INVESTORS REAL ESTATE TRUST, S-11, 1997-02-18

INVESTORS REAL ESTATE TRUST
S-11, 1997-02-18
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

INVESTORS REAL ESTATE TRUST
--------------------------------------------------------------
(Exact name of registrant as specified in governing instruments)

12 SOUTH MAIN STREET
MINOT, ND 58701
(Address of principal executive offices, including zip code)

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

TIMOTHY P. MIHALICK
12 SOUTH MAIN STREET
MINOT, ND 58701
(Name and address of agent for service)

Copies of communications to:

THOMAS A. WENTZ, JR., ESQ.
PRINGLE & HERIGSTAD, P.C.
P.O. BOX 1000
MINOT, ND 58702-1000
(701) 852-0381
FAX (701) 857-1361

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

Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box.

CALCULATION OF REGISTRATION FEE

Title of securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be registered registered offering price aggregate offering registration fee
per unit price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Real 1,400,000 shares $7.20 per share $10,080,000.00 $3,475.89
Estate Trust Shares aggregate offering
of Beneficial price
Interest

</TABLE>

The registrant hereby amends this registration statement on such dates or date
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

<PAGE>

Cross Reference Sheet

Part I. Information Required in Prospectus

PAGE LOCATION IN
ITEM THIS S-11 FILING
- ---- ----------------
1 Forepart of Registration Statement and Outside Front Cover
Page of Prospectus...............................................I, 1 & 2
2 Inside Cover Page of Prospectus....................................3, 4 & 5
3 Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges.....................................................6 to 13
4 Determination of Offering Price..........................................23
5 Dilution.................................................................23
6 Selling Security Holders................................................N/A
7 Plan of Distribution.....................................................23
8 Use of Proceeds....................................................23 to 25
9 Selected Financial Data.............................................25 & 26
10 Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................26 to 33
11 General Information as to Registrant...............................33 to 35
12 Policy with Respect to Certain Activities..........................35 to 37
13 Investment Policies of Registrant........................................38
14 Description of Real Estate.........................................39 to 41
15 Tax Treatment of Registrant and Its Security Holders...............46 to 53
16 Market Price Of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters...................................56 & 57
17 Description of Registrant's Securities...................................57
18 Legal Proceedings.......................................................N/A
19 Security Ownership of Certain Beneficial Owners
and Management...................................................58 to 60
20 Directors and Executive Officers.........................................61
21 Executive Compensation..............................................60 & 61
22 Certain Relationships and Related Transactions.....................60 to 63
23 Selection, Management and Custody of Registrant's Investments............63
24 Policies with Respect to Certain Transactions.......................63 & 64
25 Limitations of Liability...........................................64 to 66
26 Financial Statements and Information..............................71 to 113
27 Interests of Named Experts and Counsel..........................30, 22 & 67
28 Disclosure of Commission Position on Indemnification for Securities
Act Liabilities........................................................65

Part II. Information Not Required in Prospectus

ITEM
- ----
30 Other Expenses of Issuance and Distribution.............................115
31 Sales to Special Parties................................................115
32 Recent Sales of Unregistered Securities.................................115
33 Indemnification of Directors and Officers...............................116
34 Treatment of Proceeds from Stock Being Registered.......................116
35 Financial Statements and Exhibits.......................................116
36 Undertakings......................................................117 & 118

<PAGE>

Prospectus
INVESTORS REAL ESTATE TRUST
12 South Main Street
Minot, ND 58701
(701) 852-1756

FOR 1,000,000 SHARES OF BENEFICIAL INTEREST
OF INVESTORS REAL ESTATE TRUST WITHOUT PAR VALUE
MINIMUM PURCHASE: 100 SHARES ($720.00)
OFFERING PRICE: $7.20 PER SHARE
---------------------------

All of the shares of Beneficial Interest offered hereby (the "Shares) are
being sold on a best efforts basis by Investors Real Estate Trust (the
"Trust"). A best efforts basis means there is no assurance that any of the
shares will be sold.1 The Trust is a North Dakota Business Trust which has
operated as a real estate investment trust ("REIT") since its formation on
July 31, 1970, and is organized for the purpose of investment in real estate
and loans secured by real estate. The Trust's investment objectives are to
provide investors appreciation of capital, greater security through investment
diversification and a high level of distributable income. The Trust owns or
holds interests in a portfolio of real estate or real estate backed mortgages
located in nine states. The proceeds from this offering will be added to the
Trust's operating capital to be used for the construction of residential
apartment buildings. See "Use of Proceeds."

All of the shares of Beneficial Interest offered hereby (the "Offering") are
being sold only by Broker-Dealers as described under "Plan of Distribution."
There is no established over-the-counter secondary market for the shares. See
"Market Price Of and Dividends On the Trust's Shares Of Beneficial Interest."

THE SECURITIES OFFERED BY THIS PROSPECTUS ARE SPECULATIVE. INVESTMENT IN THE
SHARES INVOLVES CERTAIN MATERIAL RISKS AND THERE IS NO GUARANTEE OF RETURN ON
INVESTMENT. SEE "RISK FACTORS." AMONG SUCH RISKS ARE THE FOLLOWING:

- ECONOMIC CONDITIONS THAT THE TRUST CANNOT CONTROL MAY HAVE A
NEGATIVE EFFECT ON THE VALUE OF THE TRUST'S INVESTMENTS AND
AMOUNT OF CASH THAT THE TRUST RECEIVES FROM TENANTS.

- THE TRUST NEEDS TO BORROW 70% OF THE COST OF REAL ESTATE PURCHASED
OR CONSTRUCTED.

- LACK OF LIQUIDITY IN THAT AN INVESTOR MAY NOT BE ABLE TO RESELL
THE SHARES.

- THERE IS CURRENTLY NO PUBLIC TRADING MARKET FOR THE SHARES, AND
THERE IS NO ASSURANCE THAT ONE WILL DEVELOP.

- TAXATION OF THE TRUST AS A CORPORATION IF IT FAILS TO QUALIFY AS A
REIT.

- THE ESTIMATED BOOK VALUE OF TRUST SHARES AFTER THIS OFFERING WILL
BE $4.11. A PURCHASER PAYING $7.20 PER SHARE WILL INCUR AN
IMMEDIATE BOOK VALUE DILUTION OF $3.09 PER SHARE.

- THE TRUST MUST RELY ON THE ADVISOR WITH RESPECT TO ALL INVESTMENT
DECISIONS, SUBJECT TO APPROVAL BY THE BOARD OF TRUSTEES.

<PAGE>

- THE SHARE PRICE IS ARBITRARILY DETERMINED.

- THE ADVISOR AND ITS AFFILIATES ARE OR WILL BE ENGAGED IN OTHER
ACTIVITIES THAT MAY RESULT IN POTENTIAL CONFLICTS OF INTEREST WITH
THE SERVICES THAT THE ADVISOR WILL PROVIDE TO THE TRUST.

- THE TRUST IS CURRENTLY THE GENERAL PARTNER FOR SEVEN LIMITED
PARTNERSHIPS. WITH THE EXCEPTION OF ONE LIMITED PARTNERSHIP, NONE
OF THE LIMITED PARTNERSHIPS HAVE PRODUCED SUFFICIENT CASH TO REPAY
THEIR DEBT TO THE TRUST.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

PRICE TO PUBLIC(2) SELLING COMMISSION(3) PROCEEDS TO TRUST(4)
- --------------------------------------------------------------------------------
PER SHARE $7.20 $.58 $6.62
- --------------------------------------------------------------------------------
TOTAL $7,200,000 $580,000 $6,620,000
- --------------------------------------------------------------------------------

The Trust has registered 1,400,000 of its shares of Beneficial Interest no par
value per share, of which 400,000 shares are available only to shareholders
who participate in the Trust's dividend reinvestment plan. See "Dividend
Reinvestment Plan." The shares offered hereby (the "Offering") will be sold
by securities broker-dealers (the "Soliciting Dealers") who are members of the
National Association of Securities Dealers, Inc. ("NASD").

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

(1)The shares are being offered on a "best efforts" basis. The termination
date of the offering shall be a date not later than one year after the date of
this Prospectus. Any proceeds received from subscribers for the shares will
not be placed in escrow or trust.

(2)The offering price of the shares was arbitrarily determined by the Trust
based on the price at which the shares have previously traded. See
"Determination of Offering Price."

(3)The Trust will pay the securities broker-dealers a commission of 8%
(approximately $.58 per share) for the shares of Beneficial Interest sold by
them.

(4)The proceeds to the Trust do not include a deduction for the expenses,
other than the soliciting dealer's commission, incurred by the Trust as a
result of the offering. These expenses are estimated to be $5,000 for
printing, $6,000 for filing fees, $1,000 for accounting fees and $25,000 for
legal fees to be paid to Pringle & Herigstad, P.C., counsel to the Trust.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS PAGE
---------------

SUMMARY OF THE OFFERING...................................................6-13

THE TRUST...................................................................14

BUSINESS OBJECTIVES.........................................................15
Portfolio Mix..........................................................15
Leverage...............................................................15

AVAILABLE INFORMATION CONCERNING THE TRUST..................................16
Securities and Exchange Commission.....................................16
Reports to Security Holders............................................16
Incorporation by Reference.............................................16

RISK FACTORS................................................................16
Price of Shares Arbitrarily Determined.................................16
High Leverage..........................................................17
Failure to Qualify as a Real Estate Investment Trust...................17
Best Efforts Sale......................................................17
Business Environment...................................................17
Risks Related to Mortgage Lending......................................18
Relationship with Advisor..............................................18
Conflict of Interest...................................................18
Environmental Liability................................................19
Competition............................................................19
Liquidity..............................................................19
Affiliated Limited Partnerships........................................19
Front-End Fees.........................................................20

COMPENSATION TABLE..........................................................20

CONFLICTS OF INTEREST.......................................................21
Transactions with Affiliates and Related Parties.......................21
Compensation to the Advisor and Conflicts of Interest..................21
Competition by the Trust with Affiliates...............................22
Non-Arm's Length Agreements............................................22
Lack of Separate Representation........................................22

DETERMINATION OF OFFERING PRICE.............................................23

DILUTION....................................................................23

PLAN OF DISTRIBUTION........................................................23

USE OF PROCEEDS.............................................................23

SELECTED FINANCIAL DATA - ANNUAL............................................25

TWO YEAR SELECTED FINANCIAL DATA - QUARTERLY RESULTS........................26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..............................................26
General................................................................26
Results of Operations..................................................26
Six Months Ended October 31, 1996...................................26
Fiscal Year 1996 Compared to Fiscal Year 1995.......................28
Fiscal Year 1995 Compared to Fiscal Year 1994.......................30
Dividends..............................................................31
Funds from Operations..................................................31

<PAGE>

Liquidity and Capital Resources........................................31
Affiliated Partnerships................................................32
Consolidated Financial Statements......................................32
Impact of Inflation....................................................33
Economic Conditions....................................................33

GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST.......................33
Organization of Trust..................................................33
Governing Instruments of Trust.........................................33
Independent Trustees...................................................33
Shareholder Meetings...................................................34

STRUCTURE OF THE TRUST......................................................34

POLICY WITH RESPECT TO CERTAIN ACTIVITIES...................................35
To Issue Senior Securities.............................................35
To Borrow Money........................................................35
To Make Loans To Other Persons.........................................36
Mortgage Loans Receivable - Unrelated..................................36
To Invest in the Securities of Other Issuers for the Purpose of
Exercising Control...............................................36
Consolidated Partnerships .............................................37
To Underwrite Securities of Other Issuers..............................37
To Engage in the Purchase and Sale (or Turnover) of Investments........37
To Offer Securities in Exchange for Property...........................37
To Repurchase or Otherwise Reacquire Its Shares or Other Securities....37
To Make Annual and Other Reports to Shareholders.......................37

INVESTMENT POLICIES OF THE TRUST............................................38
Investments in Real Estate or Interests in Real Estate.................38
Investments in Real Estate Mortgages...................................38
Investments in Other Securities........................................38
Investments in Securities Of or Interests In Persons Primarily
Engaged in Real Estate Activities................................38

DESCRIPTION OF REAL ESTATE..................................................39
INVESTMENT PORTFOLIO - INVESTORS REAL ESTATE TRUST
AS OF OCTOBER 31, 1996...........................................39
Real Estate Owned......................................................39
Title..................................................................41
Insurance..............................................................41
Planned Improvements...................................................41
Contracts or Options to Sell...........................................41
Occupancy and Leases...................................................41

SHARES AVAILABLE FOR FUTURE SALE............................................42

OPERATING PARTNERSHIP AGREEMENT.............................................43
Management.............................................................43
Transferability of Interests...........................................43
Capital Contribution...................................................44
Exchange Rights........................................................44
Registration Rights....................................................45
Operations.............................................................45
Distributions..........................................................45
Allocations............................................................45
Term...................................................................45
Fiduciary Duty.........................................................46
Tax Matters............................................................46

<PAGE>

TAX TREATMENT OF THE TRUST AND ITS SECURITY HOLDERS.........................46
Federal Income Tax.....................................................46
North Dakota Income Tax................................................47
Taxation of the Trust's Shareholders...................................48
Taxation of Tax-Exempt Shareholders....................................48
Tax Considerations for Foreign Investors...............................49
Backup Withholding.....................................................49
State and Local Taxes..................................................49
Other Tax Considerations...............................................49
Tax Aspects of the Operating Partnership...............................50
Classification as a Partnership........................................50
Income Taxation of the Operating Partnership and Its Partners..........51

ERISA CONSIDERATIONS........................................................53

MARKET PRICE OF AND DIVIDENDS ON THE TRUST'S SHARES OF BENEFICIAL
INTERESTS..............................................................56
Market for the Registrant's Common Stock and Related Security
Holder Matters...................................................56
Dividend History.......................................................57

DIVIDEND REINVESTMENT PLAN..................................................57

DESCRIPTION OF THE TRUST'S SECURITIES.......................................57
Description of Shares of Beneficial Interest...........................57
Restrictions on Transfer...............................................58

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............58

EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...60

ADVISORY AGREEMENT..........................................................61
Basic Compensation.....................................................62
Additional Compensation................................................62
Limitation.............................................................62
Roger R. Odell.........................................................63
Thomas A. Wentz, Sr....................................................63

SELECTION, MANAGEMENT AND CUSTODY OF TRUST'S INVESTMENTS....................63
Management of Trust's Investments......................................63

POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS...............................63

LIMITATIONS OF LIABILITY....................................................64

LEGAL MATTERS...............................................................66

EXPERTS.....................................................................66

GLOSSARY OF TERMS...........................................................67

CONSOLIDATED FINANCIAL STATEMENTS - AS OF APRIL 30, 1996 AND 1995
AND INDEPENDENT AUDITOR'S REPORT......................................F-1
- SIX MONTHS ENDED OCTOBER 31, 1996 (UNAUDITED)......................F-35

<PAGE>

SUMMARY OF THE OFFERING

THIS SECTION SUMMARIZES CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS AND IS INTENDED FOR QUICK REFERENCE ONLY. THIS IS NOT A COMPLETE
DESCRIPTION OF THE INVESTMENT. POTENTIAL STOCKHOLDERS MUST READ AND EVALUATE
THE FULL TEXT OF THIS PROSPECTUS AND ALL SUPPORTING DOCUMENTS ATTACHED AS
EXHIBITS HERETO IN ORDER TO EVALUATE AN INVESTMENT IN THE COMPANY. THE
FOLLOWING SUMMARY THEREFORE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THIS PROSPECTUS AND THE SUPPORTING DOCUMENTS.

A GLOSSARY OF TERMS IS PROVIDED AT THE END OF THIS DOCUMENT.

INTRODUCTION

Investors Real Estate Trust is offering for sale 1,000,000 shares of
Beneficial Interest to residents of the States of North Dakota, South Dakota,
Montana, Arizona, Florida, Colorado and Minnesota. The shares are being sold
on a best efforts basis with no minimum or maximum amount required to be sold.
The share price is $7.20 per share of which 8% ( approximately $.58) shall be
paid to the selling agent and the balance (approximately $6.62) to IRET.

WHO MAY INVEST

In order to purchase shares, an investor must be a resident of one of the
following states: North Dakota, South Dakota, Montana, Arizona, Minnesota,
Florida or Colorado.

THE TRUST

Investors Real Estate Trust (hereinafter "IRET"), an unincorporated business
trust, was organized under the laws of the State of North Dakota on July 31,
1970. IRET has qualified and operated as a "real estate investment trust"
under Sections 856-858 of the Internal Revenue Code since its inception.
Since February 1, 1997, IRET carries on its activities through IRET
Properties, a North Dakota Limited Partnership. See "Structure of the Trust."

IRET has its only office in Minot, North Dakota, and operates principally
within the confines of the State of North Dakota, although it has some real
estate investments in the states of Minnesota, South Dakota, Nebraska,
Montana, Georgia, Colorado, Wisconsin, Idaho and Arizona.

IRET has two principal sources of operating revenue: rental income from real
estate properties and interest income from mortgages and contracts for deed
secured by real estate. A minor amount of revenue is derived from interest on
short-term investments in government securities, interest on savings deposits
and fees derived from serving as a general partner of certain limited
partnerships. In addition to operating income, the trust has received capital
gain income when real estate properties have been sold at a price in excess of
the depreciated cost of said properties.

IRET has no employees. Its business is conducted through the services of an
independent contractor (Odell-Wentz & Associates L.L.C., a North Dakota
Limited Liability Company, having as its members Roger R. Odell and Thomas A.
Wentz, Sr.) which serves as the advisor to the trust. Since the inception of
the Trust and until January 1, 1986, Roger R. Odell, 12 South Main, Minot,
North Dakota, served as advisor to the trust, providing office facilities,
administering day-to-day operations of the trust, and advising with respect to
investments and investment policy. Effective January 1, 1986, the trust
entered into a revised advisory agreement with Mr. Odell and Mr. Wentz, and on
January 1, 1994, with Odell-Wentz & Associates, L.L.C. See "Advisory
Agreement."

<PAGE>

STRUCTURE OF THE TRUST

The following diagram depicts the structure of the Trust. See "Structure of
the Company" for a further explanation of the entities depicted below.

INVESTORS REAL ESTATE TRUST
(The "Trust")
a North Dakota Business Trust
12 South Main
Minot, ND 58701

IRET, INC.
(The "General Partner")
a North Dakota corporation
wholly owned by the Trust

IRET Properties, a North Dakota Limited Partnership
(The "Operating Partnership")
As of the date hereof, the Trust owns 99.9% of the
Operating Partnership

Property Corporations Consolidated Partnerships Related
Partnership
- --------------------------------------------------------------------------------
- Pine-Cone -IRET,INC. - Sweetwater Properties
- Chateau Properties,
- West Stonehill - - Bison Properties Ltd.
IRET, INC.
- Eastgate Properties
- Miramount - IRET,
INC. - First Avenue Building

- Colton Heights
Properties

- Hill Park Properties

<PAGE>

RISK FACTORS

An investment in the shares is highly speculative and involves a high degree
of risk, including the risk of loss of an investor's entire investment. See
"Risk Factors" for a more complete discussion of factors that investors should
consider before purchasing any of the shares. These risks include:

PRICE OF SHARES ARBITRARILY DETERMINED: The price of the shares has been
determined by the Trust and is a higher price than the price paid by the
current holders of the Trust's shares.

INTENT TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST: The Trust intends to
continue operating so as to qualify as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code").

BUSINESS ENVIRONMENT: The results of operations of the Trust will depend,
among other things, upon the availability of opportunities for the investment
and reinvestment of the funds of the Trust.

HIGH LEVERAGE: The Trust seeks to borrow approximately 70% of the cost of
real estate purchased or constructed.

RELATIONSHIP WITH ADVISOR: Certain operating expenses of the Trust, including
compensation to the advisor and the trustees, must be met regardless of
profitability.

CONFLICTS OF INTEREST: The Trust will be subject to various conflicts of
interest with the Advisor or Trustees which may negatively impact operations.

