six months
ended June 30, 1999 per
weighted average common
stock shares outstanding). - - (119,151) (119,151)

Proceeds from Offering (net
of Offering costs of
$3,185,726)............... 13,780 10,578,669 - 10,592,449
---------- ----------- ------------ ------------
Balance June 30, 1999....... $ 13,980 10,778,469 (125,240) 10,667,209
========== =========== ============ ============

See accompanying notes to consolidated financial statements.

F-4

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Consolidated Statement of Cash Flows

For the six months ended June 30, 1999
(unaudited)

1999
Cash flows from operating activities: ----
Net loss........................................ $ (6,089)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation.................................. 87,819
Amortization.................................. 199
Straight line rental income................... (9,645)
Changes in assets and liabilities:
Accounts and rents receivable............... (253,521)
Other assets................................ (43,961)
Real estate tax and insurance escrows....... (328,343)
Accrued interest payable.................... 90,969
Accrued real estate taxes................... 138,650
Accounts payable............................ 86,673
Unearned income............................. 19,336
Other liabilities........................... 2,480
Due to Affiliates........................... 361,036
Security deposits........................... 54,567
-------------
Net cash provided by operating activities......... 200,170
-------------
Cash flows from investing activities:
Purchase of investment properties............... (5,884,581)
Furniture and equipment......................... (12,005)
-------------
Net cash used in investing activities............. (5,896,586)
-------------
Cash flows from financing activities:
Proceeds from offering.......................... 13,778,175
Payments of offering costs...................... (800,618)
Principal payments on debt...................... (16,561)
Loan fees....................................... (10,499)
Distributions paid.............................. (52,855)
-------------
Net cash provided by financing activities......... 12,897,642
-------------
Net increase in cash and cash equivalents......... 7,201,226

Cash and cash equivalents at beginning of period.. 202,000
-------------
Cash and cash equivalents at end of period........ $ 7,403,226
=============

See accompanying notes to consolidated financial statements.

F-5

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Consolidated Statement of Cash Flows
(continued)

For the six months ended June 30, 1999
(unaudited)

Supplemental schedule of noncash investing and financing activities:

Purchase of investment properties................. $ (20,281,026)
Assumption of mortgage debt....................... 14,396,445
--------------
$ (5,884,581)
==============

Distributions payable............................. $ 66,296
==============

Cash paid for interest............................ $ 156,691
==============

See accompanying notes to consolidated financial statements.

F-6

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 1999
(unaudited)

The accompanying consolidated financial statements have been prepared in
accordance with Generally Accepted Accounting Principles ("GAAP") for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X.

(1) Organization and Basis of Accounting

Inland Retail Real Estate Trust, Inc. (the "Company") was formed on September 3,
1998 to acquire and manage a diversified portfolio of real estate, primarily
multi-tenant shopping centers. It is anticipated that the Company will initially
focus on acquiring properties in the southeastern states, primarily Florida,
Georgia, North Carolina and South Carolina. The Company may also acquire
single-user retail properties in locations throughout the United States, certain
of which may be sale and leaseback transactions, net leased to creditworthy
tenants. Inland Retail Real Estate Advisory Services, Inc. (the "Advisor"), an
affiliate of the Company, is the advisor to the Company. On February 11, 1999,
the Company commenced an initial public offering ("Offering"), on a best efforts
basis of 50,000,000 Shares of common stock ("Shares") at $10 per Share and
4,000,000 Shares at $9.50 per Share which may be distributed pursuant to the
Company's Distribution Reinvestment Program ("DRP"). As of June 30, 1999, the
Company had received subscriptions for a total of 1,397,818 Shares. In addition
the Company has distributed 2,153 shares pursuant to the Company's DRP. As of
June 30, 1999, escrowed funds of $232,711 were reflected as restricted cash,
along with the corresponding liability for subscriptions received, in the
accompanying Consolidated Financial Statements. The escrowed funds of $232,711
represents subscriptions for Shares from Pennsylvania residents. Subscribers
residing in Pennsylvania may not be admitted as Stockholders to the Company
until subscriptions have been received and accepted for 2,500,000 Shares
($25,000,000) from all sources. Funds received from subscribers residing in
Pennsylvania are currently included in restricted cash and will be released to
the Company from the escrow immediately after subscriptions for at least
$25,000,000 have been received from all sources.

The Company intends to qualify as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended, for federal income tax purposes
commencing with the tax year ending December 31, 1999. If the Company qualifies
for taxation as a REIT, the Company generally will not be subject to federal
income tax to the extent it distributes its REIT taxable income to its
stockholders. If the Company fails to qualify as a REIT in any taxable year,
the Company will be subject to federal income tax on its taxable income at
regular corporate tax rates. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and federal income and excise taxes on its undistributed income.

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

F-7

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 1999
(unaudited)

Statement of Financial Accounting Standards No. 121 requires the Company to
record an impairment loss on its property to be held for investment whenever its
carrying value cannot be fully recovered through estimated undiscounted future
cash flows from operations and sale of properties. The amount of the impairment
loss to be recognized would be the difference between the property's carrying
value and the property's estimated fair value. As of June 30, 1999, the Company
does not believe any such impairment of its properties exists.

The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents and are carried at cost, which
approximates market.

Depreciation expense is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 30 years for
the building and building improvements and 15 years for the site improvements.
Furniture and equipment is depreciated over five years.

Loan fees are amortized on a straight line basis over the life of the related
loans.

Offering costs are offset against the Stockholders' equity accounts and consist
principally of printing, selling and registration costs.

Rental income is recognized on a straight-line basis over the term of each
lease. The difference between rental income earned on a straight-line basis and
the cash rent due under the provisions of the lease agreements is recorded as
deferred rent receivable. The Company recognizes percentage rents as they are
received.

The Company believes that the interest rates associated with the mortgages
payable and notes payable to Affiliates approximate the market interest rates
for these types of debt instruments, and as such, the carrying amount of the
mortgages payable and notes payable to Affiliates approximate their fair value.

The net loss allocable to the minority interest is immaterial, and therefore,
has not been included in the accompanying Consolidated Financial Statements.

In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present fairly
the financial position and results of operations for the period presented
herein. Results of interim periods are not necessarily indicative of results to
be expected for the year.

F-8

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Consolidated Financial Statements
(continued)

June 30, 1999
(unaudited)

(2) Basis of Presentation

The accompanying Consolidated Balance Sheet includes the accounts of the
Company, as well as the accounts of the operating partnership, in which the
Company has an approximately 99% controlling general partner interest. The
Advisor owns the remaining approximately 1% limited partner common units in the
operating partnership for which it paid $2,000 and which is reflected as a
minority interest in the accompanying Consolidated Balance Sheet. The effect of
all significant intercompany transactions have been eliminated.

(3) Transactions with Affiliates

As of June 30, 1999, the Company had incurred $3,185,726 of offering costs.
Pursuant to the terms of the Offering, the Advisor is required to pay
organizational and offering expenses (excluding sales commissions, the marketing
contribution and the due diligence expense allowance) in excess of 5.5% of the
gross proceeds of the Offering "Gross Offering Proceeds") or all organization
and offering expenses (including selling commissions) which together exceed 15%
of Gross Offering Proceeds. As of June 30, 1999, offering costs did exceed the
5.5% and 15% limitations, however the Company anticipates that these costs will
not exceed these limitations upon completion of the Offering. Any excess
amounts at the completion of the Offering will be reimbursed by the Advisor.

The Advisor and its affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its affiliates relating to the
Offering. In addition, an affiliate of the Advisor is entitled to receive
selling commissions, a marketing contribution and a due diligence expense
allowance from the Company in connection with the Offering.

The Advisor and its affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its affiliates relating to the
administration of the Company. Such costs are included in professional services
to Affiliates and general and administrative expenses to Affiliates.

The Advisor has contributed $200,000 to the capital of the Company for which it
received 20,000 Shares.

F-9

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 1999
(unaudited)

The Advisor may receive an annual Advisor Asset Management Fee of not more than
1% of the Average Invested Assets, paid quarterly. For any year in which the
Company qualifies as a REIT, the Advisor must reimburse the Company: (i) to the
extent that the Advisor Asset Management Fee plus other operating expenses paid
during the previous calendar year exceed 2% of the Company's average invested
assets for the calendar year or 25% of the Company's Net Income for that
calendar year; and (ii) to the extent that stockholders have not received an
annual distribution equal to or greater than the 7% current return. For the six
months ended June 30, 1999, the Company has not incurred any of such fees.

An Affiliate of the Advisor is entitled to receive property management fees for
management and leasing services. The Company incurred and paid property
management fees of $17,194 for the six months ended June 30, 1999, all of which
has been paid.

(4) Stock Option Plan and Soliciting Dealer Warrants

The Company adopted an Independent Director Stock Option Plan which, subject to
certain conditions, provides for the grant to each Independent Director of an
option to acquire 3,000 Shares following their becoming a Director and for the
grant of additional options to acquire 500 Shares on the date of each annual
stockholders' meeting commencing with the annual meeting in 2000 if the
Independent Director is a member of the board of directors on such date. The
options for the initial 3,000 Shares to be granted shall be exercisable as
follows: 1,000 Shares on the date of grant and 1,000 Shares on each of the first
and second anniversaries of the date of grant. The subsequent options will be
exercisable on the second anniversary of the date of grant. The initial options
will be exercisable at $9.05 per Share. The subsequent options will be
exercisable at the fair market value of a Share on the last business day
preceding the annual meeting of Stockholders, and shall be $9.05 per Share until
the earlier of the termination of the Offering or February 11, 2001. As of June
30, 1999, no options had been issued.

In addition to sales commissions, soliciting dealers will also receive one
soliciting dealer warrant for each 25 Shares sold by such soliciting dealer
during the Offering, subject to state and federal securities laws and subject to
the issuance of a maximum of 2,000,000 soliciting dealers warrants to purchase
an equivalent number of Shares. The holder of a soliciting dealer warrant will
be entitled to purchase one Share from the Company at a price of $12 during the
period commencing one year from the date of the first issuance of any of the
soliciting dealer warrants and ending five years after February 11, 1999. As of
June 30, 1999, no warrants had been issued.

F-10

<TABLE> INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

June 30, 1999
(unaudited)

(5) Investment Properties Initial Cost (A) Gross amount at which carried
<CAPTION> --------------------------- at end of period
Net -----------------------------------------
Buildings Adjustments Buildings,
Date and Site to and Site
Acquired Land improvements Basis (B) Land improvements Total
-------- ------------ ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-tenant Retail
- -------------------
Lake Walden Square
Plant City, FL.......... 05/1999 $ 3,006,662 11,532,321 - 3,006,662 11,532,321 14,538,983

Merchants Square
Zephyrhills, FL......... 06/1999 992,225 4,749,818 - 992,225 4,749,818 5,742,043
------------- ------------- ------------ ------------- ------------- -------------
Totals $ 3,998,887 16,282,139 - 3,998,887 16,282,139 20,281,026

(A) The initial cost to the Company, represents the original purchase price of
the property from an Affiliate of our Advisor, including amounts incurred
subsequent to acquisition, which were contemplated at the time the property
was acquired.

(B) Adjustments to basis includes additions to investment properties.

</TABLE>

F-11

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Consolidated Financial Statements
(continued)

June 30, 1999
(unaudited)

(6) Operating Leases

Certain tenant leases contain provisions providing for stepped rent increases.
GAAP requires the Company to record rental income for the period of occupancy
using the effective monthly rent, which is the average monthly rent for the
entire period of occupancy during the term of the lease. The accompanying
financial statements include an increase of $9,645 for the six months ended
June 30, 1999, of rental income for the period of occupancy for which stepped
rent increases apply and $9,645 in the related accounts and rents receivable as
of June 30, 1999. The Company anticipates collecting these amounts over the
terms of the related leases as scheduled rent payments are made.

(7) Mortgages Payable

Mortgages payable consist of the following at June 30, 1999:

Current Current Balance at
Property as Interest Maturity Monthly June 30,
Collateral Rate Date Payment(a) 1999
- ------------- ---------- --------- ---------- -----------
Mortgages payable to non-affiliates:

Lake Walden Square 7.63% 11/2007 $ 72,584 $10,100,831
Merchants Square 7.50% 11/2008 30,066 4,279,053
------------
$14,379,884
============

(a) All payments are principal and interest.