ENVIRONMENTAL LIABILITY: Investments in real property create a potential for
environmental liability on the part of the owner of or any mortgage lender on
such real property.

COMPETITION: Investments of the types in which the trust is interested may be
purchased on a negotiated basis by many kinds of institutions, including other
REITs, mutual savings banks, savings and loan associations, commercial banks,
insurance companies and, to a lesser extent, pension funds, credit unions and
individuals.

LIQUIDITY: No assurance can be given that a purchaser of Trust shares under
this Offering would be able to resell such shares when desired.

AFFILIATED LIMITED PARTNERSHIPS: The Trust is currently the general partner
for seven limited partnerships. With the exception of one limited
partnership, none of the limited partnerships have produced sufficient cash to
repay their debt to the Trust.

<PAGE>

TYPE CAP
---- ---
Selling agent commission
8% of the amount sold -0- to $576,000

Legal Fees $ 25,000

Registration Fees $ 5,000

Accounting Fees $ 1,000

Printing Fees $ 6,000

PROJECTED USE OF PROCEEDS

The net proceeds from the sale of the 1,000,000 shares offered to the public
will be added to the Trust's operating capital to be used in connection with
its general business purposes.

The following table sets forth information concerning the projected use of
proceeds from the sale of units, assuming that the entire offering of
1,000,000 shares is sold. The figures listed cannot be precisely calculated
at the present time and may vary materially from the amounts shown.

After deduction from the offering proceeds of all the front-end fees and
expenses associated with the offering, approximately 91.5 percent of the total
sale proceeds raised by this offering will be invested by the Trust in real
property or related investments.
DOLLARS PERCENT
GROSS OFFERING PROCEEDS 7,200,000.00 100%
SELLING COMMISSIONS - 576,000.00 8%
LEGAL FEES - 25,000.00 Less than 1% (.0035)
REGISTRATION FEES - 5,000.00 Less than 1% (.0007)
PRINTING FEES - 6,000.00 Less than 1% (.0008)
ACCOUNTING FEES - 1,000.00 Less than 1$ (.0001)
------------
CASH AVAILABLE FOR CONSTRUCTION
OF PROPERTIES $6,587,000.00 91.5%

As of the date of this Prospectus, the Trust is engaged in constructing a
67-unit apartment building in Billings, Montana, and plans to construct the
additional apartments described below. These apartments are of a design and
type previously constructed by the Trust during the past four years in Sioux
Falls, South Dakota (98 units), Bismarck, North Dakota (49 units), Minot,
North Dakota (196 units), Billings, Montana (98 units) and Grand Forks, North
Dakota (116 units). The apartments constructed in Sioux Falls, Bismarck,
Minot, Billings and Grand Forks have rented at projected rental rates and, in
the judgment of management, will produce a satisfactory investment return.
The Trust intends to continue the construction of this type of apartment
building as follows:

APARTMENTS UNDER CONSTRUCTION
-----------------------------

CITY UNITS ESTIMATED COST
---- ----- --------------

Billings, MT 67 $ 3,900,000

PLANNED APARTMENT CONSTRUCTION
------------------------------

CITY UNITS ESTIMATED COST
---- ----- --------------

Grand Forks, ND 134 $ 7,500,000
Bismarck, ND 192 10,750,000
Billings, MT 98 5,500,000
-----------
Total - Planned Apartment Construction $23,750,000

<PAGE>

The Trust owns all of the land necessary for the planned apartment
construction, but has not arranged for the financing that would be necessary.
Thus, no assurance can be given that the Trust will successfully complete this
construction program.

SUMMARY FINANCIAL INFORMATION

The summary financial data presented below has been derived from the Trust's
financial statements for the periods indicated. The entire financial
statements have been included later in this prospectus.

SELECTED FINANCIAL DATA - ANNUAL
--------------------------------
YEAR ENDED APRIL 30
---------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------------------
Consolidated Income Statement Data (Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Revenue $ 18,659,665 $ 13,801,123 $ 11,583,008 $ 8,316,643 $ 7,206,054
Operating income 3,617,807 3,560,318 3,135,426 2,231,092 1,628,155
Gain on repossession/
sale of investments 994,163 407,512 64,962 132,610 22,858
Net income 4,611,970 3,967,830 3,200,388 2,363,702 1,651,013
Balance Sheet Data
Total real estate
investments 122,377,909 84,005,635 64,089,476 50,041,059 34,302,341
Total assets 131,355,638 94,616,744 72,391,548 54,658,569 38,997,080
Shareholders' equity 50,711,920 37,835,654 29,997,189 23,745,443 18,849,635

Consolidated Per Share Data
Net income $ .38 $ .38 $ .36 $ .29 $ .23
Gain of repossession/
sale of investments .08 .04 .01 .01 .00
Dividends .36 .35 .33 .32 .31
Tax status of dividend
Capital gain 1.6% 11.0% 7.37% 4.08% 1.0%
Ordinary income 98.4% 89.0% 92.63% 74.04% 68.0%
Return of capital 0.0% 0.0% 0.00% 21.88% 31.0%

</TABLE>

CAPITALIZATION

The Trust's capitalization after the issuance and sale of the 1,000,000 shares
will be as follows:

As of October 31, 1996 After sale of 1,000,000 shares
<S> <C> <C>
Total Assets $143,769,442.00 $150,389,638.00
Less Debt 88,740,456.00 88,769,442.00
--------------- ---------------
Shareholders' Equity $ 55,028,986.00 $ 61,619,558.00 (1)

</TABLE>

(1) Reflects selling commissions of $580,000 deducted from total sale proceeds
of $7,200,000, resulting in the addition of $6,620,000 to total assets. Does
not include a deduction for the other offering expenses incurred by the Trust
which are estimated to be $37,000 for filing, printing, accounting and legal
fees.

CONFLICTS OF INTEREST

Roger R. Odell, President and a Trustee, and Thomas A. Wentz, Sr., Vice-
President, of the Trust are also officers and owners of the Advisor and
experience conflicts of interest in their management of the Trust. These
arise principally from their involvement in other activities that will
conflict with those of the Trust and include matters related to (i) allocation
of properties and management time and services between the Trust and various
partnerships and other entities, (ii) the timing and terms of the sale of a
Property, (iii) compensation of the Advisor, and (iv) the fact that Mr. Wentz
serves as the Trust's securities and tax counsel also serves as securities and
tax counsel for certain Affiliates of the Trust, and that neither the Trust
nor the stockholders will have separate counsel.

The Trustees of the Trust who are independent of the Advisor ("Independent
Trustees") are responsible for monitoring the activities of the Advisor and
must approve all of the Advisor's actions that involve a potential conflict

<PAGE>

other than certain such actions specifically permitted by the Declaration of
Trust. The "Conflicts of Interest" section discusses in more detail the more
significant of these potential conflicts of interest, as well as the
procedures that have been established to resolve a number of these potential
conflicts.

MANAGEMENT

The Trust has retained Odell-Wentz & Associates, L.L.C., as its Advisor,
pursuant to an advisory agreement, to handle the day-to-day operations of the
Trust and to investigate and recommend the Trust's real estate investments.
The members of the Board of Trustees will oversee the management of the Trust.
Seven of the ten trustees of the Trust are independent of the Advisor and have
responsibility for reviewing its performance. All trustees are elected to the
Board of Trustees annually by the stockholders.

Three of the officers of the Advisor (Roger R. Odell, Thomas A. Wentz, Sr.,
and Timothy P. Mihalick) also are officers of the Trust. The Advisor will
have responsibility for (a) investigating and recommending the Properties that
the Trust will acquire; formulating and evaluating the terms of each proposed
acquisition, and arranging for the acquisition of the Property by the Trust,
and (b) negotiating the Loan; locating and identifying potential lessees and
formulating, evaluating, and negotiating the terms of each Lease. All of the
foregoing actions are subject to approval by the Board of Trustees. The
Advisor also will have the authority, subject to approval by a majority of the
Board of Trustees, including a majority of the Independent Trustees, to select
Properties for Sale in keeping with the Trust's investment objectives and
based on an analysis of economic conditions both nationally and in the
vicinity of the Property being considered for Sale.

See "Advisory Agreement" for a description of the business background of the
individuals responsible for the management of the Trust and the Advisor, as
well as for a description of the services that the Advisor will provide.

MANAGEMENT COMPENSATION

The Trust has no employees and has contracted with Odell-Wentz & Associates,
L.L.C., to provide management services for it. See "Advisory Agreement." In
addition to the advisory fee paid for these managements services, the Trust
also incurs administrative expenses for trustees' fees, accountants' fees,
printing and postage, filing fees and other related expenses incurred in
connection with administering the Trust assets and its communications with its
shareholders and regulatory authorities. During the past five fiscal years,
the following is a summary of the administrative expenses of the Trust paid to
the Advisor, the trustees and the other administrative expenses:

FISCAL YEARS ENDING APRIL 30
----------------------------

1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Advisor's and Trustees'
Compensation $233,356 $252,013 $304,898 $336,142 $458,019
Other Administrative
Expenses 52,322 58,253 46,557 79,974 162,588
-------- -------- -------- -------- --------
TOTAL $285,678 $310,266 $351,455 $416,116 $620,607

</TABLE>

The Advisor also received fees from the Trust for investigating and
recommending investments. See "Advisory Agreement." These fees are
considered as part of the cost of such investments and are capitalized and
added to the cost of the investment property and, thus, are not included in
the above described administrative expenses. For the Fiscal Years 1992-1996,
the amount of these acquisition fees were $22,680, $56,140, $89,514, $49,836
and $117,506, respectively.

<PAGE>

MANAGEMENT OF TRUST'S INVESTMENTS

The Trust contracts with various property management companies for the purpose
of leasing, maintaining and monitoring the Trust's real estate investments.
Such independent property management firms receive a percentage of rents
collected for providing such management services. All other management is the
responsibility of the Advisor.

PLAN OF DISTRIBUTION

The shares offered by this Prospectus shall be sold by Inland National
Securities, Inc., attention David Theusch, of 21 South Main, Minot, North
Dakota 58701, (701) 852-1640, Financial Advantage Brokerage Services, Inc.,
attention Bradley P. Wells, of 17 South Main, Minot, North Dakota 58701,
(701) 852-3090, and Huntingdon Securities Corporation, attention Roger Domres,
216 South Broadway, Suite 101, Minot, North Dakota 58701, (701) 837-9440, and
such other brokerage firms who are members of The National Association of
Securities Dealers as may enter into security sales agreements with the Trust,
or the registered securities salespeople associated with said firms. All
shares shall be sold on a "best efforts" basis with no guarantee or
requirement that any shares be sold. All sales are subject to a minimum
purchase of 100 shares ($720).

For each share sold, the selling Broker-Dealer shall receive a commission of
8% (approximately $.58 per share). No other compensation or fees other than
the percentage commission shall be paid by the Trust to the Broker-Dealers.

The relationship between the Broker-Dealers and the Trust may be terminated by
either party at any time for any reason. All Broker-Dealers have the
opportunity to sell the entire Offering.

BUSINESS

INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE. The Trust currently
owns real estate located in 9 states. The company may invest in real estate
or interests in real estate which is located anywhere in the United States.

The Trust may invest in any type of real estate or interest in real estate
including, but not limited to, office buildings, apartment buildings, shopping
centers, industrial and commercial properties, special purpose buildings and
undeveloped acreage, except the Trust may not invest more than 10% of net
assets in unimproved real estate, excluding property being developed or
property where development will be completed within a reasonable period.

The method of operating the Trust's real estate shall be delegated to a
management company as it pertains to the day-to-day management. All major
operating decisions concerning the Trust's operation of its real estate shall
be made by the Board.

The method of financing the purchase of real estate investments shall be
primarily from borrowed funds and the sale of shares. The income generated
from rental income and interest income is planned to be distributed to
shareholders as dividends. The Trust will rely on proceeds from the sale of
shares offered by this Prospectus to expand its portfolio of real estate
investments.

There is no limitation on the number or amount of mortgages which may be
placed on any one piece of property, provided that the overall ratio of
liabilities to assets for the Trust must not exceed 80%. As of October 31,
1996, the ratio of total liabilities ($88,740,456) to total assets
($143,769,443) was 61.7%.

<PAGE>

It is not the Trust's policy to acquire assets primarily for possible capital
gain. Rather, it is the policy of the Trust to acquire assets primarily for
income.

The Trust has no limitation on the amount or percentage of assets which will
be invested in any specific property, except that not more than 10% of assets
can consist of unimproved real estate.

Any Trust policy as it relates to investments in real estate or interests in
real estate may be changed by the Board at anytime without a vote of the
shareholders.

TAX STATUS OF TRUST

Since its organization, the Trust has operated in a manner to qualify as a
real estate investment trust under Sections 856-858 of the Internal Revenue
Code. Under such Sections a real estate investment trust which, in any
taxable year, meets certain requirements will not be subject to Federal income
tax with respect to income which it distributes to shareholders. See "Tax
Treatment of the Trust and Its Security Holders."

DESCRIPTION OF SHARES

The shares of beneficial interests of the Trust are of one class without par
value. There is no limit on the number of shares that may be issued. All
shares participate equally in dividends and distributions when and as declared
by the trustees and in net assets upon liquidation. The shares of beneficial
interests offered hereby will be fully paid and non-assessable by the Trust
upon issuance and will have no preference, conversion, exchange, pre-emptive
or redemption rights. Annual meetings of shareholders are held on the second
Wednesday of August and special meetings may be called by the Chairman of the
trustees or by a majority of the trustees or upon written request of
shareholders holding not less than 20 percent of the issued and outstanding
shares. At any meeting a shareholder is entitled to one vote for each share
of beneficial interest owned.

DISTRIBUTION POLICY

Consistent with the Trust's objective of qualifying as a REIT, the Trust
expects to calculate and declare Distributions quarterly. The Board of
Trustees, in its discretion, will determine the amount of the Distributions
made by the Trust, which amount will depend primarily on net cash from
operations. The Trust intends to increase Distributions in accordance with
increases in net cash from operations. Consistent with the Trust's objective
of qualifying as a REIT, the Trust expects to distribute at least 95% of its
real estate investment trust taxable income, although the Board of Trustees,
in its discretion, may increase that percentage as it deems appropriate. If
the cash available to the Trust is insufficient to make Distributions, the
Trust may obtain the needed cash by borrowing funds, issuing new securities,
or selling assets. These methods of obtaining cash could affect future
Distributions by increasing operating costs or reducing income. In such an
event, it is possible that the Trust could pay Distributions in excess of its
earnings and profits and, accordingly, that such Distributions could
constitute a return of capital for federal income tax purposes, although such
Distributions would not reduce stockholders' aggregate Invested Capital.

THIS IS THE END OF THE SUMMARY SECTION.

<PAGE>

THE TRUST

IRET, pursuant to the requirements of Sections 856-858 of the Internal Revenue
Code which govern real estate investment trusts, is engaged in the business of
making passive investments in real estate equities and mortgages.

IRET has its only office at 12 South Main, Minot, North Dakota 58701,
(701) 852-1756, and operates principally within the confines of the State of
North Dakota, although it has real estate investments in the states of
Minnesota, South Dakota, Nebraska, Montana, Georgia, Colorado, Wisconsin, Idaho
and Arizona.

IRET is the general partner of seven limited partnerships which own investment
real estate. IRET, as the general partner and as a creditor of said limited
partnerships, has a substantial influence over the operation of the
partnerships. Thus, prior to its Fiscal Year 1996, the financial statements
of IRET and the seven partnerships were consolidated for financial reporting
purposes and all material intercompany transactions and balances have been
eliminated. During IRET's Fiscal Year ended April 30, 1996, Chateau
Properties, Ltd., refinanced its 64 unit apartment complex resulting in the
payment in full of its contract for deed obligation to IRET. IRET was not
required to guarantee Chateau's new mortgage loan. Thus, under generally
accepted accounting rules, Chateau's financial statement is not to be
consolidated with that of IRET. Prior year's results have been restated to
reflect the removal of Chateau from the consolidated statement. The six
limited partnerships consolidated with IRET are:

Eastgate Properties, Ltd.
Bison Properties, Ltd.
First Avenue Building, Ltd.
Sweetwater Properties, Ltd.
Hill Park Properties, Ltd.
Colton Heights, Ltd.

IRET operates on a fiscal year ending April 30. For its past three fiscal
years, its sources of operating revenue, total expenses, net real estate
investment income, capital gain income, total income, and dividend
distributions consolidated with said six limited partnerships are as follows:

Fiscal Year Ending 4/30

1996 1995 Restated 1994 Restated
---- ------------- -------------
REVENUE FROM OPERATIONS
Real Estate Rentals $17,635,297 $12,280,738 $ 9,765,701
Interest, Discount &
Fees 1,024,368 1,520,385 1,817,307
----------- ----------- -----------
$18,659,665 $13,801,123 $11,583,008

EXPENSE $15,041,858 $10,240,805 $ 8,447,582
----------- ----------- -----------

NET REAL ESTATE INVESTMENT
INCOME $ 3,617,807 $ 3,560,318 $ 3,135,426
GAIN ON SALE OF INVESTMENTS
(CAPITAL GAIN) 994,163 407,512 64,962
----------- ----------- -----------

<PAGE>

NET INCOME $ 4,611,970 $ 3,967,830 $3,200,388
----------- ----------- ----------
----------- ----------- ----------

PER SHARE
Net Income $ .38 $ .38 $ .36
Dividends Paid $ .36 $ .35 $ .33

As indicated above, IRET has two principal sources of operating revenue:
rental income from real estate properties owned by the trust and interest
income from mortgages and contracts for deed secured by real estate. A minor
amount of revenue is derived from interest on short-term investments in
government securities, interest on savings deposits and fees derived from
serving as a general partner of certain limited partnerships. In addition to
operating income, the trust has received capital gain income when real estate
properties have been sold at a price in excess of the depreciated cost of said
properties.

IRET has no employees. Its business is conducted through the services of an
independent contractor (Odell-Wentz & Associates L.L.C., a North Dakota
Limited Liability Company having as its members Roger R. Odell and Thomas A.
Wentz, Sr.) which serves as the advisor to the trust. Since the inception of
the Trust and until January 1, 1986, Roger R. Odell, 12 South Main, Minot,
North Dakota, served as advisor to the trust, providing office facilities,
administering day-to-day operations of the trust, and advising with respect to
investments and investment policy. Effective January 1, 1986, the trust
entered into a revised advisory agreement with Mr. Odell and Thomas A. Wentz,
Sr., and on January 1, 1994, with Odell-Wentz & Associates, L.L.C.

Mr. Odell is a graduate of the University of Texas, receiving his B.A. degree
in 1947. He has been a resident of Minot, North Dakota since 1947. From 1947
to 1954, he was employed by Minot Federal Savings & Loan Association, serving
as secretary of the association from 1952 to 1954. Since 1954, Mr. Odell has
been a realtor in Minot, serving as an officer and stockholder of Watne Realty
Company from 1954 to January 1, 1970, and since that time as the owner of his
own realty firm.

Mr. Wentz is a graduate of Harvard College and Harvard Law School, receiving
his A.B. degree in 1957 and his L.L.B. degree in 1960. He has been a resident
of Minot, North Dakota, since 1962. Mr. Wentz' principal occupation is the
practice of law as a partner in the law firm of Pringle & Herigstad, P.C.,
counsel to the trust and he provides services to Odell-Wentz & Associates on a
part-time basis.

BUSINESS OBJECTIVES

The Trust seeks to realize shareholder value by regular increases in the
quarter-yearly cash dividends paid to is shareholders and in appreciation of
the value of its shares of Beneficial Interest. See "Market Price and
Dividends on the Trust's Shares of Beneficial Interest" for a description of
share prices and dividends during its 26 year history.

PORTFOLIO MIX. The Trust's investment strategy is to maintain its real estate
investment portfolio at approximately 75% invested in multi-family apartment
complexes located in North Dakota and the surrounding states of Minnesota,
South Dakota, Colorado and Montana and the remaining 25% of real estate owned
in commercial property (warehouses, retirement homes, manufacturing plants,
offices, and retail properties) leased to single tenants for 15 years or
longer.