F-12

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Consolidated Financial Statements
(continued)

June 30, 1999
(unaudited)

(8) Segment Reporting

The Company owns and seeks to acquire multi-tenant retail centers, neighborhood
and community shopping centers in the Southeastern states, primarily Florida,
Georgia, North Carolina, and South Carolina. All of the Company's shopping
centers are located within these states. The Company's shopping centers are
typically anchored by grocery and drug stores complemented with additional
stores providing a wide range of other goods and services to shoppers.

The Company assesses and measures operating results on an individual property
basis for each of its properties based on net property operations. Since all
of the Company's properties exhibit highly similar economic characteristics,
cater to the day-to-day living needs of their respective surrounding
communities, and offer similar degrees of risk and opportunities for growth,the
properties have been aggregated and reported as one operating segment.

The property revenues and net property operations of the reportable segments
are summarized in the following tables as of June 30, 1999, and for the six
month period then ended, along with a reconciliation to net income. Property
asset information is as of June 30, 1999.

1999
----
Total property revenues......... $ 606,486
Total property operating
expenses...................... 272,850
Mortgage interest................ 156,691
-------------
Net property operations.......... 176,945
-------------
Interest income.................. 35,592
Less non property expenses:
Professional services.......... 39,275
General and administrative..... 91,333
Depreciation and amortization.. 88,018
-------------
Net loss......................... $ (6,089)
=============

Net investment properties........ $ 20,194,408
=============

F-13

INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)

Notes to Consolidated Financial Statements
(continued)

June 30, 1999
(unaudited)

(9) Earnings per Share

Basic earnings per share ("EPS") is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS is computed by reflecting the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. As of June 30, 1999,
options to purchase 3,000 shares of common stock at a price of $9.05 per share
were outstanding.

(10) Subsequent Events

On July 1, 1999, the Company purchased Town Center Commons by acquiring the
limited partnership interests in Inland Southeast Town Center Limited
Partnership, an affiliate of our Advisor, and acquiring all of the general
partnership interests in Inland Southeast Town Center Limited Partnership. The
Company purchased Town Center Commons for $9,656,381. The property is located
in Kennesaw, Georgia and contains 72,108 gross leasable square feet of an
existing 159,758 square foot shopping center. Its tenants leasing more than
10% of the total gross leasable area are J.C. Penney Home Store, a home
furnishings store, and Baptist Book Store, a religious retail store.

On July 27, 1999, the Company purchased Boynton Commons by acquiring all of the
membership interests in Inland Boynton Investment, L.L.C. and Inland Boynton
Acquisitions, L.L.C., and affiliate of our Advisor. The Company purchased
Boynton Commons for $30,563,440. The property is located in Boynton Beach,
Florida and contains 210,772 square feet of leasable space. Its tenants
leasing more than 10% of the total gross leasable area are The Sports
Authority, a sporting goods store; Bed, Bath & Beyond, a home furnishings
store; Barnes & Noble, a display and retail sale and/or rental of books,
magazines and other media store; and PetSmart, a pet and pet accessory retail
store.

F-14

Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)

The following unaudited Pro Forma Consolidated Balance Sheet is presented as if
the acquisition of the properties indicated in Note B had occurred on June 30,
1999.

This unaudited Pro Forma Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position would have been at June 30,
1999, nor does it purport to represent our future financial position. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.

F-15

Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)

Pro Forma
Adjustments
-------------
(A) Property Pro Forma
Historical Acquisitions as adjusted
------------- -------------- -------------
Assets
- ------
Net investment in
properties(B)............. $ 20,194,408 89,278,935 109,473,343
Cash........................ 7,403,226 837,587 8,240,813
Restricted cash (A)......... 232,711 - 232,711
Accounts and rents
receivable................ 263,166 - 263,166
Escrowed funds (E).......... 328,343 - 328,343
Furniture and Equipment..... 10,804 - 10,804
Loan fees................... 10,300 - 10,300
Other assets................ 43,961 - 43,961
------------- -------------- -------------
Total assets................ $ 28,486,919 90,116,522 118,603,441
============= ============== =============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate taxes... 138,650 191,788 330,438
Security deposits........... 54,567 114,382 168,949
Mortgages payable (D)....... 14,379,884 66,330,524 80,710,408
Liability for subscriptions
received.................. 232,711 - 232,711
Accounts payable............ 86,673 - 86,673
Accrued interest payable.... 90,969 - 90,969
Other liabilities........... 21,816 66,149 87,965
Distribution payable........ 66,296 - 66,296
Due to Affiliates........... 361,036 - 361,036
Minority interest in
partnership (C)........... 2,000 - 2,000
Accrued offering costs...... 2,385,108 - 2,385,108
------------- -------------- -------------
Total liabilities........... 17,819,710 66,702,843 84,522,553
------------- -------------- -------------

Common Stock................ 13,980 27,224 41,204
Additional paid in capital
(net of Offering costs)... 10,653,229 23,386,455 34,039,684
------------- -------------- -------------
Total Stockholders' equity.. 10,667,209 23,413,679 34,080,888
------------- -------------- -------------
Total liabilities and
Stockholders' equity...... $ 28,486,919 90,116,522 118,603,441
============= ============== =============

See accompanying notes to pro forma consolidated balance sheet.

F-16

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)

(A) The historical column represents our Consolidated Balance Sheet as of June
30, 1999. We were formed on September 3, 1998. As of June 30, 1999,
subscriptions for a total of 1,397,818 Shares had been received from the
public at $10 per Share resulting in $13,978,175 in Gross Offering
Proceeds. As of June 30, 1999, subscriber funds of $232,711 are currently
held in an interest-bearing escrow account. The escrow funds of $232,711
represents subscriptions for Shares from Pennsylvania residents.
Subscribers residing in Pennsylvania may not be admitted as Stockholders to
the Company until subscriptions have been received and accepted for
2,500,000 Shares ($25,000,000) from all sources. On August 24, 1999, we
had sold Shares in excess of $25,000,000, accordingly, proceeds received
from subscribers residing in Pennsylvania which had been in escrow were
released to the Company. In addition, we have received the Advisor's
capital contribution of $200,000 for which it was issued 20,000 Shares.
Through June 30, 1999, the Advisor advanced approximately $2,385,000 to us
for costs incurred with the Offering. As of June 30, 1999, approximately
$1,100,000 remained unpaid.

F-17

<TABLE> Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)

(continued)

(B) The pro forma adjustments reflect the acquisition of the following properties:
<CAPTION>
Boynton Lake Bridgewater Bartow Countryside Total
Town Center Commons Olympia Marketplace Marketplace Shopping Property
Acquisition Acquisition Acquisition Acquisition Acquisition Center Acquisition
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
- ------
Net investment in
properties........... $ 9,656,381 30,563,440 9,873,627 6,093,855 24,496,029 8,595,602 89,278,934
Cash................... - 348,468 205,310 - - 283,810 837,588
Other assets........... - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total assets........... $ 9,656,381 30,911,908 10,078,937 6,093,855 24,496,029 8,879,412 90,116,522
============ ============ ============ ============ ============ ============ ============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real
estate taxes......... 22,000 20,572 67,012 35,000 11,204 36,000 191,788
Security deposits...... 19,443 26,412 29,983 14,444 12,400 11,700 114,382
Mortgages payable (D).. 7,600,000 22,922,581 5,932,943 4,780,000 18,375,000 6,720,000 66,330,524
Accrued interest
payable.............. - - - - - - -
Other liabilities...... 66,149 - - - - - 66,149
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total liabilities...... 7,707,592 22,969,565 6,029,938 4,829,444 18,398,604 6,767,700 66,702,843
------------ ------------ ------------ ------------ ------------ ------------ ------------

Common Stock........... 2,266 9,235 4,708 1,470 7,090 2,455 27,224
Additional paid in
capital (net of
Offering costs)...... 1,946,523 7,933,108 4,044,291 1,262,941 6,090,335 2,109,257 23,386,455
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Stockholders'
equity (E)........... 1,948,789 7,942,343 4,048,999 1,264,411 6,097,425 2,111,712 23,413,679
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity. $ 9,656,381 30,911,908 10,078,937 6,093,855 24,496,029 8,879,412 90,116,522
============ ============ ============ ============ ============ ============ ============

</TABLE>

F-18

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)

(continued)

(C) The Pro Forma Consolidated Balance Sheet includes the accounts of the
Operating Partnership in which the Company has an approximately 99%
controlling general partner interest. The Advisor owns the remaining
approximately 1% limited partnership common units in the Operating
Partnership for which it paid $2,000 and which is reflected as a minority
interest.

(D) Represents the first mortgage loans assumed and originated conjunction with
the acquisition of properties. These mortgage loans with an aggregate
principal balance of approximately $80,710,000 are payable to third parties
at interest rates ranging from 7.0% to 8.25% per annum and maturities
ranging from March 2000 to November 2008. This also represents debt
payable to an affiliate with a principal balance of approximately $800,000
which is payable at an interest rate of 10.9% per annum and matures April
2000.

(E) Represents real estate tax and insurance escrows held.

(F) Additional offering proceeds of $41,205,000, net of offering costs of
$7,124,112 are reflected as received as of June 30, 1999. Offering costs
consist principally of registration costs, printing and selling costs,
including commissions.

F-19

Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)

This unaudited Pro Forma Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations would have been
for the six months ended June 30, 1999, nor does it purport to represent our
future financial position. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.

F-20

Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)

Historical
------------
Company Pro Forma
(A) Adjustment Pro Forma
------------ ------------ -----------

Rental income.................... $ 379,788 4,544,720 4,924,508
Percentage rental income......... - 50,576 50,576
Operating expense and real
estate tax recoveries.......... 262,290 1,040,919 1,303,209
------------ ------------ -----------
Total income..................... 642,078 5,636,215 6,278,293
------------ ------------ -----------

Advisor asset management fee (C). - 518,371 518,371
Property operating expenses...... 386,463 1,128,102 1,514,565
Management fee (G)............... 17,194 263,318 280,512
Interest expense (H)............. 156,691 2,759,846 2,916,537
Depreciation (D)................. 87,819 1,421,880 1,509,699
------------ ------------ -----------
Total expenses................... 648,167 6,091,517 6,739,684
-----------
Net loss applicable to
common shareholders (F)........ $ (461,391)
===========

Weighted average number of
shares of common stock
outstanding (E)................ 4,120,500
===========

Basic and diluted net loss
per weighted average
shares of common stock
outstanding (E)................ $ (.11)
===========

See accompanying notes to pro forma consolidated statement of operations.

F-21

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)

(A) Historical information primarily represents operations of properties
acquired in May and June 1999.

(B) Total pro forma adjustments for acquisitions are as though they were
acquired January 1, 1998.

Lake Merchants Town Lake Boynton
Walden Square Center Olympia Commons
----------- ----------- ----------- ----------- ----------
Rental income........ $ 571,000 245,000 359,529 $ 425,560 1,191,020
Percentage rental
income............. - - - - 0
Additional rental
income............. 183,000 85,000 91,961 133,817 358,013
----------- ----------- ----------- ----------- ----------
Total income......... 754,000 330,000 451,490 559,377 1,549,033
----------- ----------- ----------- ----------- ----------
Advisor asset
management fee (C). 48,463 23,925 48,282 49,368 152,817
Property operating
expenses........... 186,165 52,634 84,921 141,885 434,767
Management fee (G)... 41,599 15,805 21,000 26,150 69,706
Interest expense (H). 286,988 133,720 266,000 244,734 790,594
Depreciation (D)..... 149,186 80,173 121,687 136,585 394,116
----------- ----------- ----------- ----------- ----------
Total expenses....... 712,401 306,257 541,890 598,722 1,842,000
----------- ----------- ----------- ----------- ----------
Net income (loss).... 41,599 23,743 (90,400) (39,345) (292,967)
=========== =========== =========== =========== ==========

Countryside
Bridgewater Bartow Shopping Total
Marketplace Marketplace Center Pro Forma
----------- ----------- ----------- -----------
Rental income........ 200,353 1,165,741 386,517 4,544,720
Percentage rental
income............. - 50,576 - 50,576
Additional rental
income............. 54,048 25,299 109,781 1,040,919
----------- ----------- ----------- -----------
Total income......... 254,401 1,241,616 496,298 5,636,215
----------- ----------- ----------- -----------
Advisor asset
management fee (C). 30,058 122,480 42,978 518,371
Property operating
expenses........... 65,670 27,260 134,800 1,128,102
Management fee (G)... 9,130 55,873 24,055 263,318
Interest expense (H). 167,061 631,181 239,568 2,759,846
Depreciation (D)..... 92,106 306,200 141,827 1,421,880
----------- ----------- ----------- -----------
Total expenses....... 364,025 1,142,994 583,228 6,091,517
----------- ----------- ----------- -----------
Net income (loss).... (109,624) 98,622 (86,930) (455,302)
=========== =========== =========== ===========

F-22

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)

(C) The advisor asset management fee has been calculated as 1% of the cost of
acquisition of the properties, prorated for the 6 months.