LEVERAGE. An essential ingredient of the Trust's investment strategy is to
leverage its equity capital by borrowing up to 70% of the cost of real estate
properties acquired for its portfolio. The Trust seeks to acquire real estate

<PAGE>

that will yield net operating income in an amount that will exceed the
interest rate payable on the mortgage indebtedness.

AVAILABLE INFORMATION CONCERNING THE TRUST

SECURITIES AND EXCHANGE COMMISSION: The Trust is currently a reporting
company pursuant to the Securities and Exchange Act of 1934 and in accordance
therewith annually files a Form 10-K and quarterly Forms 10-Q for the first
three quarters of each year with the Securities and Exchange Commission. The
information filed by the Trust can be inspected and copied at the public
reference facilities maintained by the Securities and Exchange Commission in
Washington, DC, at 450 Fifth Street NW, Room 1024, Washington, DC 20549,
(202-272-3100). Copies of said information can be obtained from the Public
Reference facility at prescribed rates.

The Trust has filed with the Securities and Exchange Commission a Registration
Statement on Form S-11 under the Securities Act of 1933 and the rules and
regulations promulgated thereunder, with respect to the Shares of Beneficial
Interest offered pursuant to this Prospectus. This Prospectus, which is part
of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and financial statement
schedules thereto. For further information with respect to the Trust and the
Shares, reference is made to the Registration Statement and such exhibits and
financial statement schedules, copies of which may be examined without charge
at or obtained upon payment of prescribed fees from, the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and will also be available for inspection and copying
at the regional offices of the Commission located at 13th Floor, 7 World Trade
Center, New York, New York, 10048 and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. The Commission maintains a Website at
http:/www.sec.gov, and reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
(including the Trust) can be obtained from that site.

Statements contained in this Prospectus as to the contents of any contract or
other document that is filed as an exhibit to the Registration Statement are
not necessarily complete, and each such statement is qualified in its entirety
by reference to the full text of such contract or document.

REPORTS TO SECURITY HOLDERS: The Trust shall furnish shareholders with annual
reports on or about July 25th of each year containing financial statements
audited by the Trust's independent accountants, with quarterly reports for the
first three quarters of each year containing unaudited summary financial and
other information, and with such other reports as the Trust deems appropriate
or as required by law.

INCORPORATION BY REFERENCE: Copies of any document or part thereof
incorporated by reference in this prospectus but delivered therewith is
available free of charge upon request made to Timothy P. Mihalick, 12 South
Main Street, Minot, ND 58701 (701-852-1756).

RISK FACTORS

An investment in the shares involves various risks. Investors should consider
the following factors which make the Offering one of high risks:

PRICE OF SHARES ARBITRARILY DETERMINED: The price of the shares has been
determined by the Trust and is a higher price than the price paid by the
current holders of the Trust's shares. The offering price set forth on the
cover page of this Prospectus should not be considered an indication of the
actual value of the shares. The price is based upon the most recent ask/bid
price for prior sales of the shares to North Dakota residents. The book value

<PAGE>

of IRET shares of beneficial interest is substantially less than the purchase
price to new shareholders under this Offering. As of October 31, 1996, the
book value of the 13,994,747 shares then outstanding was $3.93. Assuming all
of the shares registered under this Offering are sold, the estimated resulting
book value will be $4.11 per share. Thus, a purchasing shareholder paying
$7.20 per share under this Offering will incur an immediate book value
dilution of $3.09 per share.

HIGH LEVERAGE: The Trust seeks to borrow approximately 70% of the cost of
real estate purchased or constructed. This amount of leverage may expose the
Trust to cash flow problems in the event rental income decreases. Such a
scenario may require the Trust to sell properties at a loss or default on the
mortgage, thus losing the property through foreclosure.

FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST: The Trust intends to
continue operating so as to qualify as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"). Although the
Trust believes that it is organized and will continue to operate in such a
manner, no assurance can be given that the Trust will remain qualified as a
REIT. Qualification as a REIT involves the application of highly technical
and complex code provisions for which there are only limited judicial or
administrative interpretations. No assurance can be given that legislation,
new regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to qualifications as a REIT or
the federal income tax considerations of such qualifications. If in any
taxable year the Trust failed to qualify as a REIT, the Trust would not be
allowed a deduction for distribution to shareholders in computing its taxable
income and would be subject to federal income tax on its taxable income at
regular corporate rates. Unless entitled to relief under certain statutory
provisions, the Trust also would be disqualified from treatment as a REIT for
the four taxable years following the year during which qualification is lost.
As a result, the funds available for distribution to the Trust's shareholders
would be reduced for each of the years involved. Although the Trust currently
intends to continue to operate in a manner designed to qualify as a REIT, it
is possible that future economic, market, legal, tax or other considerations
may cause the Trust's Board of Trustees to revoke the REIT election.

BEST EFFORTS SALE: The shares are being sold by the Soliciting Dealers on a
"best efforts" basis whereby the selling agent is only required to use its
best efforts to locate purchasers of the shares, but is not obligated to
ensure that a minimum number or that even any shares are sold. Therefore, no
assurance is given as to the amount of proceeds that will be available for
investment by the Trust. In the event fewer than all the Shares are sold
during the offering period (which is 365 days from the date of this document),
the Trust would have fewer cash assets to apply toward its business plan. In
such event, the fixed operating expenses of the Trust, as a percentage of
gross income, would be higher and consequently reduce the taxable income
distributable to shareholders.

BUSINESS ENVIRONMENT: The results of operations of the Trust will depend,
among other things, upon the availability of opportunities for the investment
and reinvestment of the funds of the Trust. The yields available from time to
time on mortgages and other real estate investments depend to a large extent
on the type of security involved, the type of investment, the condition of the
money market, the geographical location of the property, general economic
conditions, competition, and other factors, none of which can be predicted.
Trust funds are presently invested in real estate in North Dakota and several
other states. As a result, the Trust may be subject to substantially greater
risk than if its investments were more dispersed geographically. Local
conditions, such as competitive overbuilding or a decrease in employment, may
adversely affect the performance of the Trust's investments. In the area in
which the Trust operates, the economy is dependent on the areas of agriculture

<PAGE>

and mineral development. If these areas do not perform satisfactorily, the
ability of the Trust to realize profits from its business of real estate
investments will be adversely affected.

RISKS RELATED TO MORTGAGE LENDING: All real property investments are subject
to some degree of risk, which, in some cases, varies according to the size of
the investment as a percentage of the value of the real property. In the
event of a default by a borrower on a mortgage loan, it may be necessary for
the Trust to foreclose its mortgage or engage in negotiations which may
involve further outlays to protect the Trust's investment. The mortgages
securing the Trust's loans may be, in certain instances, subordinate to
mechanics' liens, materialmen's liens, or government liens and, in instances
in which the Trust invests in a junior mortgage, to liens of senior mortgages,
and the Trust may be required to make payments in order to maintain the status
of the prior lien or to discharge it entirely. In certain areas, the Trust
might lose first priority of its lien to mechanics' or materialmen's liens by
reason of wrongful acts of the borrower. It is possible that the total amount
which may be recovered by the Trust in such cases may be less than its total
investment, with resultant losses to the Trust.

Loans made by the Trust may, in certain cases, be subject to statutory
restrictions limiting the maximum interest charges and imposing penalties,
which may include restitution of excess interest, and, in some cases, may
affect enforceability of the debt. There can be no assurance that all or a
portion of the charges and fees which the Trust receives on its loans may not
be held to exceed the statutory maximum, in which case the Trust may be
subjected to the penalties imposed by the statutes.

RELATIONSHIP WITH ADVISOR: Certain operating expenses of the Trust, including
compensation to the advisor and the trustees, must be met regardless of
profitability. The advisor's fee is computed as a percentage of the
investments of the Trust. (See "Advisory Agreement".) The Trust will be
dependent upon the Advisor for essentially all aspects of its business
operations. Because the Advisor has experience in the specialized business
segment in which the Trust operates, the loss of the Advisor, for any reason,
would likely have a material adverse affect on the Trust's operations. The
Advisor may terminate its relationship upon 60 days notice by either the
Advisor or the Trust.

CONFLICT OF INTEREST: The Advisor is entitled to receive an advisory fee
equal to a percentage of the Net Invested Assets of the Trust. (See "Advisory
Agreement".) The Advisor also will receive fees in connection with the
Trust's acquisition or construction business based upon a percentage of the
amount paid.

Any trustee or officer may have personal business interests and may engage in
personal business activities, which may include the acquisition, syndication,
holding, management, development, operation or investment in, for his own
account of for the account of others, interests in entities engaged in the
real estate business and any other business. Any trustee or officer may be
interested as trustee, officer, director, shareholder, partner, member,
advisor or employee, or otherwise have a direct or indirect interest in any
entity which may be engaged to render advice or services to the Trust, and may
receive compensation from such entity as well as compensation as trustee,
officer or otherwise hereunder.

Neither the Advisor nor its affiliates are prohibited from providing the same
services to others, including competitors. These relationships may produce
conflicts in the Advisor's and its affiliates' allocation of time and
resources among various projects. The Advisor and its affiliates believe they
have sufficient personnel to discharge their responsibilities to the Trust.

<PAGE>

All agreements and arrangements, including those relating to compensation,
between the Trust and the Advisor or any of their affiliates will not be the
result of arm's-length negotiations. However, such conflicts will be resolved
by the following factors: (i) the Trust intends to be in substantial
compliance with the Statement of Policy Regarding Real Estate Investment
Trusts adopted by the North American Securities Administrators Association,
Inc. ("NASAA") which has a specific limitation on certain fees and on the
amount of the Trust's operating expenses, including compensation to the
Advisor during the operating stage of the Trust; (ii) the Advisor is aware of
other programs being offered in the marketplace and intends to structure its
business relationships so as to be competitive with such other programs;
(iii) such agreements and arrangements are subject to approval by a majority of
the Trust's independent trustees. The Trust, the Advisor and the principals of
the Trust and Advisor are not represented by separate counsel. The Trust is
represented by the law firm of Pringle & Herigstad, P.C., which has also acted
and will continue to act as counsel to the Trust and various affiliates of the
Advisor with respect to other matters.

ENVIRONMENTAL LIABILITY: Investments in real property create a potential for
environmental liability on the part of the owner of or any mortgage lender on
such real property. Under federal and state legislation, property owners are
liable for cleanup expenses in connection with hazardous wastes or other
hazardous substances found on their property. No assurance can be given that
a substantial financial liability may not occur with respect to properties
owned or acquired in the future by the Trust. It is the policy of the Trust
to obtain a Phase I environmental survey upon purchasing property and, as of
the date of this Prospectus, the Trust is unaware of any environmental
liability with respect to properties in its portfolio.

COMPETITION: Investments of the types in which the trust is interested may be
purchased on a negotiated basis by many kinds of institutions, including
mutual savings banks, savings and loan associations, commercial banks,
insurance companies and, to a lesser extent, pension funds, credit unions and
individuals. In addition, there are a number of other real estate investment
trusts in operation, some of which may be active in one or more of the Trust's
areas of investment. Investments must thus be made by the Trust in
competition with such other entities. The yields available on mortgage and
other real estate investments depend upon many factors, including the supply
of money available for such investments and the demand for mortgage money.
The presence of the foregoing competitors increases the available supply of
funds to prospective borrowers from the Trust. All these factors, in turn,
vary in relation to many other factors such as general and local economic
conditions, conditions in the construction industry, opportunities for other
types of investments, international, national and local political affairs,
legislation, governmental regulation, tax laws, and other factors. The Trust
cannot predict the effect which such factors will have on its operations.

LIQUIDITY: No assurance can be given that a purchaser of Trust shares under
this Offering would be able to resell such shares when desired. At the
present time, there is no brokerage firm that "makes a market" for Trust
shares. All resales of Trust shares are now on a "best efforts" basis and the
ability of a shareholder to resell shares is dependent on the broker-dealer
locating a purchaser. During the past five years, to the best of the Trust's
knowledge, all shareholders desiring to resell their shares have been able to
do so within five business days.

AFFILIATED LIMITED PARTNERSHIPS: IRET has sponsored and serves as a general
partner of seven limited partnerships. Because of IRET's position as a
general partner and creditor of these partnerships and because the
partnerships (with the exception of Chateau Properties) did not produce
sufficient cash flow to pay debts due to IRET as scheduled prior to Fiscal
Year 1996, the financial statements of IRET and the seven partnerships have

<PAGE>

been consolidated for financial reporting purposes to more properly depict the
financial status of IRET. (It is emphasized that the consolidation of the
financial reports does not change the legal relationship between IRET and the
partnerships, nor the income tax reporting by IRET or the partnerships.)
During Fiscal Year 1996, a new mortgage loan was negotiated by Chateau
Properties, Ltd., on its 64-unit apartment building in Minot, North Dakota.
As a result of this refinancing, the partnership paid the balance that it owed
to IRET on the contract for deed under which the apartment building had been
purchased from IRET. Further, IRET was not required to guarantee the new
mortgage loan made by the partnership. Accordingly, for Fiscal 1996, IRET is
accounting for its partnership interest in Chateau Properties under the equity
method of accounting. Prior financial statements have been restated to
reflect this change. See Note 11 in the attached April 30, 1996, financial
report for a detailed explanation of the effect of this accounting change.

FRONT-END FEES: For the money that is being raised by this offering, there
are front-end fees. A front-end fee is a cost or expense of the offering
which must be paid regardless of the number of shares sold. The Declaration
of Trust caps all front-end fees for organizational or sale purposes at no
more than 15% of the total offering. In the present case, the total front-end
fees will be not more than 9%, which is below the capped amount. The fees are
capped in that under no situation shall they exceed the capped amount:

Type Cap
---- ---

Selling agent commission
8% of the amount sold -0- to $576,000

Legal Fees $ 25,000

Registration Fees $ 5,000

Accounting Fees $ 1,000

Printing Fees $ 6,000

COMPENSATION TABLE

The following table sets forth the fees and other compensation which the Trust
is to pay in association with this offering:

Item of Compensation Recipient Amount/Method
- -------------------- --------- -------------

Advisory Fee Odell-Wentz & Associates The advisor will earn
annually an additional
base fee of $46,340 once
the sale proceeds of
$6,620,000 are invested.
(.7% of net invested
assets).

Advisor Additional Odell-Wentz & Associates 1/2 of 1% of the 1st
Compensation $2,500,000 of value of
all acquired assets,
except new construction
is 1/2 of 1% of the
total cost. Upon
investment of sale
proceeds, the fee will
be a minimum of $12,500
to a possible maximum of
$51,220.

<PAGE>

Incentive Fees N/A While authorized by the
Restated Declaration of
Trust, no incentive fees
shall be paid to anyone.
This may be changed by a
vote of the Trustees at
anytime with incentive
fees then payable for
future transactions as
limited by the Restated
Declaration of Trust.

Front End Fees Selling Brokerage Firms (8% or approximately
Broker-Dealer $.58 of each share sold)
for a total possible
commission of $576,000.
In no event will these
fees exceed 8% of sale
proceeds received.

Experts' Fees Pringle & Herigstad, P.C. $25,000 for legal fees,
plus filing fees,
accounting fees and
printing costs estimated
to be $12,000

CONFLICTS OF INTEREST

The Trust will be subject to various conflicts of interest arising from its
relationship with the Advisor, (Odell-Wentz & Associates, L.L.C.), and its
affiliates. The Advisor, its affiliates and the trustees of the Trust are not
restricted from engaging for their own accounts in business activities of the
type conducted by the Trust, and occasions may arise when the interests of the
Trust would be in conflict with those of one or more of the trustees, the
Advisor or their affiliates. These individuals and affiliates have been
engaged in the business of real estate for approximately 40 years. With
respect to the conflicts of interest described herein, the trustees of the
Trust, of which a majority are independent, will endeavor to exercise their
fiduciary duties to the Trust in a manner that will preserve and protect the
rights of the Trust and the interests of the shareholders in the event of any
conflicts of interest between the Trust and the Advisor or its affiliates.
Any transactions between the Trust and any trustee, the Advisor or any of
their affiliates, other than the purchase or sale, in the ordinary course of
the Trust's business, will require the approval of a majority of the trustees
who are not interested in the transaction.

TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES: The Advisor and its
affiliates may receive compensation from the Trust for providing various
services. The Trust's Board of Trustees (a majority of whom are independent
of the Advisor and its affiliates) will have oversight responsibility with
respect to such services to ensure that such services are provided on terms no
less favorable to the Trust than the Trust could obtain from unrelated persons
or entities and are consistent with the Trust's investment objectives and
policies. (See "Compensation Table" and "The Advisory Agreement".)

COMPENSATION TO THE ADVISOR AND CONFLICTS OF INTEREST: The Advisor is
entitled to receive an advisory fee equal to a percentage of the Net Invested
Assets of the Trust. (See "Advisory Agreement".) The Advisor also will
receive fees in connection with the Trust's acquisition or construction of
real properties based upon a percentage of the amount paid. Accordingly, a
conflict of interest could arise since, depending upon the circumstances, the
retention, acquisition or disposition of a particular project could be

<PAGE>

advantageous to the Advisor, but detrimental to the Trust, or vice-versa. The
decision whether to liquidate the Trust or the decision to acquire, retain or
dispose of certain properties and the terms and conditions thereof, may also
create conflicts of interest.

In resolving conflicts of interest, the Board of Trustees has a fiduciary duty
to act in the best interests of the Trust as a whole. The Trust and the
Advisor believe that it would not be possible, as a practical matter, to
eliminate these potential conflicts of interest. However, the Advisory
Agreement must be renewed annually by the affirmative vote of a majority of
the independent trustees. Any conflict will be resolved by a majority of the
independent trustees, who may not renew the Advisory Agreement if they
determine that the Advisor is not satisfactorily performing its duties. In
connection with the performance of their fiduciary responsibilities, the
existence of such possible conflicts will be only one of the factors for the
trustees to consider in determining the appropriate action to be taken by the
Trust.

COMPETITION BY THE TRUST WITH AFFILIATES: Any trustee or officer may have
personal business interests and may engage in personal business activities,
which may include the acquisition, syndication, holding, management,
development, operation or investment in, for his own account for the account
of others, of interests in entities engaged in the real estate business and
any other business. Any trustee or officer of the Trust may be interested as
trustee, officer, director, shareholder, partner, member, advisor or employee,
or otherwise have a direct or indirect interest in any entity which may be
engaged to render advice or services to the Trust, and may receive
compensation from such entity as well as compensation as trustee, officer or
otherwise hereunder.

NON-ARM'S-LENGTH AGREEMENTS: All agreements and arrangements, including those
relating to compensation, between the Trust and the Advisor or any of their
affiliates will not be the result of arm's-length negotiations. However, such
conflicts will be resolved by the following factors: (i) the Trust intends to
be in substantial compliance with the Statement of Policy Regarding Real
Estate Investment Trusts adopted by the North American Securities
Administrators Association, Inc. ("NASAA") which has a specific limitation on
certain fees and on the amount of the Trust's operating expenses, including
compensation to the Advisor during the operating stage of the Trust; (ii) the
Advisor is aware of other programs being offered in the marketplace and
intends to structure its business relationships so as to be competitive with
such other programs; (iii) such agreements and arrangements are subject to
approval by a majority of the Trust's independent trustees.

LACK OF SEPARATE REPRESENTATION: The Trust, the Advisor and the principals of
the Trust and Advisor are not represented by separate counsel. The Trust is
represented by the law firm of Pringle & Herigstad, P.C., which has also acted
and will continue to act as counsel to the Advisor and various affiliates of
the Advisor with respect to other matters. Thomas A. Wentz, Sr., is the Vice-
President and a member of the Advisor, Vice-President of the Trust and the
President of Pringle & Herigstad, P.C. His son, Thomas A. Wentz, Jr., is a
trustee of the Trust and a partner in Pringle & Herigstad, P.C.

<PAGE>

DETERMINATION OF OFFERING PRICE

The offering price of $7.20 per share was arbitrarily established by the Trust
based upon the previous asked price for its shares of Beneficial Interest over
the past three calendar years. The total number of shares traded, the high
and low bid and asked prices during this period and the quarterly dividend are
as follows:

Quarterly
Calendar No. of Bid Asked Per Share
Year Months Shares Traded Low High Low High Dividend
---- ------ -------------- --- ---- --- ---- --------
1994 January-March 250,167 5.20 5.37 6.00 6.10 .082
1994 April-June 163,347 5.20 5.37 6.10 6.10 .0825
1994 July-September 134,529 5.37 5.63 6.10 6.25 .088
1994 October-December 335,518 5.63 5.89 6.25 6.40 .084
1995 January-March 210,106 5.89 5.89 6.40 6.40 .085
1995 April-June 137,766 5.89 6.03 6.40 6.55 .08625
1995 July-September 452,665 5.89 6.03 6.40 6.55 .0925
1995 October-December 466,447 5.89 6.16 6.40 6.70 .08875
1996 January-March 516,179 5.89 6.30 6.40 6.85 .09
1996 April-June 394,234 6.30 6.30 6.85 6.85 .09125
1996 July-September 309,701 6.30 6.44 6.85 7.00 .0975
1996 October-December 315,008 6.44 6.44 7.00 7.00 .095

DILUTION

The book value of IRET shares of beneficial interest is substantially less
than the purchase price to new shareholders under this Offering. As of
October 31, 1996, the book value of the 13,994,747 shares then outstanding was
$3.93. Assuming all of the shares registered under this Offering are sold,
the estimated resulting book value will be $4.11 per share. Thus, a
purchasing shareholder paying $7.20 per share under this Offering will incur
an immediate book value dilution of $3.09 per share.

PLAN OF DISTRIBUTION

The shares offered by this Prospectus shall be sold by Inland National
Securities, Inc., attention David Theusch, of 21 South Main, Minot, North
Dakota 58701, (701) 852-1640, Financial Advantage Brokerage Services, Inc.,
attention Bradley P. Wells, of 17 South Main, Minot, North Dakota 58701,
(701) 852-3090, and Huntingdon Securities Corporation, attention Roger Domres,
216 South Broadway, Suite 101, Minot, ND 58701 (701) 83709440, and such other
brokerage firms who are members of the National Association of Securities
Dealers as may enter into security sales agreements with the Trust, or the
registered securities salespeople associated with said firms. All shares
shall be sold on a "best efforts" basis with no guarantee or requirement that
any shares be sold. All sales are subject to a minimum purchase of 100 shares
($720).

The relationship between the Broker-Dealers and the Trust may be terminated by
either entity at any time for any reason. All Broker-Dealers have the
opportunity to sell the entire Offering.

USE OF PROCEEDS

The net proceeds from the sale of the 1,000,000 shares offered to the public
will be added to the Trust's operating capital to be used in connection with
its general business purposes.

<PAGE>

The following table sets forth information concerning the estimated use of
proceeds from the sale of units, assuming that the entire offering of
1,000,000 shares is sold. The figures listed cannot be precisely calculated
at the present time and may vary materially from the amounts shown.

After deduction from the offering proceeds of all the front-end fees and
expenses associated with the offering, approximately 91.5% of the total sale
proceeds raised by this offering will be invested by the Trust in real
property or related investments.

DOLLARS PERCENT
GROSS OFFERING PROCEEDS $7,200,000.00 100%
SELLING COMMISSIONS -576,000.00 8%
LEGAL FEES - 25,000.00 Less than 1% (.0035)
REGISTRATION FEES - 5,000.00 Less than 1% (.0007)
PRINTING FEES - 6,000.00 Less than 1% (.0008)
ACCOUNTING FEES - 1,000.00 Less than 1% (.0001)
-------------
CASH AVAILABLE FOR CONSTRUCTION
OF PROPERTIES $6,587,000.00 91.5%

As of the date of this Prospectus, the Trust is engaged in constructing a 67-
unit apartment building in Billings, Montana, and plans to construct the
additional apartments described below. These apartments are of a design and
type previously constructed by the Trust during the past three years in Sioux
Falls, South Dakota (98 units), Bismarck, North Dakota (49 units), Minot,
North Dakota (196 units), Billings, Montana (98 units) and Grand Forks, North
Dakota (116 units). The apartments constructed in Sioux Falls, Bismarck,
Minot, Billings and Grand Forks have rented at projected rental rates and, in
the judgment of management, will produce a satisfactory investment return.
The Trust intends to continue the construction of this type of apartment
building as follows:

Apartments Under Construction
City Units Estimated Cost
---- ----- --------------
Billings, MT 67 $ 3,900,000

Planned Apartment Construction
------------------------------

City Units Estimated Cost
---- ----- --------------
Grand Forks, ND 134 $ 7,500,000
Bismarck, ND 192 10,750,000
Billings, MT 98 5,500,000
-----------
Total - Planned Apartment Construction $23,750,000

The Trust will also continue to consider other real estate investment
opportunities that are presented to it, but is not obligated at the date of
this Prospectus to acquire any real estate investments other than the
additions to its portfolio described in "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Six Months Ended October
31, 1997", and expects to concentrate its efforts and resources on the planned
apartment construction projects described above during the next 18 month
period.

The Trust will also derive funds to fund the properties under construction
that are described above from the following sources:

<PAGE>

- DEPRECIATION REVENUE. As a "Real Estate Investment Trust" under
the Internal Revenue Code, the Trust must distribute at least 95%
of its taxable income. However, in computing taxable income, a
deduction for depreciation of the buildings owned by the Trust is
allowed. In the Fiscal year ended April 30, 1996, this
depreciation deduction was $2,261,724. The amount of this
depreciation is used by the Trust to acquire addition real estate
investments.

- LOANS. The Trust seeks to borrow approximately 70% of the cost of
real estate purchased. The objective is to purchase real estate
at a price which will yield a higher percentage return than the
interest rate payable on the mortgage loan. This "leverage" is
essential to producing a satisfactory return to the owners of the
Trust. (No assurance can be given that the income actually earned
on real estate investments made by the Trust will be higher than
the interest rate paid on the Trust's mortgage loans.) As of
October 31, 1996, the ratio of mortgage liabilities to total Trust
real estate assets was $79,214,615 of mortgage liabilities to
$132,514,883 of net real estate owned or 59.8%. Thus, as much as
$60,328,245 could be borrowed on the existing portfolio before
reaching the desired debt ratio of 70% (present equity in real
estate of $132,514,883, minus mortgages of $79,214,615 equals
$53,300,268 divided by 30% = $177,667,560, minus present real
estate owned of $132,514,883 equals $60,328,245) (no assurance can
be given that this amount of borrowed funds would be available).

- MARKETABLE SECURITIES/CREDIT LINE. The Trust maintains an
investment in marketable government insured securities ($4,754,332
as of October 31, 1996) which securities are held in brokerage
accounts with Dean Witter and Smith Barney. The current policy of
said brokers is to allow the Trust to borrow up to 90% of the
market value of these securities for short-term needs. Also, the
Trust may enter into short-term credit line borrowing agreements
with banks if the need arises. No assurance can be given that
either of these borrowing arrangements would be available to the
Trust.

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA - ANNUAL
--------------------------------

Year Ended April 30
-----------------------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------------------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data

Revenue $ 18,659,665 $ 13,801,123 $ 11,583,008 $ 8,316,643 $ 7,206,054
Operating income 3,617,807 3,560,318 3,135,426 2,231,092 1,628,155
Gain on repossession/
sale of investments 994,163 407,512 64,962 132,610 22,858
Net income 4,611,970 3,967,830 3,200,388 2,363,702 1,651,013

Balance Sheet Data
Total real estate
investments 122,377,909 84,005,635 64,089,476 50,041,059 34,302,341
Total assets 131,355,638 94,616,744 72,391,548 54,658,569 38,997,080
Shareholders' equity 50,711,920 37,835,654 29,997,189 23,745,443 18,849,635

<PAGE>
<TABLE>
<CAPTION>
TWO YEAR SELECTED FINANCIAL DATA - QUARTERLY RESULTS
----------------------------------------------------
(FISCAL YEAR 1995 RESULTS RESTATED - SEE NOTE 11 TO FINANCIAL STATEMENTS)

Quarter Ended
-------------------------------------------------------

7-31-95 10-31-95 1-31-96 4-30-96
-------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Income Statement Data

Revenue $ 3,247,910 $ 3,529,364 $ 3,492,941 $ 3,530,908
Income before gains on
sale of investments 794,755 1,066,229 1,014,011 685,328
Net gain on sales of
investments -- 305,543 -- 101,969
Net income 794,755 1,371,772 1,014,011 787,292

Per Share
Income before gains on
sale of investments $ .07 $ .10 $ .10 $ .07
Net gain on sale of
investments -- .03 -- .01

Quarter Ended
------------------------------------------------------
7-31-95 10-31-95 1-31-96 4-30-96
------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Income Statement Data

Revenue $ 3,782,061 $ 4,715,186 $ 5,104,409 $ 5,058,009
Income before gains on
sale of investments 1,009,468 1,058,136 1,082,506 467,697
Net gain on sales of
investments -- -- 522,001 472,162
Net income 1,009,468 1,058,136 1,604,507 939,858

Per Share
Income before gains on
sale of investments $ .09 $ .09 $ .09 $ .04
Net gain on sale of
investments -- -- $ .04 $ .04
</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS

GENERAL: IRET has operated as a "real estate investment trust" under Sections
856-858 of the Internal Revenue Code since its formation in 1970. IRET is in
the business of owning income producing real estate investments. No major
changes in IRET's business has occurred from the organization of the Trust in
1970 to the date of this Prospectus, and none are planned at this time.

RESULTS OF OPERATIONS:

SIX MONTHS ENDED OCTOBER 31, 1996:

RESULTS OF OPERATIONS. IRET's net taxable earnings for the second
quarter of Fiscal 1997 were $1,045,287, compared to $1,058,136 for the
same period of Fiscal 1996. For the first six months of Fiscal 1997,
net taxable earnings were $2,278,323, compared to $2,067,604 in the
prior year. The most important performance measure, Funds from
Operations (taxable income increased by non-cash deductions of
depreciation and amortization, less extraordinary income items) for the
second quarter increased to $1,780,956 from the $1,566,136 recorded in
the prior year. For the six-month period, Funds from Operations was
$3,449,423, compared to $3,071,604 in Fiscal 1996.

Both taxable income and Funds from Operations were reduced by the
continuing vacancy of the Smith Home Furnishings property in Boise,

<PAGE>

Idaho. IRET continues to seek a replacement tenant for this property.
There are several prospects, but no firm rental offer is yet in hand.

On the positive side, IRET continued to experience satisfactory
occupancy of its apartment properties; the program of instituting modest
rental rate increases is on target and the new properties being added to
the portfolio are performing well.

Overall, IRET continues to be pleased with the performance of our
investment portfolio and look for improving financial results upon the
completion of our aggressive building and buying program.

FINANCIAL CONDITION. IRET's liquidity and capital resources remain
strong. During the past year, real estate owned by IRET has increased
by 23 million dollars. This growth in real estate investments will
continue as the Trust has agreed to purchase a substantial amount of
real estate investments which will come on line during the balance of
this fiscal year. Comparative balance sheet figures are:

10-31-96 10-31-95
-------- --------
Cash and Marketable Securities $ 6,098,851 $ 5,362,217
Net Real Estate Owned 132,514,883 109,426,978
Net Real Estate Mortgages 2,414,610 2,932,478
Total Assets 143,769,442 119,313,979
Total Liabilities 88,740,456 75,697,170
Shareholder Equity 55,028,986 42,616,809

CONSOLIDATED FINANCIAL REPORTS. The Financial Statements shown in this
report consolidate IRET's financial report with those of the six limited
partnerships of which IRET is the General Partner and creditor.

PROPERTY SALES AND PURCHASE. During the second quarter, IRET did not sell
any of its investments.

The following properties were added to our portfolio during the second
quarter and are producing income:

COST
----
Edgewood Vista 24 unit Alzheimers Center, Missoula, MT $ 950,000
16,000 sq. ft. Computer City retail commercial building,
Grand Rapids, MI $ 2,100,000
98 unit apartment complex in Billings, MT $ 6,100,000
116 unit Legacy Apartment complex in Grand Forks, ND $ 6,465,000
Sweetwater Springs Retirement Home, Phase I,
Douglasville, GA $ 2,810,000

The following properties are under construction:

67 unit Circle 50 apartment complex in Billings, MT $ 3,900,000
Sweetwater Springs Retirement Home, Phase II,
Douglasville, GA $ 1,540,000

IRET has entered into purchase agreements to acquire the following
properties:

360 unit Park Meadows apartment complex, St. Cloud, MN $10,120,000
192 unit Neighborhood apartment complex, Colorado
Springs, CO $10,750,000
210 unit Miramont apartment complex, Fort Collins, CO $14,200,000
108 unit Woodridge apartment complex, Rochester, MN $ 6,300,000

<PAGE>

INCREASED DIVIDENDS. The Board of Trustees declared a dividend of 9.75
cents per share payable January 9, 1997, to shareholders of record at
the close of business on January 3, 1997. This is an increase from the
regular dividend of 9.5 cents per share paid on October 1, 1996, and is
the 103rd consecutive quarterly dividend paid by IRET.

FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995: IRET's Fiscal Year 1996,
which ended on April 30, 1996, produced very favorable results, including a
substantial increase in IRET's investment portfolio and satisfactory
increases in earnings and funds from operations.

EARNINGS. IRET's net taxable earnings for Fiscal Year 1996 increased to
$4,611,970, compared to $3,967,830 earned in Fiscal 1995 and $3,200,388
earned in Fiscal 1994. Fiscal 1996 taxable income includes $994,163 of
capital gain income from the sale of assets from the investment
portfolio, compared to $407,512 of capital gain income in Fiscal 1995
and $64,962 of capital gain income in Fiscal 1994.

On a per share basis, net taxable income was $.38 per share for Fiscal
1996, the same as earned in Fiscal 1995. Per share taxable income in
Fiscal 1994 was $.36 per share.

As noted in prior reports, as IRET repositions its investment portfolio
by replacing high yielding mortgage loans with equity investments in
real estate properties, taxable earnings are depressed.

FUNDS FROM OPERATIONS. Funds from operations (taxable income increased
by non-cash deductions of depreciation and amortization, and reduced by
capital gain income and other extraordinary income items) for Fiscal
1996 increased to $5,977,431 ($.49 per share) from the $5,434,244 ($.52
per share) generated in Fiscal 1995 and the $4,607,708 ($.52 per share)
generated in Fiscal 1994.

REVENUES. Total revenues for Fiscal 1996 were $18,659,665, compared to
$13,801,123 in Fiscal 1995 and $11,583,008 in Fiscal 1994. The increase
in revenues received during Fiscal 1996 in excess of Fiscal 1995
revenues was $4,858,542. This increase resulted from:

Rent from 6 properties acquired in Fiscal 1996 $3,272,078
Rent from 6 properties acquired in Fiscal 1995
in excess of that received in Fiscal 1994 2,094,922
An increase in rental rates on existing
properties (2.5%) 259,084
A decrease in rent on Smith Home Furnishing
Building (bankruptcy of tenant) -348,310
A decrease in rent - properties sold during 1996 -178,888
A decrease in interest income -240,344
----------
$4,858,542

The increase in revenue during Fiscal 1996 resulted primarily from the
addition of new real estate properties to the portfolio. Rents received
on properties acquired prior to the beginning of Fiscal 1995 increased
by 2.5%. Overall occupancy was stable at 95%. The decline in operating
income per share (from $.35 per share in Fiscal 1994, to $.34 in 1995
and $.30 in 1996) reflects the continuing repositioning of the
investment portfolio from a mix of real estate equities and mortgage
loans to one consisting entirely of real estate equities. The income on
the mortgage loans made by the Trust was immediately reflected in
operating income. Many of these mortgage loans earned interest at 14%
per annum and several produced additional participation income. These
mortgages have now been largely paid off and have been replaced with
equity investments in apartments and triple net leased commercial

<PAGE>

property. The initial operating and taxable income on the equity
investments is lower than what was being earned on the mortgage loans,
but management is of the opinion that these new investments will produce
very satisfactory investment returns in the years ahead.

Capital gain income, on the other hand, has been increasing ($.01 per
share in Fiscal 1994 compared to $.04 per share in Fiscal 1995 and $.08
per share in Fiscal 1996). IRET is marketing its older and smaller
apartment investments and will continue to reposition its portfolio into
newer and larger properties.

The $644,140 increase in net income for Fiscal 1996 over the net income
earned in the prior fiscal year resulted from:

An increase in gain from the sale of investments $ 586,651
An increase in net rental income (rents, less
utilities, maintenance, taxes, insurance
and management) 3,193,087
A decrease in interest income (496,017)
An increase in interest expense (2,063,429)
An increase in depreciation expense (494,430)
A decrease in bad debt expense 200,000
An increase in operating expenses and advisory
trustee services (204,481)
An increase in amortization expense (77,241)
-----------
$ 644,140

PROPERTY ACQUISITIONS. IRET acquired over $40,000,000 of new properties
during Fiscal 1996. They were:

COMMERCIAL: COST
---------- ----
- Barnes & Noble Superbookstore, Omaha, NE
(15 year net lease) $3,627,206**

- Stone Container Manufacturing Plant, Fargo, ND $4,042,217**

APARTMENTS:
----------
- 96 units, Billings, MT $ 3,727,440*
- 49 units, North Pointe, Bismarck, ND $ 927,450**
- 98 units, South Pointe Phase I, Minot, ND $ 2,727,085**
- 313 units, West Stonehill, St. Cloud, MN $10,765,830**
- 18 units, Minot, ND $ 593,147
- 49 units, Grand Forks, ND $ 3,373,754*
- 164 units, South Winds, Grand Forks, ND $ 5,433,683
- 98 units, South Pointe II, Minot, ND $ 4,290,061*
- 49 units, Circle 50, Billings, MT $ 491,247*
- 67 units, Columbia Park II, Grand Forks, ND $ 661,855*
------------
$40,660,975

*Property not placed in service at April 30, 1996. Additional costs are
still to be incurred.

**Represents costs to complete a project started in the year ending April
30, 1995.

PROPERTY DISPOSITIONS: During Fiscal 1996, IRET sold several older and
smaller apartment buildings. In addition, a contract for deed receivable
from Chateau Properties, Ltd., was paid in full, resulting in the
recognition of deferred capital gain. The total gain recognized from the
sale of properties (both current and deferred) was $994,163 for Fiscal
1996, compared to $407,512 in Fiscal 1995, and $64,962 in Fiscal 1994.
It is management's intention to continue to market IRET's older and
smaller apartment projects.

<PAGE>

FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994: (This comparative report
is reproduced as it was submitted for Fiscal Year 1995. The Fiscal 1995
results were restated in the Fiscal 1996 Financial Report because of the
removal of Chateau Properties from the consolidated Financial Report
resulting in small changes to the Fiscal 1995 results. See Note 11 to
the attached Financial Report for an explanation of these changes.) Net
income for Fiscal 1995 increased to $3,971,108, compared to $3,243,063
for Fiscal 1994 and $2,363,702 for Fiscal 1993. On a per share basis,
net income was $.38 for Fiscal 1995, an increase of 6% over the $.36
earned in the prior year and 31% more than the $.29 earned in Fiscal
1993.

Gain from the sale of real estate investments constituted $403,094 ($.04
per share) of the Fiscal 1995 net income, compared to $64,962 ($.01 per
share) included in the Fiscal 1994 net income and $132,610 ($.01 per
share) for Fiscal 1993.