(D) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years for buildings and fifteen years
for improvements. The allocation of land, buildings and improvements was
based upon values stated in the related appraisal.

(E) The pro forma weighted average shares of common stock outstanding for the
six months ended June 30, 1999 was calculated by estimating the additional
shares sold to purchase each of the properties on a weighted average basis
plus the 20,000 shares purchased by the Advisor in connection with our
organization.

(F) The net income (loss) allocable to the minority interest is immaterial, and
therefore, has been excluded.

(G) Management fees are calculated as 4.5% of gross revenues.

(H) As part of the acquisition of certain of these properties, the Company
assumed existing debt. The pro forma adjustments relating to interest
expense were based on the following terms:

Lake Walden

Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Lake Walden Square of approximately $10,100,000 in connection
with the acquisition. The assumed debt, which originated October 30, 1997,
has an annual interest rate of 7.63% and requires monthly principal and
interest payments.

In addition, as part of the acquisition, the Company assumed a second
mortgage debt of approximately $800,000 with an interest rate of 10.9%.

Merchants Square

Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Merchants Square Shopping Center of approximately $4,300,000 in
connection with the acquisition. The assumed debt, which originated
October 9, 1998, has an annual interest rate of 7.5% and requires monthly
principal and interest payments.

Town Center

Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage
debts related to Town Center totaling approximately $7,600,000 in
connection with the acquisition. The assumed debts, which originated April
13, 1999, have annual interest rates ranging from 175 basis points over
LIBOR (currently 6.7%) to 7%.

F-23

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)

Boynton Commons

As part of the acquisition, the Company assumed the outstanding mortgage
debts related to Boynton Commons Shopping Center of approximately
$22,900,000. The assumed debts, which were modified March 19, 1999, have
annual interest rates of 175 basis points over LIBOR (currently 6.7%) and
7.21%, respectively.

Lake Olympia

Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Lake Olympia totaling approximately $5,933,000 in connection
with the acquisition. The assumed debt, which originated June 24, 1998,
has an annual interest rate of 8.25% and requires monthly principal and
interest payments.

Bridgewater Marketplace

As part of the acquisition, the Company assumed an outstanding mortgage
debt of approximately $4,450,000. The debt was modified on September 7,
1999. The principal balance was increased to approximately $4,780,000 and
has an annual interest rate of 175 basis points over LIBOR (currently
6.99%).

Bartow Marketplace

The Company purchased this property with the proceeds of a new first
mortgage loan in the amount of $18,375,000. The loan is evidenced by two
promissory notes. The notes bear an annual interest rate of 150 basis
points over LIBOR (currently 6.87%).

Countryside Shopping Center

Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Countryside Shopping Center of approximately $6,720,000 in
connection with the acquisition. The assumed debt, which originated March
31, 1998, has an annual interest rate of 175 basis points over LIBOR
(currently 7.13%).

F-24

Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

The following unaudited Pro Forma Consolidated Statement of Operations is
presented to effect the acquisition of the properties indicated in Note B of
the Notes to the Pro Forma Consolidated Statement of Operations as though they
occurred on January 1, 1998 except for Town Center and Bridgewater Marketplace
which were completed late in the fourth quarter of 1998 and significant
operations had not yet begun.

This unaudited Pro Forma Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations would have been
for the year ended December 31, 1998, nor does it purport to represent our
future financial position. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.

F-25

Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

Historical
-------------
Pro Forma
Company Adjustment
(A) (B) Pro Forma
------------- ----------- ------------

Rental income..................... $ - 7,776,417 7,776,417
Operating expense and real
estate tax recoveries........... - 1,281,597 1,281,597
------------- ----------- ------------
Total income...................... - 9,058,014 9,058,014
------------- ----------- ------------

Advisor asset management fee (E).. - 938,201 938,201
Property operating expenses....... - 1,434,622 1,434,622
Management fee (G)................ - 411,818 411,818
Interest expense (H).............. - 5,015,871 5,015,871
Depreciation (C).................. - 2,597,755 2,597,755
------------- ----------- ------------
Total expenses.................... - 10,398,267 10,398,267
------------
Net loss applicable to
common shareholders (F)......... $(1,340,253)
============

Weighted average number of
shares of common stock
outstanding (D)................. 4,120,500
============

Basic and diluted net loss
per weighted average
shares of common stock
outstanding (D)................. $ (.33)
============

See accompanying notes to pro forma consolidated statement of operations.

F-26

<TABLE> Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

(A) Historical information is not applicable as the Company had no operations through December 31, 1998.

(B) Total pro forma adjustments for acquisitions are as though they were acquired January 1, 1998.
<CAPTION>
Countryside
Lake Merchants Boynton Lake Bartow Shopping Total
Walden Square Commons Olympia Marketplace Center Pro Forma
----------- ----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income............. $1,636,260 582,001 1,637,021 811,499 2,331,129 778,507 7,776,417
Additional rental income.. 307,229 173,038 263,043 243,936 109,643 184,708 1,281,597
----------- ----------- ----------- ------------ ----------- ----------- -----------
Total income.............. 1,943,489 755,039 1,900,064 1,055,435 2,440,772 963,215 9,058,014
----------- ----------- ----------- ------------ ----------- ----------- -----------
Advisor asset
management fee (E)...... 145,495 57,420 305,634 98,736 244,960 85,956 938,201
Property operating
expenses................ 381,443 169,316 288,616 296,719 57,949 240,579 1,434,622
Management fees (G)....... 87,975 35,181 85,503 49,979 109,835 43,345 411,818
Interest expense (H)...... 869,275 322,500 1,581,188 501,409 1,262,363 479,136 5,015,871
Depreciation (C).......... 447,882 192,416 788,231 273,170 612,401 283,655 2,597,755
----------- ----------- ----------- ------------ ----------- ----------- -----------
Total expenses............ 1,932,070 776,833 3,049,172 1,220,013 2,287,508 1,132,671 10,398,267
----------- ----------- ----------- ------------ ----------- ----------- -----------
Net income (loss)......... 11,419 (21,794) (1,149,108) (164,578) 153,264 (169,456) (1,340,253)
=========== =========== =========== ============ =========== =========== ===========

</TABLE>

F-27

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

Acquisition of Lake Walden Square, Plant City, Florida

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Lake Walden Square
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 1,636,260 - 1,636,260
Additional rental income.. 307,229 - 307,229
------------ ----------- -----------
Total income.............. 1,943,489 - 1,943,489
------------ ----------- -----------
Advisor asset
management fee (E)...... - 145,495 145,495
Property operating
expenses................ 381,443 - 381,443
Management fees (G)....... 87,975 - 87,975
Interest expense (H)...... 782,075 87,200 869,275
Depreciation (C).......... - 447,882 447,882
------------ ----------- -----------
Total expenses............ 1,251,493 680,577 1,932,070
------------ ----------- -----------
Net income (loss)......... $ 691,996 (680,577) 11,419
============ =========== ===========

Acquisition of Merchants Square, Zephyrhills, Florida

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Merchants Square
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 582,001 - 582,001
Additional rental income.. 173,038 - 173,038
------------ ----------- -----------
Total income.............. 755,039 - 755,039
------------ ----------- -----------
Advisor asset
management fee (E)..... - 57,420 57,420
Property operating
expenses................ 169,316 - 169,316
Management fees (G)....... 35,181 - 35,181
Interest expense (H)...... 72,305 250,195 322,500
Depreciation (C).......... - 192,416 192,416
------------ ----------- -----------
Total expenses............ 276,802 500,031 776,833
------------ ----------- -----------
Net income (loss)......... $ 478,237 (500,031) (21,794)
============ =========== ===========

F-28

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

Acquisition of Boynton Commons, Boynton Beach, Florida

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Boynton Commons
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 1,637,021 - 1,637,021
Additional rental income.. 263,043 - 263,043
------------ ----------- -----------
Total income.............. 1,900,064 - 1,900,064
------------ ----------- -----------
Advisor asset
management fee (E)...... - 305,634 305,634
Property operating
expenses................ 288,616 - 288,616
Management fees (G)....... 49,111 36,392 85,503
Interest expense (H)...... 1,515,721 65,467 1,581,188
Depreciation (C).......... - 788,231 788,231
------------ ----------- -----------
Total expenses............ 1,853,448 1,195,724 3,049,172
------------ ----------- -----------
Net income (loss)......... $ 46,616 (1,195,724) (1,149,108)
============ =========== ===========

Acquisition of Lake Olympia, Ocoee, Florida

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Lake Olympia
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 811,499 - 811,499
Additional rental income.. 243,936 - 243,936
------------ ----------- -----------
Total income.............. 1,055,435 - 1,055,435
------------ ----------- -----------
Advisor asset
management fee (E)..... - 98,736 98,736
Property operating
expenses................ 296,719 - 296,719
Management fees (G)....... 49,979 - 49,979
Interest expense (H)...... 501,409 - 501,409
Depreciation (C).......... - 273,170 273,170
------------ ----------- -----------
Total expenses............ 848,107 371,906 1,220,013
------------ ----------- -----------
Net income (loss)......... $ 207,328 (371,906) (164,578)
============ =========== ===========

F-29

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

Acquisition of Bartow Marketplace, Cartersville, Georgia

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Bartow Marketplace
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 2,331,129 - 2,331,129
Additional rental income.. 109,643 - 109,643
------------ ----------- -----------
Total income.............. 2,440,772 - 2,440,772
------------ ----------- -----------
Advisor asset
management fee (E)..... - 244,960 244,960
Property operating
expenses................ 57,949 - 57,949
Management fees (G)....... - 109,835 109,835
Interest expense (H)...... - 1,262,363 1,262,363
Depreciation (C).......... - 612,401 612,401
------------ ----------- -----------
Total expenses............ 57,949 2,229,559 2,287,508
------------ ----------- -----------
Net income (loss)......... $ 2,382,823 (2,229,559) 153,264
============ =========== ===========

Acquisition of Countryside Shopping Center, Naples, Florida

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Countryside Shopping Center
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 778,507 - 778,507
Additional rental income.. 184,708 - 184,708
------------ ----------- -----------
Total income.............. 963,215 - 963,215
------------ ----------- -----------
Advisor asset
management fee (E)..... - 85,956 85,956
Property operating
expenses................ 240,579 - 240,579
Management fees (G)....... 31,848 11,497 43,345
Interest expense (H)...... 336,092 143,044 479,136
Depreciation (C).......... - 283,655 283,655
------------ ----------- -----------
Total expenses............ 608,519 524,152 1,132,671
------------ ----------- -----------
Net income (loss)......... $ 354,696 (524,152) (169,456)
============ =========== ===========

F-30

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

(C) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years for buildings and fifteen years
for improvements. The allocation of land, buildings and improvements is
based upon values stated in the related appraisal.

(D) The pro forma weighted average number of shares of common stock for the
year ended December 31, 1998 was calculated by estimating the additional
shares sold to purchase each of the properties on a weighted average basis
plus the 20,000 shares purchased by the Advisor in connection with our
organization.

(E) The Advisor asset management fee has been calculated as 1% of the cost of
acquisition of the properties

(F) The net income (loss) allocable to the minority interest is immaterial, and
therefore, has been excluded.

(G) Management fees are calculated at 4.5% of gross revenues.

F-31

Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)

(H) As part of the acquisition of certain of these properties, the Company
assumed existing debt. The pro forma adjustments relating to interest
expense were based on the following terms:

Lake Walden

In addition, as part of the acquisition, the Company assumed a second
mortgage debt of approximately $800,000 with an interest rate of 10.9%.

Merchants Square

Boynton Commons

Lake Olympia

Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Lake Olympia totaling approximately $5,900,000 in connection
with the acquisition. The assumed debt, which originated June 24, 1998,
has an annual interest rate of 8.25% and requires monthly principal and
interest payments.