Total revenues were $14,117,694 in Fiscal 1995, compared to $11,884,579
in 1994 and $8,316,643 in 1993. The Fiscal 1995 revenue increase of
$2,233,115 consisted of:

Rent from 4 properties acquired in Fiscal 1995 $ 534,013
Rent from 4 properties acquired in Fiscal 1994
in excess of that received in Fiscal 1994 1,860,429
An increase in rental rates on existing
properties (3%) 213,973
An increase in occupancy rates on existing
properties (1/2%) 52,171
A decrease in rent - property sold during 1995
(Yankton) (131,995)
A decrease in interest income (260,001)
-----------
Net revenue increase (1995 over 1994) $2,233,115
-----------
-----------

Thus, the increase in revenue resulted primarily from the addition of new
real estate properties to the portfolio. Scheduled rents on existing
properties increased by 3%, while occupancy increased to 95.5% from 95% in
the prior year.

The $728,045 increase in net income for Fiscal 1995 over the amount earned
in the prior year resulted from:

An increase in gain from sale of investments $ 338,132
An increase in net rental income (rents, less
utilities, maintenance, taxes, insurance
and management) 1,999.032
A decrease in interest income (295,476)
An increase in interest expense (832,073)
An increase in depreciation expense (441,163)
A decrease in bad debt expense 50,000
An increase in operating expenses & other items (87,407)
-----------
$ 728,045
-----------
-----------

IRET purchased some $27,000,000 of real estate properties during Fiscal
1995 and has contracted to acquire approximately $25,000,000 of additional
real estate properties in the coming year. Thus, the Trust's portfolio
will shift rapidly from a significant investment in high-yielding mortgage
loans to a portfolio consisting primarily of equity positions in real
estate. This change in the portfolio will result in a decrease in net
income because of increased depreciation.

We expect earnings in Fiscal 1996 to exceed this year's level. Occupancy,
rental rates and interest rates are expected to remain at present levels
and

<PAGE>

the new properties that are being added to the portfolio will enhance net
income.

DIVIDENDS. The following dividends were paid during Fiscal 1996:

Date Per Share Dividend
---- ------------------
July 1, 1995 $.09*
October 1, 1995 $.0875
January 5, 1996 $.09
April 1, 1996 $.09125
-------
$.35875

*Includes $.005 special dividend.

FUNDS FROM OPERATIONS. The funds derived during Fiscal 1996 by the Trust from
its operations increased by 12% over the prior year and by 33% from the Fiscal
1994 level ($5,977,431 in Fiscal 1996, versus $5,348,271 in 1995 and $4,487,099
in 1994). (IRET uses the definition of "Funds From Operations" recommended by
the National Association of Real Estate Investment Trusts to mean "net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures calculated on the same basis." It is emphasized
that funds from operations as so calculated and presented does not represent
cash flows from operations as defined under generally accepted accounting
principles and should not be considered as an alternative to net income as an
indication of operating performance or to cash flows as a measure of liquidity
or ability to fund all cash needs.) (See the Consolidated Statements of Cash
Flows in the Consolidated Financial Statements attached hereto.)

The following is a comparison of dividends paid during the past five fiscal
years to Funds From Operations (as defined above):

Fiscal Fiscal Fiscal Fiscal Fiscal
Item 1996 1995 (Restated) 1994 (Restated) 1993 1992
- ---- ---- --------------- --------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Income (GAAP) $4,611,970 $3,967,830 $3,200,388 $2,363,702 $1,651,073
Less Gains (Losses)
from Property
Sales 994,163 407,512 64,962 132,610 22,858
---------- ---------- --------- ---------- ----------
Operating Income $3,617,807 $3,560,318 3,135,426 $2,231,092 $1,628,155
Plus Depreciation 2,261,724 1,767,294 1,323,474 1,051,370 824,369
Plus Amortization 97,900 20,659 28,199 16,364 11,289
---------- ---------- ---------- ---------- ----------
Funds from
Operations $5,977,431 $5,348,271 $4,487,099 $3,298,826 $2,463,813
Dividends Paid 4,439,034 3,660,986 3,102,061 2,633,799 2,257,303
---------- ---------- ---------- ---------- ----------
$1,538,397 $1,687,285 $1,385,038 $ 665,027 $ 206,510
</TABLE>

Management expects that the Funds From Operations (as defined above) will
continue to improve during Fiscal 1997 and will exceed dividends paid in the
coming year.

LIQUIDITY AND CAPITAL RESOURCES. IRET's financial condition at the end of
Fiscal 1996 continued at the very strong level of its prior fiscal year.

- Equity capital increased to $50,711,920 from $37,835,654 on April 30,
1995, a gain of $12,876,266 (34%). Equity capital on April 30, 1994, was
$30,320,401. These increases result from the sale of shares of beneficial
interest and the reinvestment of dividends in new shares.

- Liabilities increased to $80,643,718 from $56,781,090 on April 30, 1995,
and $42,409,447 on April 30, 1994.

- Total assets increased to $131,355,638 from $94,616,744 on April 30, 1995,
and $72,729,848 on April 30, 1994.

31
<PAGE>

- Cash and marketable securities were $7,127,131 compared to the year earlier
figure of $9,595,254, and $7,263,031 on April 30, 1994.

- In addition to its cash and marketable securities, IRET has an unsecured
line of credit agreement with First American Bank West, Minot, North
Dakota, of $5,000,000, none of which was in use on April 30, 1996.

AFFILIATED PARTNERSHIPS. IRET has sponsored and serves as a general partner
of seven limited partnerships. Because of IRET's position as a general
partner and creditor of these partnerships and because the partnerships (with
the exception of Chateau Properties) did not produce sufficient cash flow to
pay debts due to IRET as scheduled prior to Fiscal Year 1996, the financial
statements of IRET and the seven partnerships have been consolidated for
financial reporting purposes to more properly depict the financial status of
IRET. (It is emphasized that the consolidation of the financial reports does
not change the legal relationship between IRET and the partnerships, nor the
income tax reporting by IRET or the partnerships.) During Fiscal Year 1996,
a new mortgage loan was negotiated by Chateau Properties, Ltd., on its
64-unit apartment building in Minot, North Dakota. As a result of this
refinancing, the partnership paid the balance that it owed to IRET on the
contract for deed under which the apartment building had been purchased from
IRET. Further, IRET was not required to guarantee the new mortgage loan made
by the partnership. Accordingly, for Fiscal 1996, IRET is accounting for its
partnership interest in Chateau Properties under the equity method of
accounting. Prior financial statements included in the audited financial
statement and this report have been restated to reflect this change. See
Note 11 in the attached financial report for a detail of the effect of this
accounting change.

The seven affiliated partnerships are as follows:

Year Property IRET
Name Formed Owned Ownership
- -------------------------------------------------------------------------

Chateau Properties, 1979 64 Unit 26.7%
Ltd. Apt. Bldg.

Sweetwater Properties, 1981 114 Units 0%
Ltd. Apts.

Bison Properties, 1982 125 Units 20%
Ltd. Apts.

First Avenue Building, 1981 16,500 sq. ft. 20%
Ltd. Office Bldg.

Eastgate Properties, 1983 116 Units 18%
Ltd. Apts.

Colton Heights, Ltd. 1984 18 Unit 18.69%
Apt. Bldg.

Hill Park Properties, 1985 96 Units 7.14%
Ltd. Apts.

CONSOLIDATED FINANCIAL STATEMENTS:

The financial statement included in this Prospectus consolidates financial
statements of IRET and six of the above seven limited partnerships (Chateau
Properties is excluded). All material inter-company transactions and
balances have been eliminated on the consolidated statement. The principal
impact of this consolidation on the statement of operations is to reduce
reported income as a result of increased depreciation. On the balance sheet,
related mortgage loans and the investment in partnerships is reduced and real
estate owned is increased. Also,

<PAGE>

the deferred income account is decreased and the retained earnings account is
also decreased.

IMPACT OF INFLATION. The costs of utilities and other rental expenses
continue to increase, but in most areas, IRET has been able to increase
rental income sufficiently to cover inflationary increases in rental expense.
Increases in rental income are not precluded by long-term lease obligations
except for a few commercial properties subject to long-term net lease
agreements. Thus, as market conditions allow, rents will be increased to
cover inflationary expenses and to provide a better return to IRET.

ECONOMIC CONDITIONS. Fiscal 1996 saw continued good economic conditions in
the northern plains states in which the Trust operates. The economy was
strong, due to adequate rainfall and higher commodity prices and a moderate
improvement in energy activity. Occupancy rates were stable at 95% and rent
levels for Trust properties improved only slightly in Fiscal 1996 (2 1/2%).

GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST

ORGANIZATION OF TRUST. Investors Real Estate Trust is an unincorporated
business trust organized and governed under the laws of North Dakota. The
Trust has qualified as a real estate investment trust under Sections 856-858
of the Internal Revenue Code.

GOVERNING INSTRUMENTS OF TRUST. The Trust was organized on July 31, 1970.
The Trust will continue, unless sooner terminated by a majority vote of the
shareholders, until the expiration of 20 years after the death of the last
survivor of the seven original trustees. All of the original Trustees are
still living, the youngest being 61 years of age. The existence of the Trust
may be extended indefinitely by action of the Trustees approved by the vote
of shareholders holding fifty per cent or more of the outstanding shares.
The Trust has 10 Trustees.

INDEPENDENT TRUSTEES. The Trust adheres to NASAA guidelines requiring a
majority of the Board to be composed of independent Trustees. The Glossary
at the end of this document defines independent Trustee. Pursuant to NASAA
guidelines, the Trust considers the following Trustees as independent:

Ralph A. Christensen has served as an independent Trustee since 1970. He is
a retired rancher. Mr. Christensen is a Director of First Bank - Minot, N.A.
Mr. Christensen has over 25 years dealing with multi-family and commercial
real property.

John D. Decker has served as an independent Trustee since 1970. Mr. Decker
is currently retired. He was the owner and operator of TBA until the retail
chain's sale in 1975. Mr. Decker is also active as an independent oil
developer. Mr. Decker has over 25 years dealing with multi-family and
commercial real property.

Mike F. Dolan has served as an independent Trustee since 1978. Mr. Dolan was
owner and operator of Monarch Concrete until the company's sale in 1980.
Mr. Dolan is also active as an independent oil developer. Mr. Dolan has over 25
years dealing with multi-family and commercial real property.

J. Norman Ellison, Jr., has served as an independent Trustee since 1970.
Mr. Ellison was the former owner and operator of Ellison's department store in
Minot. He is a partner of Ellison Realty Co. and former Director of First
Bank - Minot, ND. Mr. Ellison has over 25 years dealing with multi-family and
commercial real property.

Daniel L. Feist has served as an independent Trustee since 1985. Mr. Feist
is a general contractor and President of Feist Construction and Realty Inc.
Mr. Feist is Director of First Bank - Minot, N.A., and N.D. Holdings, Inc.,
of Minot, ND. Mr. Feist has over 25 years dealing with multi-family and
commercial real property.

<PAGE>

Patrick G. Jones has served as an independent Trustee since 1986. He is the
former Manager and Director of the Minot Daily News as well as former
President of Central Venture Capital, Inc. Mr. Jones is an active investor.
Mr. Jones has over 25 years dealing with multi-family and commercial real
property.

Jeff L. Miller has served as an independent Trustee since 1985. He is the
former President of Coca-Cola Bottling Co. of Minot. He is currently
President of M & S Concessions, Inc. Mr. Miller is a Director of First Bank
- - Minot, N.A. Mr. Miller has over 25 years dealing with multi-family and
commercial real property.

The Trust considers the following Trustees as not independent:

C. Morris Anderson has served as a Trustee since 1970. He is a partner and
founder of Magic City Realty, Ltd., an entity involved in the ownership of
rental properties. He is also the President of North Hill Bowl, Inc., a
business operating a bowling alley, restaurant and lounge in Minot.
Mr. Anderson is a Director of International Inn, Inc., and Norwest Bank - Minot,
N.A. Mr. Anderson has over 25 years dealing with multi-family and commercial
real property.

Roger R. Odell has served as a Trustee since 1970. He is a partner in the
Trust's advisor, Odell-Wentz & Associates. He is a Director of the Trust's
principal property management company - Investors Management & Marketing,
Inc. He is also a Director of Inland National Securities, Inc., one of the
two broker-dealers selling the Trust's common stock and a partner with
Mr. Anderson in Magic City Realty, Ltd.

Thomas A. Wentz, Jr., has served as a Trustee since 1996. He is a partner in
the Trust's legal counsel, Pringle & Herigstad, P.C. Mr. Wentz is the
general partner of WENCO, a North Dakota Limited Partnership, which owns
commercial, multi-family and farm real estate.

SHAREHOLDER MEETINGS. The governing provisions of the Trust require the
holding of annual meetings. It is the policy of the Board of Trustees to
hold the annual meeting in Minot, North Dakota, during the month of August.
All shareholders shall be given not less than 30 days prior written notice.

Special meetings of the shareholders may be called by the chief executive
officer, by a majority of the Trustees or by a majority of the Independent
Trustees, and shall be called by an officer of IRET upon written request of
the shareholders holding in the aggregate not less than 10% of the
outstanding shares of the IRET entitled to vote at such meeting. Upon receipt
of a written request, either in person or by mail, stating the purpose or
purposes of the meeting, IRET shall provide all shareholders within ten days
after receipt of said request, written notice, either in person or by mail,
of a meeting and the purpose of such meeting to be held on a date not less
than fifteen nor more than sixty days after the distribution of such notice,
at a time and place specified in the request, or if none if specified, at a
time and place convenient to shareholders. The holders of a majority of
shares in IRET, present in person or by proxy, shall constitute a quorum at
any meeting.

STRUCTURE OF THE TRUST

The Trust carries on its activities directly and through subsidiaries and an
Operating Partnership. IRET Properties, a North Dakota Limited Partnership,
was organized on January 31, 1997, and, since February 1, 1997, is the
principle entity through which the Trust operates. All assets and
liabilities of the Trust have been contributed to the Operating Partnership
in exchange for a general partnership interest in the Operating Partnership.
IRET, INC., a North Dakota corporation, and a wholly owned subsidiary of the
Trust acts as the general partner of the Operating Partnership. As the sole
shareholder of IRET, INC., which in turn is the sole general partner of the
Operating Partnership, the Trust has the exclusive power under the Operating
Partnership Agreement to manage and conduct the business of the

<PAGE>

Operating Partnership, subject to certain limitations contained in the
Operating Partnership Agreement. See "Operating Partnership Agreement."

The Trust interest in the Operating Partnership will entitle it to receive
all quarter-yearly cash distributions from the Operating Partnership and to
be allocated its pro-rate share of the profits and losses of the Operating
Partnership. At the date of this Prospectus, the Trust owns all of the
Operating Partnership except for the $1,000 initial contribution by the
initial limited partner. It is expected that the Operating Partnership will
merge with other partnerships or acquire real estate from other persons in
exchange for limited partnership units.

When certain of the properties were acquired by the Trust, the lender
financing the properties required, as a condition of the loan, that the
properties be owned by a "single asset entity." Accordingly, the Trust
organized three wholly owned subsidiary corporations for the purpose of
holding title to these investment properties in order to comply with the
conditions of the lender. They are: Pine Cone - IRET, INC., a Colorado
corporation, formed to own the 195-unit Pine Cone apartment complex located
in Fort Collins, Colorado; Miramont - IRET, INC., a Colorado corporation,
formed to own the 210-unit Miramont apartment complex located in Fort
Collins, Colorado; and West Stonehill - IRET, INC., a Minnesota corporation,
formed to own the 313-unit West Stonehill apartment complex located in
St. Cloud, Minnesota.

IRET is the general partner and holds investment interests in 7 limited
partnerships. They are: Eastgate Properties, Ltd.; Bison Properties, Ltd.;
First Avenue Building, Ltd.; Sweetwater Properties, Ltd.; Hill Park
Properties, Ltd.; Colton Heights, Ltd.; and Chateau Properties, Ltd. All of
the above limited partnerships, except Chateau Properties, Ltd., are
consolidated with IRET for financial reporting purposes. For an explanation
of the reasons for this consolidation, see "The Trust."

POLICY WITH RESPECT TO CERTAIN ACTIVITIES

The following information is a statement of the Trust's policy as it pertains
to the described activities.

TO ISSUE SENIOR SECURITIES. The Trust has issued and outstanding Investment
Certificates which are senior to the shares of Beneficial Interest being
offered under this Prospectus. The Investment Certificates are issued for a
definite term and annual interest rate (currently 7% for 6 months; 7 1/2% for
1 year; 8% for 3 years and 8 1/2% for 5 years). In the event of dissolution
of the Trust, the Investment Certificates would be paid in preference to the
shares of Beneficial Interest. As of January 31, 1996, the Investment
Certificates outstanding totalled $6,991,458. The Trust does not plan on
issuing other senior securities in the future.

TO BORROW MONEY. The Trust plans to continue to borrow money. The Trust
relies on borrowed funds in pursuing its investment objectives and goals.
The policy concerning borrowed funds is vested solely with the Board of
Trustees and may be changed by a majority of the Board without a vote of the
shareholders. The Trust intends to continue borrowing funds in the future.

Over the past three fiscal years, the Trust has borrowed funds as follows:

Fiscal Fiscal Fiscal
1996 1995 1994
---- ---- ----

Cost of Property
Acquired $40,660,975 $27,033,369 $17,569,810
Net Increase in
Mortgages Payable $21,702,852 $13,006,654 $11,684,600

<PAGE>

Percent of Acquisition
Price Represented by
Net Increase in
Mortgages Payable 53% 48% 67%

TO MAKE LOANS TO OTHER PERSONS. As part of the Trust's business plan, Trust
funds have been loaned to third parties. The loans are in the form of
mortgages secured by real estate. The decision to make loans is vested
solely with the Board of Trustees and may be changed by a majority of the
Board without a vote of the shareholders.

The Trust has no present plans to make additional loans of Trust funds, but
may do so in the future.

The Trust has the following outstanding mortgage loans:

MORTGAGE LOANS RECEIVABLE - UNRELATED:
--------------------------------------
Real Estate 4/30/96
Location Security Balance Rate
- -------- -------- ------- ----

BILLINGS, MT
Colton Heights Apts. - 144 Units $ 320,938 9%

DENVER, CO
Westminister-Writer Corp. Residential Lots 618,810 14%
Centrebrooke Homes Residential Lots 205,517 12%

GILBERT, AZ
NE1/4-27-2-6 Commercial Land 681,032 8%

BISMARCK, ND
M. Knutt Apts. 236,880 11%

DOUGLAS, GA
Sweetwater Springs Retirement Center 1,254,810 9%

OTHER MORTGAGES
Over $100,000 $ 978,893 8-10 1/4%
$50,000 to $99,999 360,998 8-12%
$20,000 to $49,999 252,315 8-12%
Less than $20,000 21,950 7-12%
----------
TOTAL $4,932,138
Unearned Discounts (18,222)
Allowance for Losses (165,074)
Deferred Gain (267,096)
----------
$4,481,746
----------
----------

TO INVEST IN THE SECURITIES OF OTHER ISSUERS FOR THE PURPOSE OF EXERCISING
CONTROL. The Trust has not invested in such securities in the past. The
decision to do so is vested solely in the Board of Trustees and may be
changed without a vote of the shareholders.

The Trust currently holds an interest in the following partnerships:

Year Partner-
Name, Location, Size ship Formed Fiscal
& Type of Real and % Owned 1996 Year
Estate Owned by IRET Occupancy Purchased Cost
- -----------------------------------------------------------------------------
CHATEAU PROPERTIES, LTD.
Apartment Complex 1979 99% 1972 $2,663,654
- - Minot, ND, 64 Units 26.7%

<PAGE>

CONSOLIDATED PARTNERSHIPS:

SWEETWATER PROPERTIES, LTD.
Apartment Complex 1981 94% 1972 1,354,230
- - Devils Lake, ND 0%
72 Units
- - Grafton, ND, 42 Units

BISON PROPERTIES, LTD.
Apartment Complex 1982 94% 1972 1,490,135
- - Jamestown, ND 20%
90 Units
- - Carrington, ND
18 Units
- - Cooperstown, ND
17 Units

FIRST AVENUE BUILDING, LTD.
16,500 sq. ft. Office
Building 1981 95% 1981 778,817
- - 15 First Ave. SW 20%
Minot, ND

EASTGATE PROPERTIES, LTD.
Apartment Complex 1983 85% 1970 1,681,203
- - Terrace on the Green 18%
Moorhead, MN
116 Units

COLTON HEIGHTS, LTD.
Apartment Building 1984 97% 1984 816,561
- - Minot, ND, 18 Units 18.69%

HILL PARK PROPERTIES, LTD.
Garden Grove Apts. 1985 92% 1985 2,820,677
- - 201 Xavier Drive 7.14%
Bismarck, ND, 92 Units

It is possible that the Board may increase its ownership in the above
entities or seek to acquire a controlling ownership interest in other
unrelated entities.

TO UNDERWRITE SECURITIES OF OTHER ISSUERS. The Trust has no plans to engage
in such an activity.

TO ENGAGE IN THE PURCHASE AND SALE (OR TURNOVER) OF INVESTMENTS. The Trust
has no plans to engage in such an activity.

TO OFFER SECURITIES IN EXCHANGE FOR PROPERTY. The Trust has no plans to
engage in such an activity.

TO REPURCHASE OR OTHERWISE REACQUIRE ITS SHARES OR OTHER SECURITIES. As a
"real estate investment trust" under federal income tax laws, the Trust
intends to invest only in real estate assets. The Trust is authorized, but
not obligated, to repurchase its own shares and may do so from time to time
if the Trustees deem such action to be appropriate.

TO MAKE ANNUAL AND OTHER REPORTS TO SHAREHOLDERS. The Trust is required to
provide an annual report to shareholders during the month of July. The
annual report contains a financial statement certified by an independent
public accountant. Provision of the annual report to shareholders may only be
changed by a vote of a majority of the shareholders. The Trust has a policy
of providing quarterly reports to the shareholders during January, April,
July and October. The quarterly reports do not contain a financial statement
certified by an independent public accountant. The provision of a quarterly
report to the shareholders may be changed by a majority of the Board without
a vote of the shareholders.

<PAGE>

INVESTMENT POLICIES OF REGISTRANT

The Trust may invest in any type of real estate or interest in real estate
including, but not limited to, office buildings, apartment buildings,
shopping centers, industrial and commercial properties, special purpose
buildings and undeveloped acreage, except the Trust may not invest more than
10% of net assets in unimproved real estate, excluding property being
developed or property where development will be completed within a reasonable
period.

It is not the Trust's policy to acquire assets primarily for possible capital
gain. Rather, it is the policy of the Trust to acquire assets primarily for
income.

The Trust has no limitation on the amount or percentage of assets which will
be invested in any specific property, except that not more than 10% of assets
can consist of unimproved real estate.

Any Trust policy as it relates to investments in real estate or interests in
real estate may be changed by the Board at anytime without a vote of the
shareholders.

INVESTMENTS IN REAL ESTATE MORTGAGES. While the Trust has made mortgage
loans in the past, it is the current policy of the Trust not to make any
further mortgage loans.

Any Trust policy as it relates to mortgage loans may be changed by the Board
at anytime without a vote of the shareholders.

INVESTMENTS IN OTHER SECURITIES. The Trust has purchased and now owns United
States guaranteed obligations and shares of five other real estate investment
trusts. These purchases are made solely for the purpose of holding cash until
future real estate investments are identified. No investments in other types
of securities are planned.

Any Trust policy as it relates to investments in other securities may be
changed by the Board at anytime without a vote of the shareholders.

INVESTMENTS IN SECURITIES OF OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN
REAL ESTATE ACTIVITIES. The Trust owns shares in five publicly traded REITs,
acquired at a cost of $596,961. No other purchases of such security are
contemplated at this time.

Any Trust policy as it relates to investments in other securities may be
changed by the Board at anytime without a vote of the shareholders.

<PAGE>

DESCRIPTION OF REAL ESTATE

IRET owned the following properties as of April 30, 1996:

INVESTMENT PORTFOLIO - INVESTORS REAL ESTATE TRUST
AS OF APRIL 30, 1996

REAL ESTATE OWNED:

Fiscal Mortgages
1996 Year Payable
Location Size/Type Occupancy Purchased Cost (rate)
-------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
APARTMENTS:

Century Apartments 192 Unit 89% 1986 3,565,505 2,700,000
Williston, ND Apt. Complex (7.5%)

Century Condos 22 Condo 94% 1983 421,683 0
Beulah, ND Apt. Units & 1989

Century Apts. 120 Unit 98% 1986 1,741,619 1,595,000
Dickinson, ND Apt. Complex (7.5%)

201 - 301 17th Ave NE 2 24-Unit 92% 1987 806,694 0
Waseca, MN Apt. Bldgs

Virginia Apts. 14 Unit 95% 1988 217,083 2,377
Minot, ND Apt. Bldg. (10%)

1305 Birch St. 24 Unit 94% 1989 399,278 135,871
Marshall, MN Apt. Bldg. (9.0%)

Oak Manor Apts. 27 Unit 99% 1989 285,917 238,264
Dickinson, ND Apt. Bldg. (9.75%)

4301-13 9th Ave. SW 2 18-Unit 97% 1988 997,642 218,330
Fargo, ND Apt. Bldgs. (8.65%)

Parkway Apts. 2 18-Unit 93% 1989 82,386 0
Beulah, ND Apt. Bldgs.

Scottsbluff Estates 2 24-Unit 96% 1988 710,039 196,024
Scottsbluff, NE Apt. Bldgs. (10.25%)

177 10th Ave. E 41 Unit 86% 1989 360,877 234,660
Dickinson, ND Apt. Bldg. (8.75%)

312 12th Ave. NW 18 Unit 97% 1989 256,750 45,670
Mandan, ND Apt. Bldg. (8.75%)

105 Grant St. 12 Unit 80% 1990 171,884 0
Harvey, ND Apt. Bldg.

Candlelight Apts. 66 Unit 97% 1992 838,017 539,961
Fargo, ND (2/3rds) Apt. Complex (8.25%)

Forest Park 270 Unit 97% 1993 6,596,264 4,177,577
Grand Forks, ND Apt. Complex (9.75%)

Oakwood Estates 100 Unit 95% 1993 3,323,305 2,250,000
Sioux Falls, SD Apt. Complex (7.5%)

Prairie Winds 48 Unit 98% 1993 1,960,108 1,388,452
Sioux Falls, SD Apt. Complex (7.19%)

Crestview Apts. 152 Unit 92% 1994 4,572,879 2,880,049
Bismarck, ND Apt. Complex (8.30%)

Pointe West 90 Unit 86% 1994 3,812,603 2,395,789
Rapid City, SD Apt. Complex (8.34%)

Oxbow Apts. 96 Unit 98% 1994 4,942,650 3,565,000
Sioux Falls, SD Apt. Complex (7.5%)

<PAGE>
Pine Cone 195 Unit 92% 1995 13,071,638 10,645,576
Ft. Collins, CO Apt. Complex (7.125%)

Southview 24 Unit 98% 1995 653,948 0
Minot, ND Apt. Complex

North Pointe 49 Unit 96% 1996 2,387,600 1,382,528
Bismarck, ND Apt. Complex (8.18%)

South Pointe - Phase I 98 Unit N/A 1996 4,789,552 2,775,212
Minot, ND Apt. Complex Completed (8.01%)

Stonehill 313 Unit 96% 1995 11,106,355 8,186,235
St. Cloud, MN Apt. Complex (9.21%)

1112 32nd Ave. SW 18 Unit 99% 1995 593,147 414,283
Minot, ND Apt. Complex (9.0%)

South Winds 164 Unit N/A 1995 5,433,683 3,721,568
Grand Forks, ND Apt. Complex (7.84%)

South Pointe - Phase II 98 Units N/A Not 4,270,062 0
Minot, ND Apt. Complex Completed

Billings, MT 98 Units N/A Not 3,754,088 0
Apt. Complex Completed

Columbia Park 116 Unit N/A Not 4,035,609 0
Grand Forks, ND Apt. Complex Completed

Circle 50 49 Unit N/A Not 491,247 0
Billings, MT Apt. Complex Completed

COMMERCIAL:

114 S. Main 3,500 sq ft. 100% 1978 103,905 18,389
Minot, ND Retail Bldg. (9%)

408 1st St SE Rental House 100% 1986 46,873 0
Minot, ND

Arrowhead Center 80,000 sq ft. 97% 1973 2,397,414 145,277
Minot, ND Shopping Center (10%)

Superpumper Gas Station/ 100% 1986 297,064 0
Emerado, ND Conven. Store

Superpumper Gas Station/ 100% 1987 239,212 0
Langdon, ND Conven. Store

401 South Main 9,200 sq ft. 96% 1988 474,686 0
Minot, ND Commercial Bldg.

Lester Chiropractic 5,000 sq ft. 100% 1988 268,916 0
Clinic Clinic Bldg.
Bismarck, ND (1/2 int.)

Superpumper Gas Station/ 100% 1988 301,013 0
Bottineau, ND Conven. Store

Superpumper Gas Station/ 100% 1988 428,778 0
Crookston, MN Conven. Store

Superpumper Gas Station/ 100% 1991 485,007 0
Grand Forks, ND Conven. Store

Superpumper Gas Station/ 100% 1991 250,000 0
New Town, ND Conven. Store

Pioneer Hi Bred Office/Whse. 100% 1991 653,876 350,023
Moorhead, MN (8.625%)

Lindberg Office/Whse. 100% 1991 1,455,789 851,838
Eden Prairie, MN (8.5%)

Creekside Office Bldgs. 91% 1991 1,571,135 946,482
Billings, MT (8.35%)
</TABLE>

<S> <C> <C> <C> <C> <C>
Superpumper Gas Station/ 100% 1992 120,600 0
Sidney, MT Conven. Store

Hutchinson Technology Manufacturing 100% 1992 4,429,026 2,470,548
Sioux Falls, SD Plant (8.5%)

Minot Plaza 11,200 sq ft. 100% 1993 502,898 0
Minot, ND Strip Shopping Center

Retail Warehouse 70,000 sq ft. 58% 1994 5,639,576 3,629,797
Boise, ID Retail warehouse (9.75%)

Midco Theatre 28,528 sq. ft. 100% 1994 2,545,736 1,703,009
Grand Forks, ND 10-screen theatre (8.65%)
30 Year Lease

Pet Foods 18,000 sq. ft. 100% 1995 1,276,776 834,130
Fargo, ND Retail/Whse. (8.31%)

Barnes and Noble 30,000 sq. ft. 100% 1995 3,292,012 2,317,499
Fargo, ND Retail/Whse. (7.98%)

Stone Container Currently Under N/A 1995 4,938,486 3,271,632
Fargo, ND Construction (8.25%)

Barnes & Noble Currently Under 100% 1995 3,699,101 2,510,624
----------
Omaha, NE Construction (7.98%)
TOTAL COMMERCIAL 35,417,879

CONSOLIDATED PARTNERSHIPS:

Sweetwater Properties 114 Apt. 79% 1972 1,354,230 251,014
Devils Lake & Grafton, ND Units (9.75%)

Bison Properties 125 Apt. 90% 1972 1,490,135 152,946
Jamestown, Carrington & Units (10%)
Cooperstown, ND

First Avenue Building 16,500 Sq. Ft. 93% 1981 779,817 0
Minot, ND Office Bldg.

Eastgate Properties 116 Unit 81% 1970 1,693,189 0
Moorhead, MN Apt. Complex

Colton Heights 18 Unit 97% 1984 816,561 381,682
Minot, ND Apt. Bldg. (9.5%)

Hill Park Properties 92 Unit 86% 1985 2,822,476 1,470,000
----------
Bismarck, ND Apt. Complex (7.5%)
TOTAL PARTNERSHIPS 8,956,408

Total Real Estate Owned $131,447,734 $71,321,337
-----------
-----------
Less Accumulated Depreciation (13,551,571)
------------
Net Carrying Value $117,896,163
------------
------------
Other Properties Sold Contract
For Deed $ 377,722
-----------
$71,699,059
-----------
-----------
</TABLE>

TITLE. The title to all of the above properties is in the name of IRET in
fee simple (in each case, IRET has in its files an attorney's title opinion
or a title insurance policy evidencing its title).

INSURANCE. In the opinion of management, all of said properties are
adequately covered by casualty and liability insurance.

PLANNED IMPROVEMENTS. There are no plans for material improvements to any of
the above properties.

CONTRACTS OR OPTIONS TO SELL. As of the date hereof, IRET had not entered
into any contracts or options to sell any of the above properties.

OCCUPANCY AND LEASES. Occupancy rates shown above are for the fiscal year
ended April 30, 1996. In the case of apartment properties, lease
arrangements with individual tenants vary from month-to-month to one year
leases, with the normal term

<PAGE>

being six months. Leases on commercial properties vary from one year to 20
years. The tenant occupying the retail warehouse in Boise, Idaho, is in
bankruptcy. The lease has been terminated and the Trust is seeking a new
tenant.

SHARES AVAILABLE FOR FUTURE SALE

Under its Restated Declaration of Trust, the Trust is authorized to issue an
unlimited number of its shares of Beneficial Interest. See "Description of
Shares of Beneficial Interest."

The shares of Beneficial Interest issued in connection with this offering and
a prior registration of 800,000 shares of Beneficial Interest will be freely
tradable by persons other than "affiliates" of the Trust without restriction
under the Securities Act of 1933, as amended, subject to certain limitations
on ownership set forth in the Restated Declaration of Trust. See
"Description of the Trust's Securities - Restrictions on Transfer."

Pursuant to the Operating Partnership Agreement, the Limited Partners (other
than the Trust) will have exchange rights which, beginning one year after the
acquisition of such limited partnership units, enable them to cause the
operating partnership to exchange their limited partnership units for cash
or, at the option of the General Partner, Trust shares of Beneficial Interest
on a one-for-one basis. Shares of Beneficial Interest of the Trust, other
than those issued under this registration and the prior registration which
was effective July 9, 1996, will be "restricted" securities under the meaning
of Rule 144 of the Securities Act of 1933 and may not be sold in the absence
of registration under the Securities Act of 1933 unless an exemption from
registration is available, including exemptions contained in Rule 144.

In general, under Rule 144 as currently in effect, if two years have elapsed
since the later of the date of acquisition of restricted securities from the
Trust or any "affiliate" of the Trust, as that term is defined under the
Securities Act of 1933, the acquiror or subsequent holder thereof is entitled
to sell within any three month period a number of shares that does not exceed
the greater of one percent (1%) of the then outstanding shares of Beneficial
Interest or the average weekly trading volume of the shares of Beneficial
Interest during the four calendar weeks preceding the date on which notice of
the sale is filed with the Securities and Exchange Commission. Sales under
Rule 144 also are subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Trust. If three years have elapsed since the date of acquisition of
restricted shares from the Trust or from any affiliate of the Trust and the
holder thereof is deemed not to have been an affiliate of the Trust at any
time during the three months preceding a sale, such holder would be entitled
to sell such shares in the public market under Rule 144(k) without regard to
the volume limitations, manner of sale provisions, public information
requirements or notice requirements.

The Trust has agreed under the Operating Partnership Agreement that it will
file with the Securities and Exchange Commission a shelf registration on Form
S-3 under Rule 415 of the Securities Act or any similar rule adopted by the
Commission with respect to any Trust shares of Beneficial Interest that may
be issued upon exchange of limited partnership units in the operating
partnership, pursuant to Section 8.06 of the Operating Partnership Agreement
and to use its best efforts to have such registration statement declared
effective under the Securities Act of 1933.

There is no established public market for the Trust shares of Beneficial
Interest at the present time. See "Market Price Of and Dividends On The
Trust's Shares of Beneficial Interest."

No prediction can be made as to the effect, if any, that future sales of
shares of Beneficial Interest, or the availability of such shares for future
sale, will have on the market price of the shares of Beneficial Interest
prevailing from time to time. Sales of substantial amounts of shares of
Beneficial Interest, or the

<PAGE>

perception that such sales could occur, may adversely affect prevailing
market prices of such shares. See "Risk Factors - Liquidity."

OPERATING PARTNERSHIP AGREEMENT

The following summary of the material terms of the Operating Partnership
Agreement, and the descriptions of certain provisions thereof set forth
elsewhere in this Prospectus, is qualified in its entirety by reference to
the Operating Partnership Agreement, which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

MANAGEMENT. The Operating Partnership has been organized as a North Dakota
limited partnership pursuant to the terms of the Agreement of Limited
Partnership of the Operating Partnership (the "Operating Partnership
Agreement"). Pursuant to the Operating Partnership Agreement, the General
Partner, as the sole general partner of the Partnership, has full, exclusive
and complete responsibility and discretion in the management and control of
the Operating Partnership, and the Limited Partners have no authority in
their capacity as Limited Partners to transact business for, or participate
in the management activities or decisions of, the Operating Partnership
except as required by applicable law. However, any amendment to the
Operating Partnership Agreement that would (i) adversely affect the Exchange
Rights (as defined herein), (ii) adversely affect the Limited Partners'
rights to receive cash distributions, (iii) alter the Operating Partnership's
allocations capital of the Operating Partnership, requires the consent of
Limited Partners (other than the General Partner) holding more than fifty
percent (50%) of the Units held by such partners.

TRANSFERABILITY OF INTERESTS. The General Partner may not voluntarily
withdraw from the Operating Partnership or transfer or assign its interest in
the Operating Partnership unless the transaction in which such withdrawal or
transfer occurs results in the Limited Partners receiving property in an
amount equal to the amount they would have received had they exercised their
Exchange Rights immediately prior to such transaction, or unless the
successor to the General Partners contributes substantially all of its assets
to the Operating Partnership in return for an interest in the Operating
Partnership. With certain limited exceptions, the Limited Partners may not
transfer their interests in the Operating Partnership, in whole or in part,
without the written consent of the General Partner, which consent the General
Partner may withhold in its sole discretion. The General Partner may not
consent to any transfer that would cause the Operating Partnership to be
treated as a corporation for federal income tax purposes.

The Company may not engage in any transaction resulting in a change of
control (a "Transaction") unless in connection with the Transaction the
Limited Partners receive or have the right to receive cash or other property
equal to the product of the number of Shares of Beneficial Interest into
which each Unit is then exchangeable and the greatest amount of cash,
securities or other property paid in the Transaction to the holder of one
Share of Beneficial Interest in consideration of one such Share. If, in
connection with the Transaction, a purchase, tender or exchange offer shall
have been made to and accepted by the holders of more than fifty percent
(50%) of the outstanding Shares of Beneficial Interest, each holder of Units
will receive, or will have the right to elect to receive, the greatest amount
of cash, securities, or other property which such holder would have received
has it exercised its right to redemption and received Shares of Beneficial
Interest in exchange for its OP Units immediately prior to the expiration of
such purchase, tender or exchange offer and had thereupon accepted such
purchase, tender or exchange offer.

Notwithstanding the foregoing paragraph, the Trust may merge, or otherwise
combine its assets, with another entity if, immediately after such merger or
other combination, substantially all of the assets of the surviving entity,
other than Units held by the Trust, are contributed to the Operating
Partnership as a capital

<PAGE>

contribution in exchange for Units with a fair market value, as reasonable
determined by the Trust, equal to the agreed value of the assets so
contributed.

In respect of any Transaction described in the preceding two paragraphs, the
Trust is required to use its commercially reasonable efforts to structure
such Transaction to avoid causing the Limited Partners to recognize gain for
federal income tax purposes by virtue of the occurrence of or their
participation in such Transaction, provided such efforts are consistent with
the exercise of the Board of Trustees' fiduciary duty under applicable law.