Bartow Marketplace

Countryside Shopping Center

F-32

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Lake Walden Square for the year
ended December 31, 1998. This Historical Summary is the responsibility of the
management of Inland Retail Real Estate Trust, Inc. Our responsibility is to
express an opinion on the Historical Summary based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Historical Summary. We believe that our audit provides a reasonable basis
for our opinion.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc., as described in note 2. The presentation is not intended to be a
complete presentation of Lake Walden Square's revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Lake Walden Square for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
July 2, 1999

F-33

Lake Walden Square
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Gross income:
Base rental income.............................. $1,636,260
Operating expense and real estate
tax recoveries................................ 294,334
Percentage rent................................. 425
Other income.................................... 12,470
-----------
Total Gross Income.............................. 1,943,489
-----------
Direct operating expenses:
Operating expenses.............................. 173,592
Real estate taxes............................... 166,039
Utilities....................................... 30,914
Insurance....................................... 10,898
Management Fees................................. 87,975
Interest Expense................................ 782,075
-----------
Total direct operating expenses................. 1,251,493
-----------
Excess of gross income over
direct operating expenses..................... $ 691,996
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-34

Lake Walden Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

1. Business

Lake Walden Square (Lake Walden) is located in Plant City, Florida. It
consists of approximately 263,000 square feet of gross leasable area and
was 92% leased and occupied at December 31, 1998. Approximately 62% of
Lake Walden is leased to three tenants representing approximately 55% of
base rental income. An Affiliate of Inland Retail Real Estate Trust, Inc.
purchased Lake Walden from an unaffiliated third party (Seller) on behalf
of Inland Retail Real Estate Trust, Inc. on May 6, 1998. Inland Retail
Real Estate Trust, Inc. will acquire Lake Walden from this affiliate at
their cost upon receipt of proceeds from an equity offering.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc. and is not intended to be a complete presentation of Lake
Walden Square's revenues and expenses. The Historical Summary has been
prepared on the accrual basis of accounting and requires management of Lake
Walden Square to make estimates and assumptions that affect the reported
amounts of the revenues and expenses during the reporting period. Actual
results may differ from those estimates.

3. Gross Income

Lake Walden leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Lake Walden Square is reimbursed for common
area, real estate, insurance costs and management fees.

Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments increased base rental income by $7,627 for the
year ended December 31, 1998.

F-35

Lake Walden Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998 are as follows:

Year Amount
---- ------
1999 $ 1,674,258
2000 1,623,155
2001 1,497,366
2002 1,314,614
2003 1,131,801
Thereafter 9,418,719
-----------
$16,659,913
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Lake Walden. Costs such as
depreciation, amortization, professional fees and loan assumption fees are
excluded from the Historical Summary.

The seller provided management services for Lake Walden for an annual fee
of 4% of gross revenues (as defined) through May 6, 1998. Subsequent to
the sale of Lake Walden to the affiliate (note 1), a new management
agreement was executed with an annual management fee of 4.5% of gross
revenues (as defined).

Inland Retail Real Estate Trust, Inc. will assume the outstanding first
mortgage debt related to Lake Walden Square of approximately $10,100,000 in
connection with the acquisition. The assumed debt, which originated
October 30, 1997 and matures on November 1, 2007, has an annual interest
rate of 7.63% and requires monthly principal and interest payments.

In addition, Inland Retail Real Estate Trust, Inc. will assume a second
mortgage debt of approximately $800,000 in connection with the acquisition.
Within a short time thereafter, the debt will subsequently be paid off by
Inland Retail Real Estate Trust, Inc. and accordingly, the related interest
expense is excluded from the Historical Summary.

F-36

Lake Walden Square
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

Gross income:
Base rental income.............................. $ 898,348
Operating expense and real estate
tax and insurance recoveries.................. 353,489
-----------
Total Gross Income.............................. 1,251,837
-----------
Direct operating expenses:
Operating expenses.............................. 228,849
Management fees................................. 56,333
Real estate taxes............................... 87,500
Insurance....................................... 5,449
Interest Expense................................ 430,482
-----------
Total direct operating expenses................. 808,613
-----------
Excess of gross income over
direct operating expenses..................... $ 443,224
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-37

Lake Walden Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

1. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses for
the six months ended June 30, 1999 has been prepared from operating
statements provided by the owners of the property during that period and
requires management of Lake Walden Square to make estimates and assumptions
that affect the amounts of the revenues and expenses during that period.
Actual results may differ from those estimates.

In the opinion of management, all normal recurring adjustments necessary
for a fair presentation of results for the unaudited interim period
presented have been reflected. Certain information in footnote disclosures
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.

2. Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debt related to Lake Walden Square of approximately $10,100,000 in
connection with the acquisition. The assumed debt, which originated
October 30, 1997 and matures November 1, 2007, has an annual interest rate
of 7.63% and requires monthly principal and interest payments.

In addition, as part of the acquisition, the Company will assume a second
mortgage debt of approximately $800,000 with an interest rate of 10.9%.

F-38

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Merchants Square Shopping Center for
the year ended December 31, 1998. This Historical Summary is the
responsibility of the management of Inland Retail Real Estate Trust, Inc. Our
responsibility is to express an opinion on the Historical Summary based on our
audit.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Merchants Square Shopping Center for the year ended December 31,
1998, in conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
July 2, 1999

F-39

Merchants Square Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Gross income:
Base rental income.............................. $ 582,001
Operating expense and real estate
tax recoveries................................ 171,468
Percentage rent................................. 576
Other income.................................... 994
-----------
Total Gross Income.............................. 755,039
-----------
Direct operating expenses:
Operating expenses.............................. 68,924
Real estate taxes............................... 90,572
Insurance....................................... 9,820
Management Fees................................. 35,181
Interest Expense................................ 72,305
-----------
Total direct operating expenses................. 276,802
-----------
Excess of gross income over
direct operating expenses..................... $ 478,237
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-40

Merchants Square Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

1. Business

Merchants Square Shopping Center (Merchants Square) is located in
Zephyrhills, Florida. It consists of 74,850 square feet of gross leasable
area and was 100% leased and occupied at December 31, 1998. Approximately
64% of Merchants Square is leased by one major tenant, Kash N' Karry,
representing approximately 55% of base rental income. An Affiliate of
Inland Retail Real Estate Trust, Inc. purchased Merchants Square from an
unaffiliated third party (Seller) on behalf of Inland Retail Real Estate
Trust, Inc. on October 9, 1998. Inland Retail Real Estate Trust, Inc. will
acquire Merchants Square from this affiliate at their cost upon receipt of
proceeds from equity offering.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc. and is not intended to be a complete presentation of Merchants
Square's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management of Merchants
Square to make estimates and assumptions that affect the reported amounts
of the revenues and expenses during the reporting period. Actual results
may differ from those estimates.

3. Gross Income

Merchants Square leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. The leases
include provisions under which Merchants Square is reimbursed for common
area, real estate taxes, insurance costs and management fees. Certain of
the leases contain renewal options for various periods at various rental
rates.

Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $1,782 for the
year ended December 31, 1998.

F-41

Merchants Square Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998 are as follows:

Year Amount
---- ------
1999 $ 564,443
2000 536,668
2001 500,796
2002 481,711
2003 418,129
Thereafter 3,004,744
-----------
$ 5,506,491
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Merchants Square. Costs
such as depreciation, amortization and professional fees are excluded from
the Historical Summary.

The Seller provided management services for Merchants Square for an annual
fee ranging from 4% to 6% of gross revenues (as defined) through October 9,
1998. Subsequent to the sale of Merchants Square to the affiliate (note
1), a new management agreement was executed with an annual management fee
of 4.5% of gross revenues (as defined).

Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debt related to Merchant Square of approximately $4,300,000 in connection
with the acquisition. The assumed debt which originated October 9, 1998
and matures November 1, 2008, has an annual interest rate of 7.5% payable
monthly for the first 12 months which can be adjusted to an annual interest
rate of 7.25% subsequently upon payment of scheduled principal payments.

5. Pro Forma Adjustment (unaudited)

The interest expense associated with the assumed debt discussed in note 4,
would have been approximately $322,500 if the related debt had been in
existence since January 1, 1998.

F-42

Merchants Square Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

Gross income:
Base rental income.............................. $ 297,440
Operating expense and real estate
tax and insurance recoveries.................. 121,773
-----------
Total Gross Income.............................. 419,213
-----------
Direct operating expenses:
Operating expenses.............................. 41,096
Management Fees................................. 18,265
Real estate taxes............................... 50,000
Insurance....................................... 5,150
Interest Expense................................ 160,464
-----------
Total direct operating expenses................. 274,975
-----------
Excess of gross income over
direct operating expenses..................... $ 144,238
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-43

Merchants Square Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

1. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Merchants Square Shopping Center to make estimates and
assumptions that affect the amounts of the revenues and expenses during that
period. Actual results may differ from those estimates.

In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.

2. Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debt related to Merchants Square Shopping Center of approximately $4,300,000
in connection with the acquisition. The assumed debt, which originated
October 9, 1998 and matures November 1, 2008, has an annual interest rate of
7.5% payable monthly for the first 12 months which can be adjusted to an
annual interest rate of 7.25% subsequently upon payment of scheduled
principal payments.

F-44

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Town Center Commons for the period
from January 1, 1999 through March 31, 1999. This Historical Summary is the
responsibility of the management of Inland Retail Real Estate Trust, Inc. Our
responsibility is to express an opinion on the Historical Summary based on our
audit.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Town Center Commons for the period from January 1, 1999 through
March 31, 1999, in conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
July 2, 1999

F-45

Town Center Commons
Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through March 31, 1999

Gross income:
Base rental income.............................. $ 185,358
Operating expense and real estate
tax recoveries................................ 23,771
-----------
Total Gross Income.............................. 209,129
-----------
Direct operating expenses:
Operating expenses.............................. 15,522
Real estate taxes............................... 22,000
Utilities....................................... 1,053
Insurance....................................... 2,805
Management Fees................................. 7,379
-----------
Total direct operating expenses................. 48,759
-----------
Excess of gross income over
direct operating expenses..................... $ 160,370
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-46

Town Center Commons
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through March 31, 1999

1. Business

Town Center Commons (Town Center) is located in Kennesaw, Georgia. It
consists of approximately 72,100 square feet of gross leasable area and was
96% leased and occupied at March 31, 1999. Approximately 59% of Town
Center is leased to one tenant, J.C. Penney Home Store, representing
approximately 63% of base rental income. In addition, Town Center is also
anchored by an 80,000 square foot Gaylans which owns the land and building.
An affiliate of Inland Retail Real Estate Trust, Inc. purchased Town Center
from an unaffiliated third party (Seller) on behalf of Inland Retail Real
Estate Trust, Inc. on April 13, 1999. Inland Retail Real Estate Trust,
Inc. will acquire Town Center from this affiliate at their cost upon
receipt of proceeds from an equity offering.

Town Center was under development throughout the majority of 1998 with
significant property operations commencing January 1, 1999. As such, the
period from January 1, 1999 through March 31, 1999 represents the operating
results of the property subsequent to development and are expected to
approximate future anticipated operations.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc. and is not intended to be a complete presentation of Town
Center's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management of Town Center
to make estimates and assumptions that affect the reported amounts of the
revenues and expenses during the reporting period. Actual results may
differ from those estimates.

3. Gross Income

Town Center leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Town Center is reimbursed for common area
costs, real estate taxes, insurance costs and management fees. Certain of
the leases contain renewal options for various periods at various rental
rates.

F-47

Town Center Commons
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through March 31, 1999

Minimum rents to be received from tenants under operating leases in effect
at March 31, 1999 are as follows:

Year Amount
---- ------
1999 $ 719,058
2000 960,831
2001 960,831
2002 960,831
2003 945,498
Thereafter 2,955,083
-----------
$ 7,502,132
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Town Center. Costs such as
interest expense, depreciation, amortization and professional fees are
excluded from the Historical Summary.

Town Center is managed pursuant to the terms of a management agreement for
an annual fee of 4% to 6% of gross revenues (as defined). Subsequent to
the sale of Town Center (note 1), the current management agreement will
cease. Any new management agreement may cause future management fees to
differ from the amounts reflected in the Historical Summary.

As Town Center was under development during 1998, the property is subject
to reassessment for real estate taxes. The amount included in the
financial statements represents management's best estimate of the 1999 real
estate tax liability.

5. Pro Forma Adjustment (unaudited)

Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debts related to Town Center of approximately $7,600,000 in connection with
the acquisition. The assumed debts which originated April 13, 1999 and
mature April 13, 2000, have annual interest rates ranging from 175 points
over LIBOR (currently 6.7%) to 7%.

The interest expense associated with the assumed debt would have been
approximately $33,000 if the related debt had been in existence since
January 1, 1999.

F-48

Town Center Commons
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

Gross income:
Base rental income.............................. $ 359,529
Operating expense and real estate
tax and insurance recoveries.................. 91,961
-----------
Total Gross Income.............................. 451,490
-----------
Direct operating expenses:
Operating expenses.............................. 37,931
Management Fees................................. 21,000
Real estate taxes............................... 41,380
Insurance....................................... 5,610
Interest Expense................................ 110,833
-----------
Total direct operating expenses................. 216,754
-----------
Excess of gross income over
direct operating expenses..................... $ 234,736
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-49

Town Center Commons
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

1. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Town Center Commons to make estimates and assumptions that
affect the amounts of the revenues and expenses during that period. Actual
results may differ from those estimates.

In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.

2. Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debts related to Town Center totaling approximately $7,600,000 in connection
with the acquisition. The assumed debts, which originated April 13, 1999,
have annual interest rates ranging from 175 basis points over LIBOR
(currently 6.7%) to 7%.

F-50

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Boynton Commons Shopping Center for
the year ended December 31, 1998. This Historical Summary is the
responsibility of the management of Inland Retail Real Estate Trust, Inc. Our
responsibility is to express an opinion on the Historical Summary based on our
audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No.1 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Boynton Commons Shopping Center's
revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Boynton Commons Shopping Center for the year ended December 31,
1998, in conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
March 18, 1999

F-51

Boynton Commons Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Gross income:
Base rental income.............................. $1,637,021
Operating expense and real estate
tax recoveries................................ 262,713
Other income.................................... 330
-----------
Total Gross Income.............................. 1,900,064
-----------
Direct operating expenses:
Real estate taxes............................... 198,598
Operating expenses.............................. 47,748
Management Fees................................. 49,111
Insurance....................................... 10,966
Utilities....................................... 31,304
Interest Expense................................ 1,515,721
-----------
Total direct operating expenses................. 1,853,448
-----------
Excess of gross income over
direct operating expenses..................... $ 46,616
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-52

Boynton Commons Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

1. Business

Boynton Commons Shopping Center (Boynton Commons) is located in Boynton
Beach, Florida. Phases of the property were open in 1997, however, tenant
space was still under construction through October of 1998. It consists of
approximately 212,000 square feet of gross leasable area and was 89% leased
and occupied at December 31, 1998. Approximately 13% of Boynton Commons is
leased to one tenant representing approximately 24% of base rental income.
An Affiliate of Inland Retail Real Estate Trust, Inc. purchased Boynton
Commons from an unaffiliated third party (seller) on behalf of Inland
Retail Real Estate Trust, Inc. on March 19, 1999. Inland Retail Real
Estate Trust, Inc. will acquire Boynton Commons from this affiliate at
their cost upon receipt of proceeds from an equity offering.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No.1 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Boynton Commons' revenues and expenses. The Historical
Summary has been prepared on the accrual basis of accounting and requires
management of Boynton Commons to make estimates and assumptions that affect
the reported amounts of the revenues and expenses during the reporting
period. Actual results may differ from those estimates.

3. Gross Income

Boynton Commons leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Boynton Commons is reimbursed for common
area, real estate taxes and insurance costs. Certain leases contain
renewal options at various periods at various rental rates.

F-53

Boynton Commons Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998 are as follows:

Year Amount
---- ------
1999 $ 2,546,237
2000 2,565,645
2001 2,576,560
2002 2,585,143
Thereafter 38,163,356
-----------
$48,436,941
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Boynton Commons. Costs
such as depreciation, amortization and professional fees are excluded from
the Historical Summary.

Boynton Commons is managed by an affiliate of the seller pursuant to the
terms of an management agreement for an annual fee of 3% of base rents.
Subsequent to the sale of Boynton Commons (note 1), the current management
agreement will cease. Any new management agreement may cause future
management fees to differ from the amounts reflected in the Historical
Summary.

Inland Retail Real Estate Trust, Inc. will assume the outstanding debt of
approximately $22,000,000 in connection with the acquisition.
Approximately $15,000,000 of this debt has a term of seven years and a
fixed rate of 7% payable in monthly installments of interest only. The
remaining $7,000,000 is payable in monthly installments of interest only at
a floating rate and is due in March 2000.

In connection with the acquisition of Boynton Commons by an Affiliate
(note 1), the original debt, noted above, was modified. The principal
balance was increased to approximately $22,900,000 and the fixed interest
rate was increased to 7.21%. The remaining terms were unchanged. Inland
Retail Real Estate Trust, Inc. is expected to assume this modified debt in
connection with their acquisition. The additional interest expense
associated with the modification, which occurred in March 1999, was
excluded from the Historical Summary.

F-54

Boynton Commons Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

Gross income:
Base rental income.............................. $1,191,020
Operating expense and real estate
tax and insurance recoveries.................. 358,013
-----------
Total Gross Income.............................. 1,549,033
-----------
Direct operating expenses:
Operating expenses.............................. 219,555
Management Fees................................. 69,706
Real estate taxes............................... 202,212
Insurance....................................... 13,000
Interest Expense................................ 782,013
-----------
Total direct operating expenses................. 1,286,486
-----------
Excess of gross income over
direct operating expenses..................... $ 262,547
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-55

Boynton Commons Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

1. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Boynton Commons Shopping Center to make estimates and
assumptions that affect the amounts of the revenues and expenses during that
period. Actual results may differ from those estimates.

In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.

2. As part of the acquisition, the Company assumed the outstanding mortgage
debts related to Boynton Commons Shopping Center of approximately
$22,900,000. The assumed debts, which were modified March 19, 1999, have
annual interest rates of 175 basis points over LIBOR (currently 6.7%) and
7.21%, respectively.

F-56

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Lake Olympia Square for the year
ended December 31, 1998. This Historical Summary is the responsibility of the
management of Inland Retail Real Estate Trust, Inc. Our responsibility is to
express an opinion on the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Lake Olympia Square's revenues
and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Lake Olympia Square for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
July 2, 1999

F-57

Lake Olympia Square
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Gross income:
Base rental income.............................. $ 811,499
Operating expense and real estate
tax recoveries................................ 238,369
Other income.................................... 5,567
-----------
Total gross income.............................. 1,055,435
-----------
Direct operating expenses:
Operating expenses.............................. 107,963
Real estate taxes............................... 126,363
Utilities....................................... 39,554
Insurance....................................... 22,839
Management fees................................. 49,979
Interest expense................................ 501,409
-----------
Total direct operating expenses................. 848,107
-----------
Excess of gross income over
direct operating expenses..................... $ 207,328
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-58

Lake Olympia Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

1. Business

Lake Olympia Square is located in Ocoee, Florida. It consists of
approximately 85,800 square feet of gross leasable area and was 95% leased
and occupied at December 31, 1998. Approximately 51% of Lake Olympia
Square is leased by one major tenant, Winn-Dixie Stores, representing
approximately 36% of base rental income. An Affiliate of Inland Retail
Real Estate Trust, Inc. purchased Lake Olympia Square from an unaffiliated
third party (the Seller) on behalf of Inland Retail Real Estate Trust, Inc.
on June 24, 1998. Inland Retail Real Estate Trust, Inc. will acquire Lake
Olympia Square from this Affiliate at their cost upon receipt of proceeds
from an equity offering.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No.2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Lake Olympia Square's revenues and expenses. The
Historical Summary has been prepared on the accrual basis of accounting and
requires management of Lake Olympia Square to make estimates and
assumptions that affect the reported amounts of the revenues and expenses
during the reporting period. Actual results may differ from those
estimates.

3. Gross Income

Lake Olympia Square leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. The leases
include provisions under which Lake Olympia Square is reimbursed for common
area costs, real estate taxes, and insurance costs.

Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $48,724 for the
year ended December 31, 1998.

F-59

Lake Olympia Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998 are as follows:

Year Amount
---- ------
1999 $ 828,960
2000 800,052
2001 719,510
2002 605,519
2003 605,519
Thereafter 4,207,448
-----------
$ 7,767,008
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Lake Olympia Square. Costs
such as depreciation, amortization, and professional fees are excluded from
the Historical Summary.

The seller provided management services for Lake Olympia for an annual fee
of 5% of gross revenues (as defined) through June 24, 1998. Subsequent to
the sale of Lake Olympia to the Affiliate (note 1), a new management
agreement was executed with an annual management fee of 4.5% of gross
revenues (as defined).

Inland Retail Real Estate Trust, Inc. will assume the outstanding first
mortgage debt related to Lake Olympia of approximately $5,933,000 in
connection with the acquisition (note 1). The assumed debt, which
originated May 1997 and matures April 2007, has an annual interest rate of
8.25% and requires monthly interest and principal payments.

F-60

Lake Olympia Square
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

Gross income:
Base rental income.............................. $ 425,560
Operating expense and real estate
tax and insurance recoveries.................. 133,817
-----------
Total gross income.............................. 559,377
-----------
Direct operating expenses:
Operating expenses.............................. 72,277
Management fees................................. 26,150
Real estate taxes............................... 67,012
Insurance....................................... 2,596
Interest expense................................ 244,734
-----------
Total direct operating expenses................. 412,769
-----------
Excess of gross income over
direct operating expenses..................... $ 146,608
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-61

Lake Olympia Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

1. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Lake Olympia Square to make estimates and assumptions that
affect the amounts of the revenues and expenses during that period. Actual
results may differ from those estimates.

In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.

2. As part of the acquisition, the Company assumed the outstanding mortgage
debt related to Lake Olympia Square of approximately $5,900,000. The
assumed debt, which originated June 24, 1998, has an annual interest rate of
8.25% and requires monthly principal and interest payments.

F-62

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Bridgewater Marketplace for the
period from January 1, 1999 through June 30, 1999. This Historical Summary is
the responsibility of the management of Inland Retail Real Estate Trust, Inc.
Our responsibility is to express an opinion on the Historical Summary based on
our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Bridgewater Marketplace's
revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Bridgewater Marketplace for the period from January 1, 1999
through June 30, 1999, in conformity with generally accepted accounting
principles.

KPMG LLP

Chicago, Illinois
August 26, 1999

F-63

Bridgewater Marketplace
Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999

Gross income:
Base rental income.............................. $ 200,353
Operating expense and real estate
tax recoveries................................ 54,048
-----------
Total gross income.............................. 254,401
-----------
Direct operating expenses:
Operating expenses.............................. 27,269
Real estate taxes............................... 35,000
Insurance....................................... 3,401
Management fees................................. 9,130
Interest expense................................ 152,635
-----------
Total direct operating expenses................. 227,435
-----------
Excess of gross income over
direct operating expenses..................... $ 26,966
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-64

Bridgewater Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999

1. Business

Bridgewater Marketplace (Bridgewater) is located in Orlando, Florida. It
consists of approximately 58,000 square feet of gross leasable area and was
94% leased and 86% occupied at June 30, 1999. Approximately 76% of
Bridgewater is leased to one tenant, Winn-Dixie, representing approximately
88% of base rental income. Inland Retail Real Estate Trust, Inc. has
signed a sale and purchase agreement for the purchase of Bridgewater from
an unaffiliated third-party.

Bridgewater was under development throughout the majority of 1998 with
significant operations commencing January 1, 1999. As such, the period
from January 1, 1999 through June 30, 1999 represents the operating results
of the property subsequent to development and is representative of future
anticipated operations.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Bridgewater's revenues and expenses. The Historical
Summary has been prepared on the accrual basis of accounting and requires
management of Bridgewater to make estimates and assumptions that affect the
reported amounts of the revenues and expenses during the reporting period.
Actual results may differ from those estimates.

3. Gross Income

Bridgewater leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Bridgewater is reimbursed for common area
costs, real estate taxes, insurance costs and management fees. Certain of
the leases contain renewal options for various periods at various rental
rates.

Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $3,697 for the
six months ended June 30, 1999.