CAPITAL CONTRIBUTION. All assets of the Trust will be held by the Operating
Partnership, including the proceeds of this Offering. Although the Operating
Partnership will receive the net proceeds of the Offering, the Trust and the
General Partner will be deemed to have made a capital contribution to the
Operating Partnership in the amount of the gross proceeds of the Offering and
the Operating Partnership will be deemed simultaneously to have paid the
expenses paid or incurred in connection with the Offering. The Operating
Partnership Agreement provides that if the Operating Partnership requires
additional funds at any time or from time to time in excess of funds
available to the Operating Partnership from borrowing or capital
contributions, the General Partner or the Trust may borrow such funds from a
financial institution or other lender and lend such funds to the Operating
Partnership on the same terms and conditions as are applicable to the General
Partner's or the Trust's, as applicable, borrowing of such funds. Moreover,
the General Partner is authorized to cause the Operating Partnership to issue
partnership interests for less than fair market value if the Trust (i) has
concluded in good faith that such issuance is in the best interest of the
Trust and the Operating Partnership and (ii) the General Partner makes a
capital contribution in an amount equal to the proceeds of such issuance.
Under the Operating Partnership Agreement, the General Partner generally is
obligated to contribute or cause the Trust to contribute the proceeds of a
share offering by the Trust as additional capital to the Operating
Partnership. Upon such contribution, the General Partner or the Trust, as
applicable, will receive additional Units and the General Partner's or the
Trust's, as applicable, percentage interest in the Operating Partnership will
be increased on a proportionate basis based upon the amount of such
additional capital contributions. Conversely, the percentage interests of
the Limited Partners will be decreased on a proportionate basis in the event
of additional capital contributions by the General Partner or the Trust. In
addition, if the General Partner or the Trust contributes additional capital
to the Operating Partnership, the General Partner will revalue the property
of the Operating Partnership to its fair market value (as determined by the
General Partner) and the capital accounts of the partners will be adjusted to
reflect the manner in which the unrealized gain or loss inherent in such
property (that has not been reflected in the capital accounts previously)
would be allocated among the partners under the terms of the Operating
Partnership Agreement if there were a taxable disposition of such property
for such fair market value on the date of the revaluation.

EXCHANGE RIGHTS. Pursuant to the Operating Partnership Agreement, the
Limited Partners (other than the Trust) have exchange rights ("Exchange
Rights") that enable them to cause the Operating Partnership to exchange
their Units for cash, or at the option of the General Partner, Shares of
Beneficial Interest on a one-for-one basis. The exchange price will be paid
in cash in the event that the issuance of Shares of Beneficial Interest to
the exchanging Limited Partner would (i) result in any person owning,
directly or indirectly, Shares of Beneficial Interest in excess of the
Ownership Limitation, (ii) result in shares of beneficial interest of the
Trust being owned by fewer than 100 persons (determined without reference to
any rules of attribution), (iii) result in the Trust being "closely held"
within the meaning of Section 856(h) of the Code, (iv) cause the Trust to
own, actually or constructively, 10% or more of the ownership interest in a
tenant of the Trust's or the Operating Partnership's real property, within
the meaning of Section 856(d)(2)(B) of the Code, or (v) cause the acquisition
of Shares of Beneficial Interest by such redeeming Limited Partner to be
"integrated" with any other distribution of Shares of Beneficial Interest for
purposes of complying with the

<PAGE>

Securities Act. The Exchange Rights may be exercised by the Limited Partners
at any time after the first anniversary of the date of their acquisition,
provided that not more than two exchanges may occur during each calendar year
and each Limited Partner may not exercise the Exchange Right for less than
1,000 Units or, if such Limited Partner holds less than 1,000 Units, all of
the Units held by such Limited Partner. See "Federal Income Tax
Considerations - Tax Aspects of the Operating Partnership." The number of
Shares of Beneficial Interest issuable upon exercise of the Exchange Rights
will be adjusted upon the occurrence of share splits, mergers, consolidations
or similar pro rata share transactions, which otherwise would have the effect
of diluting the ownership interests of the Limited Partners or the
shareholders of the Company.

REGISTRATION RIGHTS. For a description of certain registration rights held
by the Limited Partners, see "Shares Available for Future Sale."

OPERATIONS. The Operating Partnership Agreement requires that the Operating
Partnership be operated in a manner that will enable the Trust to satisfy the
requirements for being classified as a REIT for federal tax purposes, to
avoid any federal income or excise tax liability imposed by the Code, and to
ensure that the Operating Partnership will not be classified as a "publicly
traded partnership" for purposes of Section 7704 of the Code.

In addition to the administrative and operating costs and expenses incurred
by the Operating Partnership, the Operating Partnership will pay all
administrative costs and expenses of the Trust and the General Partner
(collectively, the "Trust Expenses") and the Trust Expenses will be treated
as expenses of the Operating Partnership. The Trust Expenses generally will
include (i) all expenses relating to the operation and continuity of
existence of the Trust and the General Partner, (ii) all expenses relating to
the public offering and registration of securities by the Trust, (iii) all
expenses associated with the preparation and filing of any periodic reports
by the Trust under federal, state or local laws or regulations, (iv) all
expenses associated with compliance by the Trust and the General Partner with
laws, rules and regulations promulgated by any regulatory body and (v) all
other operating or administrative costs of the General Partner incurred in
the ordinary course of its business on behalf of the Partnership.

DISTRIBUTIONS. The Operating Partnership Agreement provides that the
Operating Partnership shall distribute cash from operations (including net
sale or refinancing proceeds, but excluding net proceeds from the sale of the
Operating Partnership's property in connection with the liquidation of the
Operating Partnership) on a quarterly (or, at the election of the General
Partner, more frequent) basis, in amounts determined by the General Partner
in its sole discretion, to the partners in accordance with their respective
percentage interests in the Operating Partnership. Upon liquidation of the
Operating Partnership, after payment of, or adequate provision for, debts and
obligations of the Operating Partnership, including any partner loans, any
remaining assets of the Operating Partnership will be distributed to all
partners with positive capital accounts in accordance with their respective
positive capital account balances. If the Trust has a negative balance in
its capital account following a liquidation of the Operating Partnership, it
will be obligated to contribute cash to the Operating Partnership equal to
the negative balance in its capital account.

ALLOCATIONS. Income, gain and loss of the Operating Partnership for each
fiscal year generally is allocated among the partners in accordance with
their respective interests in the Operating Partnership, subject to
compliance with the provisions of Code Sections 704(b) and 704(c) and
Treasury Regulations promulgated thereunder.

TERM. The Operating Partnership shall continue until April 30, 2050, or
until sooner dissolved upon (i) the bankruptcy, dissolution or withdrawal of
the General Partner (unless the Limited Partners elect to continue the
Operating Partnership, (ii) the sale or other disposition of all or
substantially all the assets of the Operating Partnership, (iii) the
redemption of all limited partnership interests in

<PAGE>

the Partnership (other than those held by the Trust, if any), or (iv) the
election by the General Partner.

FIDUCIARY DUTY. The Limited Partners have agreed that in the event of any
conflict in the fiduciary duties owed by the Trust to its shareholders and by
the General Partner to such Limited Partners, the General Partner will
fulfill its fiduciary duties to such limited partnership by acting in the
best interests of the Trust's shareholders.

TAX MATTERS. Pursuant to the Operating Partnership Agreement, the General
Partner is the tax matters partner of the Operating Partnership and, as such,
has authority to handle tax audits and to make tax elections under the Code
on behalf of the Operating Partnership.

TAX TREATMENT OF THE TRUST AND ITS SECURITY HOLDERS

FEDERAL INCOME TAX. Since its organization, the Trust has operated in a
manner to qualify as a real estate investment trust under Sections 856-858 of
the Internal Revenue Code. Under such Sections a real estate investment
trust which, in any taxable year, meets certain requirements will not be
subject to Federal income tax with respect to income which it distributes to
shareholders.

To be considered a real estate investment trust for purposes of the Federal
income tax laws, the Trust must continue to meet the following requirements,
among others:

(1) At the end of each fiscal quarter at least 75% of the value
of the total assets of the Trust must consist of real estate
assets (including interests in mortgages on real property
and shares in other real estate investment trusts meeting
the requirements for taxation in accordance with Sections
856-858 of the Internal Revenue Code), cash, cash items
including receivables and government securities. As to
non-real estate investments, which may not exceed 25% of the
total assets of the Trust, the securities of any one issuer
acquired by the Trust may not represent more than 5% of the
value of the Trust's assets or more than 10% of the
outstanding voting securities of such issuer.

(2) At least 75% of the gross income of the Trust for the
taxable year must be derived from real property rents,
interest on obligations secured by mortgages on real
property, abatements and refunds of real estate taxes, gains
from the sale or other disposition of real estate interests
or mortgages on real property and dividends or other
distributions on, and gains from the sale of, shares of
other real estate investment trusts meeting the requirements
for taxation in accordance with Sections 856-868 of the
Internal Revenue Code. An additional 15% of the gross
income of the Trust must be derived from the same sources
or from dividends, or interest, or gains from the sale or
other disposition of stock or securities, or any combination
of the foregoing.

(3) Gross income for the taxable year from sales or other
disposition of stock or securities held for less than six
months and of real property (or interests in real property)
held for less than four years must be less than 30% of gross
income. The Trust may not hold any property primarily for
sale to customers in the ordinary course of its trade or
business.

<PAGE>

(4) Beneficial ownership of the Trust must be held by 100 or
more persons during at least 335 days of a taxable year of
12 months, or during a proportionate part of a taxable year
of less than 12 months. More than 50% of the outstanding
capital stock may not be owned, directly or indirectly, by
or for, five or fewer individuals, at any time during the
last half of the taxable year.

As a real estate investment trust, the Trust will not be taxed on that
portion of its taxable income (including capital gains) which is distributed
to shareholders, if at least 95% of its real estate investment trust taxable
income (taxable income adjusted as provided in Section 857 of the Internal
Revenue Code) is distributed. However, to the extent that there is
undistributed taxable income or undistributed capital gain, the Trust will be
taxed as a corporation at corporate income tax rates. The Trust will not be
entitled to carry back or carry forward any net operating losses.

So long as the Trust has met the statutory requirements for taxation as a
real estate investment trust, distributions made to the Trust's shareholders
will be taxed to them as ordinary income or long term capital gain, as the
case may be. Distributions will not be eligible for the dividend exclusion
for individuals, or for the 85% dividends received deduction for
corporations. The Trust will notify each shareholder as to what portion of
the distributions in the opinion of its counsel constitutes ordinary income
or capital gain. The shareholders may not include in their individual income
tax returns any operating or extraordinary losses of the Trust, whether
ordinary or capital losses.

If, in any taxable year, the Trust should not qualify as a real estate
investment trust, it would be taxed as a corporation and distributions to its
shareholders would not be deductible by the Trust in computing its taxable
income. Such distributions, to the extent made out of the Trust's current or
accumulated earnings and profits, would be taxable to the shareholders as
dividends, but would be eligible for the dividend exclusion, or the 85%
dividends received deduction for corporations.

The foregoing, while summarizing some of the more significant provisions of
the Internal Revenue Code which govern the tax treatment of the Trust, is
general in character. For a complete statement, reference should be made to
the pertinent Code Sections and the Regulations issued thereunder.

In the opinion of the law firm of Pringle & Herigstad, P.C., counsel for the
Trust, the contemplated method of operation of the Trust complies with the
requirements of the Internal Revenue Code for qualification as a real estate
investment trust. The Regulations of the Treasury Department require that the
trustees have continuing exclusive authority over the management of the
Trust, the conduct of its affairs and, with certain limitations, the
management and disposition of the trust property. It is the intention of the
trustees to effect any amendments to the Declaration of Trust that may be
necessary in the opinion of counsel for the Trust to meet the requirements of
any modification or interpretation of the Regulations. Provision for such
amendment by the trustees, without the vote or consent of the shareholders,
is contained in the Declaration of Trust.

NORTH DAKOTA INCOME TAX. In the opinion of counsel for the Trust, since the
Trust qualifies as a Real Estate Investment Trust for purposes of the Federal
income tax laws, it will not be subject to the North Dakota Corporate Income
Tax on that portion of its taxable income (including capital gains) which is
distributed to shareholders, provided that the 95 percent distribution
requirement outlined above is met. To the extent there is undistributed
taxable income or undistributed capital gain, the Trust will be taxed as a
corporation for North Dakota income tax purposes. The Trust will not be
entitled to carry back or carry forward any net operating losses.
Distributions to the trust shareholders of capital gains or taxable income
will be subject to the North Dakota income tax.

<PAGE>

TAXATION OF THE TRUST'S SHAREHOLDERS. If the Trust qualifies as a REIT, and
so long as the Trust so qualifies, distributions made to the Trust's
shareholders out of current or accumulated earnings and profits will be taken
into account by them as ordinary income (which will not be eligible for the
dividends received deduction for corporations). Distributions that are
designated as capital gain dividends will be taxed as long-term capital gains
to the extent they do not exceed the Trust's actual net capital gain dividend
for the taxable year, although corporate shareholders may be required to
treat up to 20% of any such capital gain dividend as ordinary income.
Distributions in excess of current or accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares of stock, but rather will reduce
the adjusted basis of such shares of stock. To the extent that such
distributions exceed the adjusted basis of shareholder's shares of stock they
will be included in income as long-term or short-erm capital gain assuming
the shares are held as a capital asset in the hands of the shareholder. The
Trust will notify shareholders at the end of each year as to the portions of
the distributions which constitute ordinary income, net capital gain or
return of capital.

In addition, any dividend declared by the Trust in October, November or
December of any year payable to a shareholder of record on a specified date
in any such month shall be treated as both paid by the Trust and received by
the shareholder on December 31 of such year, provided that the dividend is
actually paid by the Trust during January of the following calendar year.
Shareholders may not include in their individual income tax returns any net
operating losses or capital losses of the Trust.

In general any gain or loss upon a sale or exchange of shares by a
shareholder who has held such shares as a capital asset will be long-term or
short-term depending on whether the stock was held for more than one year;
provided, however, any loss on the sale or exchange of shares that have been
held by such shareholder for six months or less will be treated as a
long-term capital loss to the extent of distributions from the Trust required
to be treated by such shareholders as long-term capital gain.

TAXATION OF TAX-EXEMPT SHAREHOLDERS. The IRS has ruled that amounts
distributed as dividends by a qualified REIT do not constitute unrelated
business taxable income ("UBTI") when received by a tax-exempt entity. Based
on that ruling the dividend income from the Trust should not, subject to
certain exceptions described below, be UBTI to a qualified plan, IRA or other
tax-exempt entity (a "Tax-Exempt Shareholder") provided that Tax-Exempt
Shareholder has not held its shares as "debt financed property" within the
meaning of the Code and the shares are not otherwise used in an unrelated
trade or business of the Tax-Exempt Shareholder. Similarly, income from the
sale of Common Stock should not, subject to certain exceptions described
below, constitute UBTI unless the Tax-Exempt Shareholder has held such Common
Stock as a dealer (under Section 512(b)(5)(B) of the Code) or as "debt
financed property" within the meaning of Section 514 of the Code.

For Tax-Exempt Shareholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code respectively, income from
an investment in the Trust will constitute UBTI unless the organization is
able to deduct properly amounts set aside or placed in reserve for certain
purposes so as to offset the income generated by its investment in the Trust.
Such prospective investors should consult their tax advisors concerning
these "set-aside" and reserve requirements.

Notwithstanding the above, however, the recently enacted Omnibus Budget
Reconciliation Act of 1993 (the "1993 Act") provides that, effective for
taxable years beginning in 1994, a portion of the dividends paid by a
"pension held REIT" shall be treated as UBTI as to any trust which (i) is
described in Section 401(a) of the Code, (ii) is tax-exempt under Section
501(a) of the Code, and (iii) holds more

<PAGE>

than 10% (by value) of the interests in the REIT. Tax-exempt pension funds
that are described in Section 401(a) of the Code are referred to below as
"qualified trusts."

A real estate investment trust is a "pension held REIT" if (i) it would not
have qualified as a real estate investment trust but for the fact that
Section 856(h)(3) of the Code (added by the 1993 Act) provides that stock
owned by qualified trusts shall be treated, for purposes of the "not closely
held" requirements, as owned by the beneficiaries of the trust (rather than
by the trust itself), and (ii) either (a) at least one such qualified trust
holds more than 25% (by value) of the interests in the REIT, OR (b) one or
more such qualified trusts, each of whom owns more than 10% (by value) of the
interests in the REIT, hold in the aggregate more than 50% (by value) of the
interests in the REIT.

TAX CONSIDERATIONS FOR FOREIGN INVESTORS. The preceding discussion does not
address the federal income tax considerations to foreign investors of an
investment in the Trust. Foreign investors in the Shares should consult
their own tax advisors concerning those provisions of the Code which deal
with the taxation of foreign taxpayers. In particular, foreign investors
should consider, among other things, the impact of the Foreign Investors Real
Property Tax Act of 1980. In addition, various income tax treaties between
the United States and other countries could affect the tax treatment of an
investment in the Shares. Furthermore, the backup withholding and
information reporting rules are under review by the United States Treasury,
and their application to the Common Stock could be changed prospectively or
retroactively by future Treasury Regulations.

BACKUP WITHHOLDING. The Trust will report to its domestic shareholders and
the IRS the amount of dividends paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31% with
respect to dividends paid unless such holder (a) is a corporation or comes
within certain other exempt categories and when required, demonstrates this
fact, or (b) provides a correct taxpayer identification number, certifies as
to no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A shareholder that
does not provide the Trust with a correct taxpayer identification number may
also be subject to penalties imposed by the IRS. Any amount paid as backup
withholding will be creditable against the shareholder's income tax
liability. In addition, the Trust may be required to withhold a portion of
capital gain distributions to any shareholders who fail to certify their
non-foreign status to the Trust.

STATE AND LOCAL TAXES. The Trust or its shareholders may be subject to state
or local taxation in the state or local jurisdiction in which the Trust's
investments or loans are located or in which the shareholders reside.

Prospective shareholders should consult their tax advisors for an explanation
of how state and local tax laws could affect their investment in the Shares.

OTHER TAX CONSIDERATIONS. In the event the Trust enters into any joint
venture transactions, special tax risks might arise. Such risks include
possible challenge by the IRS of (i) allocations of income and expense items,
which could affect the computation of taxable income of the Trust and
(ii) the status of the joint venture as a partnership (as opposed to a
corporation). If a joint venture were treated as a corporation, the joint
venture would be treated as a taxable entity and if the Trust's ownership
interest in the joint venture exceeds 10%, the Trust would cease to qualify
as a REIT. Furthermore, in such a situation even if the Trust ownership does
not exceed 10%, distributions from the joint venture to the Trust would be
treated as dividends, which are not taken into account in satisfying the 75%
gross income test described above and which could therefore make it more
difficult for the Trust to qualify as a REIT for the taxable year in which
such distribution was received and the interest in the joint venture held by
the Trust would not qualify as a "real estate asset" which could make it more
difficult for the Trust to meet the 75% asset test described above. Finally,
in such a situation the Trust would

<PAGE>

not be able to deduct its share of losses generated by the joint venture in
computing its taxable income., See "Failure of the Trust to Qualify as a
Real Estate Investment Trust" above for a discussion of the effect of the
Trust's failure to meet such tests for a taxable year. The Trust will not
enter into any joint venture, however, unless it has received from its
counsel an opinion to the effect that the joint venture will be treated for
tax purposes as a partnership. Such opinion will not be binding on the IRS
and no assurance can be given that the IRS might not successfully challenge
the status of any such joint venture as a partnership.

TAX ASPECTS OF THE OPERATING PARTNERSHIP. The following discussion
summarizes certain federal income tax considerations applicable to the
Trust's investment in the Operating Partnership. The discussion does not
cover state or local tax laws or any federal tax laws other than income tax
laws.