F-65

Bridgewater Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999

Minimum rents to be received from tenants under operating leases in effect
at June 30, 1999, are as follows:

Year Amount
---- ------
1999 $ 260,935
2000 534,587
2001 534,587
2002 519,315
2003 508,063
Thereafter 5,637,199
-----------
$ 7,994,686
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Bridgewater. Costs such as
depreciation, amortization, and professional fees are excluded from the
Historical Summary.

Bridgewater is managed pursuant to the terms of a management agreement for
an annual fee of 4% of rent collection (as defined). Subsequent to the
sale of Bridgewater (note 1), the current management will cease. Any new
management agreement may cause future management fees to differ from the
amounts reflected in the Historical Summary.

As Bridgewater was under development during 1998, the property is subject
to reassessment for real estate taxes. The amount included in the
financial statements represents management's best estimate of the 1999 real
estate tax liability.

Inland Retail Real Estate Trust, Inc. will assume certain outstanding
mortgage debt (note 5) related to Bridgewater of approximately $4,450,000
in connection with the acquisition. The assumed debt, which originated
February 1998 and matures February 2000, has an annual interest rate of
6.86% and requires interest only payments (note 5).

F-66

Bridgewater Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999

5. Pro Forma Adjustment (unaudited)

In connection with the acquisition of Bridgewater by Inland Retail Real
Estate Trust, Inc. (note 1), the original debt (note 4) will be modified.
The principal balance will be increased to approximately $4,780,000 and the
annual interest rate will be based on LIBOR plus 1.75% (6.99% at June 30,
1999). Approximately $1,792,500 of the $4,780,000 will be due one year
from the date of closing and the remainder will be due six years
thereafter. The additional interest expense associated with the
modification, which will occur at the closing of the acquisition, was
excluded from the Historical Summary.

F-67

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Bartow Marketplace for the year
ended December 31, 1998. This Historical Summary is the responsibility of the
management of Inland Retail Real Estate Trust, Inc. Our responsibility is to
express an opinion on the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Bartow Marketplace's revenues and
expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Bartow Marketplace for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
August 30, 1999

F-68

Bartow Marketplace
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Gross income:
Base rental income.............................. $2,331,129
Percentage rental income........................ 50,529
Operating expense and real estate
tax recoveries................................ 59,114
-----------
Total gross income.............................. 2,440,772
-----------
Direct operating expenses:
Operating expenses.............................. 22,796
Real estate taxes............................... 22,408
Insurance....................................... 2,081
Utilities....................................... 10,664
-----------
Total direct operating expenses................. 57,949
-----------
Excess of gross income over
direct operating expenses..................... $2,382,823
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-69

Bartow Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

1. Business

Bartow Marketplace (Bartow) is located in Bartow County, Georgia. It
consists of approximately 375,800 square feet of gross leasable area and
was 100% leased and occupied at December 31, 1998. Approximately 90% of
Bartow is leased to two tenants representing approximately 81% of base
rental income. Inland Retail Real Estate Trust, Inc. has signed a sale and
purchase agreement for the purchase of Bartow from an unaffiliated third-
party.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Bartow's revenues and expenses. The Historical Summary has
been prepared on the accrual basis of accounting and requires management of
Bartow to make estimates and assumptions that affect the reported amounts
of the revenues and expenses during the reporting period. Actual results
may differ from those estimates.

3. Gross Income

Bartow leases retail space under various lease agreements with its tenants.
All leases are accounted for as operating leases. Certain of the leases
include provisions under which Bartow is reimbursed for common area costs,
real estate taxes, and insurance costs. Certain of the leases contain
renewal options for various periods at various rental rates. Certain of
the leases contain additional rental income based on a stated percentage of
gross sales over the tenant's annual break point.

Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $4,431 for the
year ended December 31, 1998.

F-70

Bartow Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998, are as follows:

Year Amount
---- ------
1999 $ 2,329,189
2000 2,334,265
2001 2,152,889
2002 2,081,141
2003 2,083,304
Thereafter 22,835,586
-----------
$33,816,374
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Bartow. Costs such as
mortgage interest, depreciation, amortization, and professional fees are
excluded from the Historical Summary.

Two tenants, leasing approximately 90% of gross leasable area, pay their
operating expenses, including real estate taxes, directly. As such, the
amounts are excluded from the Historical Summary.

Bartow is currently managed by the seller and is not charged an annual
management fee. Subsequent to the sale of Bartow (note 1), Inland Retail
Real Estate Trust, Inc. will execute a management agreement with the
tenants in which an annual management fee would be charged. A new
management agreement may cause future operating expenses to differ from the
amounts reflected in the Historical Summary.

F-71

Bartow Marketplace
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

Gross income:
Base rental income.............................. $1,165,741
Percentage rental income........................ 50,576
Operating expense and real estate
tax and insurance recoveries.................. 25,299
-----------
Total gross income.............................. 1,241,616
-----------
Direct operating expenses:
Operating expenses.............................. 15,170
Management fees................................. 55,873
Real estate taxes............................... 11,204
Insurance....................................... 886
-----------
Total direct operating expenses................. 83,133
-----------
Excess of gross income over
direct operating expenses..................... $1,158,483
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-72

Bartow Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

1. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Bartow Marketplace to make estimates and assumptions that
affect the amounts of the revenues and expenses during that period. Actual
results may differ from those estimates.

In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.

F-73

Independent Auditors' Report

The Board of Directors
Inland Retail Real Estate Trust, Inc.:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Countryside Shopping Center for the
year ended December 31, 1998. This Historical Summary is the responsibility of
the management of Inland Retail Real Estate Trust, Inc. Our responsibility is
to express an opinion on the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Countryside Shopping Center's
revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Countryside Shopping Center for the year ended December 31, 1998,
in conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
October 15, 1999

F-74

Countryside Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Gross income:
Base rental income.............................. $ 778,507
Operating expense and real estate
tax recoveries................................ 183,010
Other income.................................... 1,698
-----------
Total Gross Income.............................. 963,215
-----------
Direct operating expenses:
Operating expenses.............................. 152,504
Real estate taxes............................... 67,117
Insurance....................................... 15,508
Management fees................................. 31,848
Utilities....................................... 5,450
Interest expense................................ 336,092
-----------
Total direct operating expenses................. 608,519
-----------
Excess of gross income over
direct operating expenses..................... $ 354,696
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-75

Countryside Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

1. Business

Countryside Shopping Center (Countryside) is located in Naples, Florida.
It consists of approximately 74,000 square feet of gross leasable area and
was 98% leased and occupied at December 31, 1998. Approximately 70% of
Countryside is leased to one tenant representing approximately 50% of base
rental income. An Affiliate of Inland Retail Real Estate Trust, Inc.
purchased Countryside from an unaffiliated third party (seller) on behalf
of Inland Retail Real Estate Trust, Inc. on March 31, 1998. Inland Retail
Real Estate Trust, Inc. will acquire Countryside from this affiliate at
their cost upon receipt of proceeds from an equity offering.

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Countryside's revenues and expenses. The Historical
Summary has been prepared on the accrual basis of accounting and requires
management of Countryside to make estimates and assumptions that affect the
reported amounts of the revenues and expenses during the reporting period.
Actual results may differ from those estimates.

3. Gross Income

Countryside leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which Countryside is reimbursed for common
area costs, real estate taxes, management fees and insurance costs.
Certain of the leases contain renewal options for various periods at
various rental rates.

F-76

Countryside Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998, are as follows:

Year Amount
---- ------
1999 $ 797,855
2000 802,466
2001 802,466
2002 700,625
2003 609,485
Thereafter 6,181,488
-----------
$ 9,894,385
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Countryside. Costs such as
depreciation, amortization and professional fees are excluded from the
Historical Summary.

The seller provided management services to Countryside through March 31,
1998 and did not charge an annual management fee. Subsequent to the sale
of Countryside to the affiliate (note 1), a new management agreement was
executed with an annual management fee of 4.5% of gross revenues (as
defined).

Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debt related to Countryside of approximately $6,720,000 in connection with
the acquisition. The assumed debt, which originated March 31, 1998 and
matures March 31, 2001, has an annual interest rate of 1.75% over LIBOR
(6.8% at December 31, 1998) and requires monthly interest only payments.

5. Pro Forma Adjustment (unaudited)

The interest expense associated with the assumed debt discussed in note 4,
would have been approximately $480,000 if the related debt had been in
existence since January 1, 1998.

F-77

Countryside Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

Gross income:
Base rental income.............................. $ 386,517
Operating expense and real estate
tax and insurance recoveries.................. 109,781
-----------
Total gross income.............................. 496,298
-----------
Direct operating expenses:
Operating expenses.............................. 80,800
Management fees................................. 24,055
Real estate taxes............................... 36,000
Insurance....................................... 18,000
Interest expense................................ 239,568
-----------
Total direct operating expenses................. 398,423
-----------
Excess of gross income over
direct operating expenses..................... $ 97,875
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-78

Countryside Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)

1. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Countryside Shopping Center to make estimates and assumptions
that affect the amounts of the revenues and expenses during that period.
Actual results may differ from those estimates.

In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.

2. Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Countryside Shopping Center of approximately $6,720,000 in
connection with the acquisition. The assumed debt, which originated March
31, 1998, has an annual interest rate of 175 basis points over LIBOR
(currently 7.13%).

F-79

APPENDIX A
PRIOR PERFORMANCE TABLES

The following prior performance tables contain information concerning
public real estate limited partnerships sponsored by Affiliates of the Advisor
(collectively, the "Partnerships" or the "Programs", and individually. the
"Partnership" or the "Program"). This information has been summarized, in
part, in narrative form in this Supplement under "Prior Performance of Our
Affiliates." The purpose of the tables is to provide information on the
performance of those partnerships in evaluating the experience of the
Affiliates of the Advisor as sponsors of such programs. However, the
inclusion of these tables does not imply that we will make investments
comparable to those reflected in the tables or that investors in our Shares
will experience returns comparable to those experienced in the programs
referred to in these tables. Persons who purchase our Shares in the Company
will not thereby acquire any ownership in any of the partnerships to which
these tables relate. The tables consist of:

Table I Experience in Raising and Investing Funds

Table II Compensation to IREIC and Affiliates

Table III Operating Results of Prior Programs

Table IV Results of Completed Programs

Table V Sales or Disposals of Properties

Table VI Acquisition of Properties by Programs*

* Prospective investors in Inland Retail Real Estate Trust, Inc. may obtain
copies of Table VI by contacting the Advisor.

Table VI is included in Part II of the Registration Statement filed with
the SEC of which this Supplement is a part. Upon written request to us or the
Advisor, any prospective investor may obtain, without charge, a copy of Table
VI. See also "Additional Information" for information on examining at, or
obtaining copies from, offices of the SEC.

A-1

Except with respect to Inland Land Appreciation Fund, L.P., Inland Land
Appreciation Fund II, L.P., and Inland Capital Fund, L.P., the partnerships
presented in the tables are public real estate limited partnership formed
primarily to acquire, operate and sell existing residential and commercial real
properties. Generally, the investment objectives of those partnerships were as
follows:

(1) Capital appreciation; and
(2) Cash distributions for limited partners.

Our investment objectives are to: (i) provide regular Distributions to
Stockholders in amounts which may exceed our taxable income due to the non-cash
nature of depreciation expense and, to such extent, will constitute a tax-
deferred return of capital, but in no event less than 95% of our taxable
income, pursuant to the REIT Requirements; (ii) provide a hedge against
inflation by entering into leases which contain clauses for scheduled rent
escalations or participation in the growth of tenant sales, permitting us to
increase Distributions and provide capital appreciation; and (iii) preserve
Stockholders' capital.

A-2

TABLE I

EXPERIENCE IN RAISING AND INVESTING FUNDS

Table I presents information on a dollar and percentage basis showing the
experience of Inland Real Estate Investment Corporation ("IREIC"), of which the
Advisor is a wholly owned subsidiary, in raising and investing funds in prior
partnerships where the offering closed in the three years prior to December 31,
1998. The Table particularly focuses upon the dollar amount available for
investment in properties expressed as a percentage of total dollars raised.

A-3

TABLE I-(Continued)

EXPERIENCE IN RAISING AND INVESTING FUNDS (A)
(000's omitted)

Inland Real Estate
Corporation
--------------------
1 Program
--------------------
Dollar amount offered (B)................. $ 647,000
Dollar amount raised...................... 539,331 100.00%
Less offering expenses:
Syndication fees (C).................... 51,109 9.48
Other fees (D).......................... 6,427 1.19
Organizational fees..................... 37 0.00
Reserves (E).............................. 2,815 0.00
---------- ---------
Available for investment.................. $ 478,943 89.33%
========== =========

Acquisition costs:
Cash down payments (F).................. $ 644,632
Other cash expenditures capitalized..... 2,578
----------
Total acquisition costs............... $ 647,210
==========

Percent leverage (G)...................... 44.65%
Date offerings commenced.................. (H)
Length of offering........................ (H)
Months to invest 90% of amount available
for investment (measured from beginning
of offering)............................ (H)

A-4

TABLE I-(Continued)

EXPERIENCE IN RAISING AND INVESTING FUNDS (A)
(000's omitted)

NOTES TO TABLE I

(A) The figures in this table are cumulative and are as of December 31, 1998.
The dollar amount raised represents the cash proceeds collected by the
program. The Table reflects payments made or to be made from investor
capital contributions upon receipt. The Table reflects experience for
Inland Real Estate Corporation ("IREC") , a REIT which closed in 1998.

(B) Does not reflect Shares offered for distribution to Stockholders
participating in the IREC's distribution reinvestment program.

(C) Syndication fees are paid by the program to an affiliate, Inland
Securities Corporation, or unaffiliated third parties commissions for the
sale of Shares. All of these syndication fees were utilized to pay
commissions and expenses of the offerings.

(D) Other fees are paid by the program to unaffiliated parties and consist
principally of printing, selling and registration costs.

(E) Generally, a working capital reserve is established to fund, among other
things, anticipated future cash flow deficits.

(F) Cash down payments include amounts paid at closing and projected amounts
to be paid from working capital reserves at mortgage balloon dates.
Actual amounts paid at the balloon dates will depend upon the operating
results of the partnerships.

(G) Represents mortgage financing at December 31, 1998 divided by the total
acquisition costs including such mortgage financing.

(H) On October 14, 1994, the program commenced an initial public offering, on
a best effort basis, ("Initial Offering") of 5,000,000 shares of common
stock ("Shares") at $10.00 per share. On July 24, 1996, the program
commenced an offering of an additional 10,000,000 Shares at $10.00 per
Share, on a best efforts basis, (the "Second Offering"). On July 14,
1997, the program commenced an offering of an additional 20,000,000
Shares at $10.00 per Share, on a best efforts basis, (the "Third
Offering"). On April 7, 1998, the program commenced an offering of an
additional 27,000,000 Shares at $11.00 per Share, on a best efforts
basis, (the "Fourth Offering"). In order to maximize flexibility in
evaluating strategic alternatives, the program's board of directors
decided to terminate the Fourth Offering on December 31, 1998. As of
December 31, 1998, the program had received subscriptions for a total of
16,642,397 Shares in the Fourth Offering. As of December 31, 1998,
substantially all proceeds available for investment from the offerings
were invested in real properties.

A-5

TABLE II

COMPENSATION TO IREIC AND AFFILIATES (A)

Table II summarizes the amount and type of compensation paid to IREIC and
its Affiliates in connection with the prior partnerships and program.

Some partnerships acquired their properties from Affiliates of the Advisor
which had purchased such properties from unaffiliated third parties.

A-6

TABLE II

COMPENSATION TO IREIC AND AFFILIATES (A)
(000's omitted)

Inland
Public Real Estate
Programs Corporation
------------- ------------
6 Programs 1 Program
------------- ------------
Date offering commenced......................... - 10/14/94
Dollar amount raised............................ $ 172,241 $ 539,331
============= ============

Amounts paid or payable to general partner or
affiliates from proceeds of offerings:
Selling commissions and underwriting fees... $ 5,885(B) 49,619(C)
Other offering expenses (D)................. 2,310 1,490
Acquisition cost and expense ............... 10,088(E) 661
============= ============

Dollar amount of cash available (deficiency)
from operations before deducting (adding)
payments to (from) general partner or
affiliates (F)................................ $ 16,025
=============

Amounts paid to (received from) general partner
or affiliates related to operations:
Property management fees (G)................ $ 845 4,129
Partnership subsidies received.............. 0 0
Accounting services......................... 228 115
Data processing service..................... 158 138
Legal services.............................. 239 14
Mortgage servicing fees..................... 0 130
Mortgage interest expense................... 0 206
Acquisition costs expensed.................. 0 431
Other administrative services............... 855 220
Property upgrades........................... 848 0
Property operating expenses................. 0 0

Dollar amount of property sales and refinancings
before payments to general partner and
affiliates (H):
Cash........................................ $ 15,529 0
Equity in notes and undistributed sales
proceeds.................................. 5,960 0

Dollar amounts paid or payable to general partner
or affiliates from sales and refinancings (I):
Sales commissions........................... $ 267 0
Property upgrade............................ 8 0
Mortgage brokerage fee...................... 0 0
Participation in cash distributions......... 0 0

A-7

TABLE II--(Continued)

COMPENSATION TO IREIC AND AFFILIATES
(000's omitted)

NOTES TO TABLE II

(A) The figures in this Table II relating to proceeds of the offerings are
cumulative and are as of December 31, 1998 and the figures relating to
cash available from operations are for the three years ending December
31, 1998. The dollar amount raised represents the cash proceeds
collected by the partnerships or program. Amounts paid or payable to
IREIC or affiliates from proceeds of the offerings represent payments
made or to be made to IREIC and affiliates from investor capital
contributions.

(B) The total amount of selling commissions paid to an affiliate includes
approximately $2,712,000, which was in turn paid to third party
soliciting dealers.

(C) The total amount of selling commissions paid to an affiliate includes
approximately $42,236,000, which was in turn paid to third party
soliciting dealers.

(D) Consists of legal, accounting, printing and other offering expenses,
including amounts to be paid to Inland Securities Corporation to be used
as incentive compensation to its regional marketing representatives and
amounts for reimbursement of the general partner for marketing, salaries
and direct expenses of its employees while directly engaged in
registering and marketing the Units and other marketing and organization
expenses.

(E) Represents initial cash down payments and future principal payments and
prepaid items and fees paid to IREIC and its affiliates in connection
with the acquisition of properties less amounts paid to unaffiliated
third parties to acquire such properties. Cash down payments include
amounts received at closing.

Public
Programs
-------------
6 Programs
-------------
Acquisition fees....................... $ 9,975
Reimbursement (at cost) for upgrades
and acquisition due diligence........ 113
Partnership down payments.............. 38,745
Inland down payments................... (38,745)
-------------
Acquisition cost and expense........... $ 10,088
=============

(F) See Note (B) to Table III.

A-8

TABLE II--(Continued)

COMPENSATION TO IREIC AND AFFILIATES
(000's omitted)

NOTES TO TABLE II

(G) An affiliate provides property management services for all properties
acquired by the partnerships or program. Management fees have not
exceeded 4.5% of the gross receipts from the properties managed. With
respect to Inland Capital Fund, L.P., Inland Land Appreciation Fund II,
L.P. and Inland Land Appreciation Fund, L.P., IREIC receives an annual
asset management fee equal to one-quarter of 1% of the original cost to
the partnership of undeveloped land, limited to a cumulative total over
the life of the partnership of 2% of the land's original cost to the
partnership.

(H) See Table V and Notes thereto regarding sales and disposals of
properties.

(I) Real estate sales commissions and participations in cash distributions
are paid or payable to IREIC and/or its affiliates in connection with the
sales of properties. Payments of all amounts shown are subordinated to
the receipt by the limited partners of their original capital investment.
See Table V and Notes thereto.

A-9

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS

Table III presents operating results for programs, the offerings of which
closed during each of the five years ended prior to December 31, 1998. The
operating results consist of:

--The components of taxable income (loss);
--Taxable income or loss from operations and property sales;
--Cash available and source, before and after cash distributions to
investors; and
--Tax and distribution data per $1,000 invested.

A-10

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS
(000's omitted, except for amounts presented per $1,000 invested)

Inland Real Estate Corporation
--------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
Gross revenues................ $ 73,302 29,422 6,328 1,180
Profit on sale of properties.. 0 0 0 0

Less:
Operating expenses.......... 21,017 8,863 1,873 327
Interest expense............ 13,422 5,655 597 164
Program expenses............ 3,114 1,576 449 22
Depreciation & amortization. 11,663 4,681 957 170
--------- --------- --------- ---------
Net income (loss)-GAAP basis.. $ 24,086 8,647 2,452 497
========= ========= ========= =========

Taxable income (loss) (A):

Total from operations......... 0 0 0 0
From gain on sale............. 0 0 0 0
========= ========= ========= =========

Cash available (deficiency)
from operations (B)......... 40,002 15,218 5,180 978
Cash available from sales (C). 0 0 0 0
Cash (deficiency) from
Financings.................. 166,352 43,926 25,670 0
Total cash available before --------- --------- --------- ---------
distributions and special
items....................... 206,354 59,144 30,850 978

A-11

TABLE III--(Continued)

OPERATING RESULTS OF PRIOR PROGRAMS
(000's omitted, except for amounts presented per $1,000 invested)

Inland Real Estate Corporation
--------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
Less distributions to investors:
From operations............. 33,297 11,899 3,286 607
From sales and refinancings. 0 0 0 0
From return of capital...... 0 0 0 0
From supplemental capital
contribution (return on
capital).................... 0 0 0 0

Less distributions to general
partner:
From operations............. 0 0 0 0
From sales and refinancings. 0 0 0 0
Cash available after --------- --------- --------- ---------
distributions before
special items............... 173,057 47,245 27,564 371

Special items:
Advances (repayments) from
(to) general partner or
affiliates................ 0 0 0 0
Repurchase of shares (D).... (1,317) (421) (30) (27)
Use of partnership reserves. 0 0 0 0
Use of cash available for
offering purposes......... 0 0 0 0
Cash available after --------- --------- --------- ---------
distributions and special
items....................... $171,740 46,824 27,534 344
========= ========= ========= =========

Tax data per $1,000 invested (A):

Federal income tax results:
Ordinary income (loss):
From operations........... 0 0 0 0
From recapture............ 0 0 0 0
Capital gain.............. 0 0 0 0

A-12

TABLE III--(Continued)

OPERATING RESULTS OF PRIOR PROGRAMS
(000's omitted, except for amounts presented per $1,000 invested)

Inland Real Estate Corporation
--------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
Distribution date per $1,000 invested:

Cash distributions to investors:
Source (on GAAP basis):
Investment income......... 88 86 82 78
Return of capital......... 0 0 0 0
Supplemental capital
contributions (return on
capital)................. 0 0 0 0
Source (on cash basis):
Sales..................... 0 0 0 0
Refinancings.............. 0 0 0 0
Operations (E)............ 88 86 82 78
Return of capital......... 0 0 0 0
Supplemental capital
contributions (return on
capital)................. 0 0 0 0

Percent of properties remaining
unsold (F).................. 100.00%
========

A-13

TABLE III--(Continued)

OPERATING RESULTS OF PRIOR PROGRAMS
(000's included)

NOTES TO TABLE III

(A) The Program qualified as a real estate investment trust ("REIT") under
the Code for federal income tax purposes commencing with the tax year
ending December 31, 1995. Since the Program qualified for taxation as a
REIT, the Program generally will not be subject to federal income tax to
the extent it distributes its REIT taxable income to its stockholders.
If the Program fails to qualify as a REIT in any taxable year, the
Program will be subject to federal income tax on its taxable income at
regular corporate tax rates. Even if the Program qualifies for taxation
as a REIT, the Program may be subject to certain state and local taxes on
its income and property and federal income and excise taxes on its
undistributed income.

(B) "Cash Available (Deficiency) from Operations," represents all cash
revenues and funds received by the partnerships, including but not
limited to operating income less operating expenses, and interest income.
These amounts do not include payments made by the partnerships from
offering proceeds nor do they include proceeds from sales or
refinancings. These amounts also exclude advances from or repayments to
IREIC and affiliates which are disclosed elsewhere in the table and
include principal payments on long-term debt. For example:

Inland Real Estate Corporation
--------------------------------------
1998 1997 1996 1995
Net cash provided by operating -------- -------- -------- --------
activities per the Form 10-K
annual report or 10-Q
quarterly report............ $ 42,775 15,924 5,530 978
Principal payments on
long-term debt.............. (74) (67) - -
Payments for deferred loan
fees........................ (2,702) (639) (350) -
--------- --------- --------- ---------
$ 40,002 15,218 5,180 978
========= ========= ========= =========

A-14

TABLE III--(Continued)

OPERATING RESULTS OF PRIOR PROGRAMS
(000's included)

NOTES TO TABLE III

(D) The program established a unit repurchase program which provides
liquidity to investors. These funds were utilized by the program to
repurchase units, pursuant to the terms of the related prospectus.

(E) Distributions by the IREC to the extent of its current and accumulated
earnings and profits for federal income tax purposes are taxable to
stockholders as ordinary income. Distributions in excess of these
earnings and profits generally are treated as a non-taxable reduction of
the stockholder's basis in the shares to the extent thereof, and
thereafter as taxable gain (a return of capital). These Distributions in
excess of earnings and profits will have the effect of deferring taxation
of the amount of the Distribution until the sale of the stockholder's
shares.

1998 1997 1996 1995
% of Distribution representing:-------- -------- -------- --------
Ordinary income............. 76.22 74.19 83.50 94.24
Return of Capital........... 23.78 25.81 16.50 5.76
-------- -------- -------- --------
100.00 100.00 100.00 100.00

(F) Percent of properties remaining unsold represents original total
acquisition costs of properties retained divided by original total
acquisition cost of all properties in the program, plus the total of
uninvested offering proceeds (if any).

A-15

TABLE IV

RESULTS OF COMPLETED PROGRAMS

(000's omitted, except for amounts presented per $1,000 invested)

Table IV is a summary of operating and disposition results of prior public
partnerships sponsored by Affiliates of the Advisor, which during the five
years ended prior to December 31, 1998 have sold their properties and either
hold notes with respect to such sales or have liquidated. One public
partnership, Inland Real Estate Growth Fund, L.P., has disposed of all its
properties during the five years ended prior to December 31, 1998.

Inland Real Estate
Program Name Growth Fund, L.P.
- --------------------------------- --------------------
Dollar amount raised.................. 9,465
Number of properties purchased........ 2
Date of closing of offering........... 08/21/87
Date property sold.................... Various

Tax and distribution data per
$1,000 invested (A):
Federal income tax results:
Ordinary income (loss):
Operations...................... (1,245)
Recapture....................... 0
Capital Gain.................... 1,537

Deferred Gain:
Capital......................... 0
Ordinary........................ 0

Cash distributions to investors
(cash basis):
Sales........................... 1,093
Operations...................... 196

NOTES TO TABLE IV

(A) Data per $1,000 invested is presented as of December 31, 1998. See Table
V and Notes thereto regarding sales and disposals of properties.

A-16

TABLE V

SALES OR DISPOSALS OF PROPERTIES

Table V presents information on the results of the sale or disposals of
public partnership properties during the three years ended prior to December
31, 1998. Since January 1, 1996, partnerships sponsored by Affiliates of the
Advisor had 27 sales transactions. The table provides certain information to
evaluate property performance over the holding period such as:

--Sales proceeds received by the partnerships in the form of cash down
payments at the time of sale after expenses of sale and secured notes
received at sale;

--Cash invested in properties;

--Cash flow (deficiency) generated by the property;

--Taxable gain (ordinary and total); and

--Terms of notes received at sale.

A-17

<TABLE>
TABLE V (Continued)

SALES OR DISPOSALS OF PROPERTIES (A)
(000's omitted)
<CAPTION>
Selling Price, net of closing costs
Cash Selling
Received, Commissions Secured
net of paid or Mortgage Notes Net
Date Date of Closing payable to at Time Received Selling
Acquired Sale Costs(B) Inland of Sale at Sale(C) Price
<S> <C> <C> <C> <C> <C> <C> <C>
Land II 5.538 Acres of Parcel #22... 10/30/92 01/05/96 154 0 0 0 154
Land I 4.629 Acres of Parcel #24.... 05/23/90 04/01/96 53 0 0 0 53
Land II .87 Acres of Parcel #8...... 06/14/91 04/03/96 10 0 0 0 10
Land I 3.52 Acres of Parcel #1...... 01/19/89 12/24/96 501 0 0 0 501
Land I 10.53 Acres of Parcel #15.... 01/03/90 Var 96 533 0 0 0 533
Land II 8.25 Acres of Parcel #23.... 10/30/92 Var 96 1,527 0 0 0 1,527
Monthly Income Fund I-
Yorkville Living Center, Lot #11.. 01/29/88 09/12/97 40 0 0 0 40
Land I 2.081 Acres of Parcel #13.... 11/07/89 09/18/97 26 0 0 0 26
Land I 81.216 Acres of Parcel #1.... 01/19/89 Var 97 31 0 (3,580)(G) 2,170(F) 5,781
Land I 5.468 Acres of Parcel #15.... 01/03/90 Var 97 491 0 0 0 491
Land II 12.6506 Acres of Parcel #7.. 04/22/91 Var 97 1,133 0 0 0 1,027
Land II 2.61 Acres of Parcel #23.... 10/30/92 Var 97 477 0 0 0 477
Capital Fund 8.6806 Ac. of Parcel #2 11/09/93 Var 97 686 0 0 0 686
Capital Fund 2.305 Ac. of Parcel #4. 03/30/94 Var 97 642 0 0 0 642
Land I Lots of Parcel #15........... 01/03/90 Var 98 645 0 0 1,968 2,613
Land I Lots of Parcel #21........... 03/08/90 Var 98 650 0 (450) 2,449 3,549
Land I 30 Acres of Parcel #16....... 01/29/90 Var 98 61 0 0 1,362 1,423
Land II Parcel #15.................. 09/04/91 Var 98 (6) 0 0 2,750 2,744
Land II Lots Parcel #23............. 10/30/92 Var 98 2,142 0 0 0 2,142
Land II Lots Parcel #7.............. 04/22/91 Var 98 1,402 0 0 0 1,402
Capital Fund Easement Parcel #5..... 04/01/94 Var 98 63 0 0 0 63
Capital Fund Lots Parcel #2......... 11/09/93 Var 98 143 0 0 0 143
Capital Fund Lots Parcel #6......... 05/11/94 Var 98 109 0 0 1,125 1,234
Capital Fund Lots Parcel #13........ 10/06/94 Var 98 1,290 0 0 0 1,290
Capital Fund Lots Parcel #4......... 03/30/94 Var 98 681 0 0 0 681
Capital Fund Lots Parcel #18........ 11/02/95 Var 98 1,410 0 0 0 1,410
Growth Fund I - Scottsdale Sierra... 12/31/85 05/06/98 7,255 0 (375) 0 7,630

</TABLE>

<TABLE>
TABLE V (Continued)

SALES OR DISPOSALS OF PROPERTIES (A)
(000's omitted)
<CAPTION>
Cost of Properties including closing
costs and other cash expenditures
Original Partnership
Mortgage Capital
Financing Invested(D) Total
<S> <C> <C> <C>
Land II 5.538 Acres of Parcel #22... 0 60 60
Land I 4.629 Acres of Parcel #24.... 0 23 23
Land II .87 Acres of Parcel #8...... 0 10 10
Land I 3.52 Acres of Parcel #1...... 0 281 281
Land I 10.53 Acres of Parcel #15.... 0 265 265
Land II 8.25 Acres of Parcel #23.... 0 1,104 1,104
Monthly Income Fund I-
Yorkville Living Center, Lot #11.. 0 25 25
Land I 2.081 Acres of Parcel #13.... 0 6 6
Land I 81.216 Acres of Parcel #1.... 0 5,668 5,668
Land I 5.468 Acres of Parcel #15.... 0 173 173
Land II 12.6506 Acres of Parcel #7.. 0 746 746
Land II 2.61 Acres of Parcel #23.... 0 352 352
Capital Fund 8.6806 Ac. of Parcel #2 0 255 255
Capital Fund 2.305 Ac. of Parcel #4. 0 70 70
Land I Lots of Parcel #15........... 0 2,366 2,366
Land I Lots of Parcel #21........... 0 2,358 2,358
Land I 30 Acres of Parcel #16....... 0 816 816
Land II Parcel #15.................. 0 1,043 1,043
Land II Lots Parcel #23............. 0 1,455 1,455
Land II Lots Parcel #7.............. 0 997 997
Capital Fund Easement Parcel #5..... 0 7 7
Capital Fund Lots Parcel #2......... 0 58 58
Capital Fund Lots Parcel #6......... 0 1,215 1,215
Capital Fund Lots Parcel #13........ 0 1,147 1,147
Capital Fund Lots Parcel #4......... 0 121 121
Capital Fund Lots Parcel #18........ 0 1,062 1,062
Growth Fund I - Scottsdale Sierra... 3,283 3,755 7,038

</TABLE>

A-18
<TABLE>

TABLE V (Continued)

SALES OR DISPOSALS OF PROPERTIES (A)
(000's omitted)
<CAPTION>

Excess
(deficiency)
of property
operating Amount of
cash subsidies Total
receipts included in Taxable Ordinary
over cash operating Gain Income Capital
expenditures(E) cash receipts from Sale from Sale Gain
<S> <C> <C> <C> <C> <C>
Land II 5.538 Acres of Parcel #22... 0 0 94 0 94
Land I 4.629 Acres of Parcel #24.... 0 0 30 0 30
Land II .87 Acres of Parcel #8...... 0 0 0 0 0
Land I 3.52 Acres of Parcel #1...... 0 0 220 0 220
Land I 10.53 Acres of Parcel #15.... 0 0 268 0 268
Land II 8.25 Acres of Parcel #23.... 0 0 423 0 423
Monthly Income Fund I-
Yorkville Living Center, Lot #11.. (23) 0 15 0 15
Land I 2.081 Acres of Parcel #13.... 0 0 20 0 20
Land I 81.216 Acres of Parcel #1.... 0 0 (193) 0 (193)
Land I 5.468 Acres of Parcel #15.... 0 0 309 0 309
Land II 12.6506 Acres of Parcel #7.. 0 0 387 0 387
Land II 2.61 Acres of Parcel #23.... 0 0 125 0 125
Capital Fund 8.6806 Ac. of Parcel #2 0 0 431 0 431
Capital Fund 2.305 Ac. of Parcel #4. 0 0 572 0 572
Land I Lots of Parcel #15........... 0 0 71 0 71
Land I Lots of Parcel #21........... 0 0 742 0 742
Land I 30 Acres of Parcel #16....... 0 0 1,058 0 1,058
Land II Parcel #15.................. 0 0 1,701 0 1,701
Land II Lots Parcel #23............. 0 0 521 0 521
Land II Lots Parcel #7.............. 0 0 297 0 297
Capital Fund Easement Parcel #5..... 0 0 57 0 57
Capital Fund Lots Parcel #2......... 0 0 78 0 78
Capital Fund Lots Parcel #6......... 0 0 11 0 11
Capital Fund Lots Parcel #13........ 0 0 144 0 144
Capital Fund Lots Parcel #4......... 0 0 561 0 561
Capital Fund Lots Parcel #18........ 0 0 348 0 348
Growth Fund I - Scottsdale Sierra... 822 0 4,356 0 4,356

</TABLE>

TABLE V - (Continued)

SALES OR DISPOSALS OF PROPERTIES
(000's omitted)

NOTES TO TABLE V

(A) The table includes all sales of properties by the partnerships during the
three years ended December 31, 1997. All sales have been made to parties
unaffiliated with the partnership.

(B) Consists of cash payments received from the buyers and the assumption of
certain liabilities by the buyers at the date of sale, less expenses of
sale.

(C) The stated principal amount of the notes is shown in the table under
"Secured Notes Received at Sale." All sales with notes received at sale
are being reported for tax purposes on the installment basis.

(D) Amounts represent the dollar amount raised from the offerings of limited
partnership units, less sales commissions and other offering expenses.

(E) Represents "Cash Available (Deficiency) from Operations (including
subsidies)" as adjusted for applicable "Fixed Asset Additions" through
the year of sale.

(F) As a result of the sale of the remaining approximately 81 acres of Parcel
1 on December 29, 1997, the Partnership received mortgage loans
receivable totaling $2,170,089, of which $575,000 accrued interest at 9%
per annum and had a maturity date of July 1, 1998 and was paid in full.
The remaining $1,595,089 accrues interest at 9% per annum and has a
maturity date of December 30, 2000.

(G) As a result of the sale of the remaining approximately 81 acres of Parcel
1 on December 29, 1997, the buyer assumed the current mortgage note held
by the Partnership which had a balance of $3,325,515 at that time.

A-20