CLASSIFICATION AS A PARTNERSHIP. The Trust will include in its income its
distributive share of the Operating Partnership's income and deduct its
distributive share of the Partnership's losses only if the Partnership is
classified for federal income tax purposes as a partnership rather than as a
corporation or an association taxable as a corporation. An organization
formed as a partnership will be treated as a partnership, rather than as a
corporation, for federal income tax purposes if it (i) has no more than two
of the four corporate characteristics that the Treasury Regulations use to
distinguish a partnership from a corporation for tax purposes and (ii) is not
a "publicly traded" partnership. Those four corporate characteristics are
continuity of life, centralization of management, limited liability, and free
transferability of interests. A publicly traded partnership is a partnership
whose interests are traded on an established securities market or are readily
tradable on a secondary market (or the substantial equivalent thereof). A
publicly traded partnership will be treated as a corporation for federal
income tax purposes unless at least 90% of such partnership's gross income
for a taxable year consists of "qualifying income" under Section 7704(d) of
the Code, which generally includes any income that is qualifying income for
purposes of the 95% gross income test applicable to REITs (the "90%
Passive-Type Income Exception"). See "Federal Income Tax."

The U.S. Treasury Department recently issued regulations effective for
taxable years beginning after December 31, 1995 (the "PTP Regulations") that
provide limited safe harbors from the definition of a publicly traded
partnership. Pursuant to one of those safe harbors, (the "Private Placement
Exclusion"), interests in a partnership will not be treated as readily
tradable on a secondary market or the substantial equivalent thereof if (i) all
interests in the partnership were issued in a transaction (or transactions) that
was not required to be registered under the Securities Act of 1933, and (ii) the
partnership does not have more than 100 partners at any time during the
partnership's taxable year. In determining the number of partners in a
partnership, a person owning an interest in a flow-through entity (I.E., a
partnership, grantor trust, or S corporation) that owns an interest in the
partnership is treated as a partners in such partnership only if
(a) substantially all of the value of the owner's interest in the flow-through
entity is attributable to the flow-through entity's interest (direct or
indirect) in the partnership and (b) a principal purpose of the use of the
tiered arrangement is to permit the partnership to satisfy the 100-partner
limitation. At the date of this Prospectus, the Operating Partnership qualifies
for the Private Placement Exclusion. If the Operating Partnership is considered
a publicly traded partnership under the PTP Regulations because it is deemed to
have more than 100 partners, such Partnership should not be treated as a
corporation because it should be eligible for the 90% Passive-Type Income
Exception.

The Trust has not requested, and does not intend to request, a ruling from
the Service that the Operating Partnership will be classified as a
partnership for federal income tax purposes. Instead, Pringle & Herigstad,
P.C., is of the opinion that, based on certain factual assumptions and
representations, the Operating Partnership does not possess more than two
corporate characteristics and will not be

<PAGE>

treated as a publicly traded partnership and, thus, will be treated for
federal income tax purposes as a partnership and not as a corporation or an
association taxable as a corporation, or a publicly traded partnership.
Unlike a tax ruling, an opinion of counsel is not binding upon the Service,
and no assurance can be given that the Service will not challenge the status
of the Operating Partnership as a partnership for federal income tax
purposes. If such challenge were sustained by a court, the Operating
Partnership would be treated as a corporation for federal income tax
purposes, as described below. In addition, the opinion of Pringle &
Herigstad, P.C., is based on existing law, which is to a great extent the
result of administrative and judicial interpretation. No assurance can be
given that administrative or judicial changes would not modify the
conclusions expressed in the opinion.

If for any reason the Operating Partnership was taxable as a corporation,
rather than a partnership, for federal income tax purposes, the Trust would
not be able to qualify as a REIT. See "Federal Income Tax Considerations."
In addition, any change in the Partnership's status for tax purposes might be
treated as a taxable event, in which case the Trust might incur a tax
liability without any related cash distribution. See "Federal Income Tax
Considerations - Requirements for Qualification - Distribution Requirements."
Further, items of income and deduction of the Partnership would not pass
through to its partners, and its partners would be treated as shareholders
for tax purposes. Consequently, the Partnership would be required to pay
income tax at corporate tax rates on its net income, and distributions to its
partners would constitute dividends that would not be deductible in computing
such Partnership's taxable income.

INCOME TAXATION OF THE OPERATING PARTNERSHIP AND ITS PARTNERS.

PARTNERS, NOT PARTNERSHIPS, SUBJECT TO TAX. A partnership is not a
taxable entity for federal income tax purposes. Rather, the Trust will be
required to take into account is allocable share of the Operating
Partnership's income, gains, losses, deductions, and credits for any taxable
year of the Partnership ending within or with the taxable year of the Trust,
without regard to whether the Trust has received or will receive any
distribution from the Partnership.

PARTNERSHIP ALLOCATIONS. Although a partnership agreement generally will
determine the allocation of income and losses among partners, such
allocations will be disregarded for tax purposes under section 704(b) of the
Code if they do not comply with the provisions of section 704(b) of the Code
and the Treasury Regulations promulgated thereunder. If an allocation is not
recognized for federal income tax purposes, the item subject to the
allocation will be reallocated in accordance with the partners' interests in
the partnership, which will be determined by taking into account all of the
facts and circumstances relating to the economic arrangement of the partners
with respect to such item. The Operating Partnership's allocations of
taxable income and loss are intended to comply with the requirements of
section 704(b) of the Code and the Treasury Regulations promulgated
thereunder.

TAX ALLOCATIONS WITH RESPECT TO CONTRIBUTED PARTNERS. Pursuant to
section 704(c) of the Code, income, gain, loss, and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for federal
income tax purposes in a manner such that the contributor is charged with, or
benefits from, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain
or unrealized loss is generally equal to the difference between the fair
market value of the contributed property at the time of contribution and the
adjusted tax basis of such property at the time of contribution. The
Treasury Department recently issued regulations requiring partnerships to use
a "reasonable method" for allocating items affected by section 704(c) of the
Code and outlining several reasonable allocation methods. The Operating
Partnership plans to elect to use the traditional method for allocating Code
section 704(c) items with respect to the Properties it acquires in exchange
for Units.

<PAGE>

Under the Operating Partnership Agreement, depreciation or amortization
deductions of the Operating Partnership generally will be allocated among the
partners in accordance with their respective interests in the Operating
Partnership, except to the extent that the Operating Partnership is required
under Code section 704(c) to use a method for allocating tax depreciation
deductions attributable to the Properties that results in the Trust receiving
a disproportionately large share of such deductions. In addition, gain on
the sale of a Property contributed to the Operating Partnership by a Limited
Partner in exchange for Units will be specially allocated to such member to
the extent of any "built-in" gain with respect to such Property for federal
income tax purposes. Depending on the allocation method elected under Code
section 704(c), it is possible that the Trust (i) may be allocated lower
amounts of depreciation deductions for tax purposes with respect to
contributed Properties than would be allocated to the Trust if such
Properties were to have a tax basis equal to their fair market value at the
time of contribution and (ii) may be allocated taxable gain in the event of a
sale of such contributed Properties in excess of the economic profit
allocated to the Trust as a result of such sale. These allocations may cause
the Trust to recognize taxable income in excess of cash proceeds, which might
adversely affect the Trust's ability to comply with the REIT distribution
requirements, although the Trust does not anticipate that this event will
occur. The foregoing principles also will affect the calculation of the
Trust's earnings and profits for purposes of determining which portion of the
Trust's distributions is taxable as a dividend. The allocations described in
this paragraph may result in a higher portion of the Trust's distributions
being taxed as a dividend than would have occurred had the Trust purchased
the Properties for cash.

BASIS IN OPERATING PARTNERSHIP INTEREST. The Trust's adjusted tax basis
in its partnership interest in the Operating Partnership generally is equal
to (i) the amount of cash and the basis of any other property contributed to
the Operating Partnership by the Trust, (ii) increased by (A) its allocable
share of the Operating Partnership's income and (B) its allocable share of
indebtedness of the Operating Partnership, and (iii) reduced, but not below
zero, by (A) the Trust's allocable share of the Operating Partnership's loss
and (B) the amount of cash distributed to the Trust, including constructive
cash distributions resulting from a reduction in the Trust's share of
indebtedness of the Operating Partnership.

If the allocation of the Trust's distributive share of the Operating
Partnership's loss would reduce the adjusted tax basis of the Trust's
partnership interest in the Operating Partnership below zero, the recognition
of such loss will be deferred until such time as the recognition of such loss
would not reduce the Trust's adjusted tax basis below zero. To the extent
that the Operating Partnership's distributions, or any decrease in the
Trust's share of the indebtedness of the Operating Partnership (such decrease
being considered a constructive cash distribution to the partners), would
reduce the Trust's adjusted tax basis below zero, such distributions
(including such constructive distributions) will constitute taxable income to
the Trust. Such distributions and constructive distributions normally will
be characterized as capital gain, and, if the Trust's partnership interest in
the Operating Partnership has been held for longer than the long-term capital
gain holding period (currently one year), the distributions and constructive
distributions will constitute long-term capital gain.

SALE OF THE OPERATING PARTNERSHIP'S PROPERTY. Generally, any gain realized
by the Operating Partnership on the sale of property held for more than one
year will be long-term capital gain, except for any portion of such gain that
is treated as depreciation or cost recovery recapture. Any gain recognized
by the Operating Partnership on the disposition of the Properties contributed
by a partners (including the Trust) in exchange for Units will be allocated
first to such contributing partner under section 704(c) of the Code to the
extent of such contributing partner's "built-in gain" on those Properties for
federal income tax purposes. The Limited Partners' "built-in gain" on the
Properties sold will equal the excess of the Limited Partners' proportionate
share of the book value of those Properties over the Limited Partners' tax
basis allocable to those Properties at the time of the sale. Any remaining
gain recognized by the Operating Partnership on the

<PAGE>
disposition of contributed Properties, and any gain recognized upon the
disposition of the Properties acquired by the Operating Partnership for cash,
will be allocated among the partners in accordance with their respective
percentage interests in the Operating Partnership. The Trust's Declaration
of Trust provides that any decision to sell any real estate asset in which a
trustee, or officer of the Trust, the Advisor, or any Affiliate of the
foregoing, has a direct or indirect interest, will be made by a majority of
the Trustees including a majority of the Independent Trustees. See "Policies
with Respect to Certain Activities - Conflict of Interest Policies."

The Trust's share of any gain realized by the Operating Partnership on the
sale of any property held by the Operating Partnership as inventory or other
property held primarily for sale to customers in the ordinary course of the
Operating Partnership's trade or business will be treated as income form a
prohibited transaction that is subject to a 100% penalty tax. Such
prohibited transaction income also may have an adverse effect upon the
Trust's ability to satisfy the income tests for REIT status. See "Federal
Income Tax Considerations" above. The Trust, however, does not presently
intend to allow the Operating Partnership to acquire or hold any property
that represents inventory or other property held primarily for sale to
customers in the ordinary course of the Trust's or the Operating
Partnership's trade or business.

ERISA CONSIDERATIONS

The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the prohibited transaction provisions of section 4975 of the Code that may be
relevant to a prospective purchaser. The discussion does not purport to deal
with all aspects of ERISA or section 4975 of the Code that may be relevant to
particular shareholders (including plans subject to Title I of ERISA, other
retirement plans and IRAs subject to the prohibited transaction provisions of
section 4975 of the Code, and governmental plans or church plans that are
exempt from ERISA and section 4975 of the Code but that may be subject to
state law requirements) in light of their particular circumstances.

The discussion is based on current provisions of ERISA and the Code, existing
and currently proposed regulations under ERISA and the Code, the legislative
history of ERISA and the Code, existing administrative rulings of the
Department of Labor ("DOL") and reported judicial decisions. No assurance
can be given that legislative, judicial, or administrative changes will not
affect the accuracy of any statements herein with respect to transactions
entered into or contemplated prior to the effective date of such changes.

A FIDUCIARY MAKING THE DECISION TO INVEST IN THE SHARES OF BENEFICIAL
INTEREST ON BEHALF OF A PROSPECTIVE PURCHASER THAT IS AN EMPLOYEE BENEFIT
PLAN, A TAX-QUALIFIED RETIREMENT PLAN, OR AN IRA IS ADVISED TO CONSULT ITS
OWN LEGAL ADVISOR REGARDING THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA,
SECTION 4975 OF THE CODE, AND STATE LAW WITH RESPECT TO THE PURCHASE,
OWNERSHIP, OR SALE OF THE SHARES BY SUCH PLAN OR IRA.

EMPLOYEE BENEFIT PLAN, TAX-QUALIFIED RETIREMENT PLANS, AND IRAS. Each
fiduciary of a pension, profit-sharing, or other employee benefit plan (an
"ERISA Plan") subject to Title I of ERISA should consider carefully whether
an investment in the Shares of Beneficial Interest is consistent with his
fiduciary responsibilities under ERISA. In particular, the fiduciary
requirements of Part 4 of Title I of ERISA require a ERISA Plan's investments
to be (i) prudent and in the best interests of the ERISA Plan, its
participants, and its beneficiaries, (ii) diversified in order to minimize
the risk of large losses, unless it is clearly prudent not to do so, and
(iii) authorized under the terms of the ERISA Plan's governing documents
(provided the documents are consistent with ERISA). In determining whether
an investment in the Shares is prudent for purposes of ERISA, the appropriate
fiduciary of a ERISA Plan should consider all of the facts and circumstances,
including whether the investment is reasonably designed, as a part of the
ERISA Plan's

<PAGE>

portfolio for which the fiduciary has investment responsibility, to meet the
objectives of the ERISA Plan, taking into consideration the risk of loss and
opportunity for gain (or other return) from the investment, the
diversification, cash flow, and funding requirements of the ERISA Plan's
portfolio. A fiduciary also should take into account the nature of the
Trust's business, the management of the Trust, the length of the Trust's
operating history, the fact that certain investment properties may not have
been identified yet, and the possibility of the recognition of UBTI.

The fiduciary of an IRA or of a qualified retirement plan not subject to
Title I of ERISA because it is a governmental or church plan or because it
does not cover common law employees (a "Non-ERISA Plan") should consider that
such an IRA or Non-RISA Plan may only make investments that are authorized by
the appropriate governing documents and under applicable state law.

Fiduciaries of ERISA Plans and persons making the investment decision for
an IRA or other Non-ERISA Plan should consider the application of the
prohibited transaction provisions of ERISA and the Code in making their
investment decision. A "party in interest" or "disqualified person" with
respect to an ERISA Plan or with respect to a Non-ERISA Plan or IRA subject
to Code section 4975 is subject to (i) an initial 5% excise tax on the amount
involved in any prohibited transaction involving the assets of the plan or
IRA and (ii) an excise tax equal to 100% of the amount involved if any
prohibited transaction is not corrected. If the disqualified person who
engages in the transaction is the individual on behalf of whom an IRA is
maintained (or his beneficiary), the IRA will lose its tax-exempt status and
its assets will be deemed to have been distributed to such individual in a
taxable distribution (and no excise tax will be imposed) on account of the
prohibited transaction. In addition, a fiduciary who permits an ERISA Plan
to engage in a transaction that the fiduciary knows or should know is a
prohibited transaction may be liable to the ERISA Plan for any loss the ERISA
Plan incurs as a result of the transaction or for any profits earned by the
fiduciary in the transaction.

STATUS OF THE TRUST AND THE OPERATING PARTNERSHIP UNDER ERISA. The
following section discusses certain principles that apply in determining
whether the fiduciary requirements of ERISA and the prohibited transaction
provisions of ERISA and the Code apply to an entity because one or more
investors in the equity interests in the entity is an ERISA Plan or is a
Non-ERISA Plan or IRA subject to section 4975 of the Code. An ERISA Plan
fiduciary also should consider the relevance of those principles to ERISA's
prohibition on improper delegation of control over or responsibility for
"plan assets" and ERISA's imposition of co-fiduciary liability on a fiduciary
who participates in, permits (by action or inaction) the occurrence of, or
fails to remedy a known breach by another fiduciary.

If the assets of the Trust are deemed to be "plan assets" under ERISA, (i)
the prudence standards and other provisions of Part 4 of Title I of ERISA
would be applicable to any transactions involving the Trust's assets, (ii)
persons who exercise any authority over the Trust's assets, or who provide
investment advise to the Trust, would (for purposes of fiduciary
responsibility provisions of ERISA) be fiduciaries of each ERISA Plan that
acquires Shares, and transactions involving the Trust's assets undertaken at
their direction or pursuant to their advise might violate their fiduciary
responsibilities under ERISA, especially with regard to conflicts of
interest, (iii) a fiduciary exercising his investment discretion over the
assets of an ERISA Plan to cause it to acquire or hold the Shares could be
liable under Part 4 of Title I of ERISA for transactions entered into by the
Trust that do not conform to ERISA standards of prudence and fiduciary
responsibility, and (iv) certain transactions that the Trust might enter into
in the ordinary course of its business and operations might constitute
"prohibited transactions" under ERISA and the Code.

Regulations of the DOL defining "plan assets" (the "Plan Asset
Regulations") generally provide that when an ERISA Plan or Non-ERISA Plan or
IRA acquires a security that is an equity interest in an entity and the
security is neither a

<PAGE>

"publicly-offered security" nor a security issued by an investment company
registered under the Investment Company Act of 1940, the ERISA or Non-ERISA
Plan's or IRA's assets include both the equity interest and an undivided
interest in each of the underlying assets of the issuer of such equity
interest, unless one or more exceptions specified in the Plan Asset
Regulations are satisfied.

The Plan Asset Regulations define a publicly-offered security as a
security that is "widely-held," "freely transferable," and either part of a
class of securities registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or sold pursuant to an effective registration
statement under the Securities Act (provided the securities are registered
under the Exchange Act within 120 days after the end of the fiscal year of
the issuer during which the offering occurred). The Shares are being sold in
an offering registered under the Securities Act and are registered under the
Exchange Act. The plan Asset Regulations provide that a security is
"widely-held" only if it is part of a class of securities that is owned by
100 or more investors independent of the issuer and of one another. A
security will not fail to be widely held because the number of independent
investors falls below 100 subsequent to the initial public offering as a
result of events beyond the issuer's control., The Trust currently has in
excess of 3,000 shareholders and is of the opinion that the Shares are now
and will be "widely held."

The Plan Asset Regulations provide that whether a security is "freely
transferable" is a factual question to be determined n the basis of all
relevant facts and circumstances. The Plan Asset Regulations further provide
that where a security is part of an offering in which the minimum investment
if $10,000 or less (as is the case with this Offering), certain restrictions
ordinarily will not, alone or in combination, affect a finding that such
securities are freely transferable. The restrictions on transfer enumerated
in the Plan Asset Regulations as not affecting that finding include: (i) any
restriction on or prohibition against any transfer or assignment that would
result in the termination or reclassification of an entity for federal or
state tax purposes, or that otherwise would violate any federal or state law
or court order, (ii) any requirement that advance notice of a transfer or
assignment be given to the issuer, (iii) any administrative procedure that
establishes an effective date, or an event (such as completion of an
offering), prior to which a transfer or assignment will not be effective, and
(iv) any limitation or restriction on transfer or assignment that is not
imposed by the issuer or a person acting on behalf of the issuer. The Trust
believes that the restrictions imposed under the Declaration of Trust on the
transfer of the Trust's Shares of Beneficial Interest will not result in the
failure of the Shares to be "freely transferable." The Trust also is not
aware of any other facts or circumstances limiting the transferability of the
Shares that are not enumerated in the Plan Asset Regulations as those not
affecting free transferability, and the Trust does not intend to impose in
the future (or to permit any person to impose on its behalf) any limitations
or restrictions on transfer that would not be among the enumerated
permissible limitations or restrictions. The Plan Asset Regulations only
establish a resumption in favor of a finding of free transferability, and no
assurance can be given that the DOL or the Treasury Department will not reach
a contrary conclusion.

Assuming that the Shares will be "widely held" and that no other facts and
circumstances other than those referred to in the preceding paragraph exist
that restrict transferability of the Shares, the Shares should be publicly
offered securities and the assets of the Trust should not be deemed to be
"plan assets" of any ERISA Plan, IRA, or Non-ERISA Plan that invests in the
Shares.

The Plan Asset Regulations also will apply in determining whether the
assets of the Operating Partnership will be deemed to be "plan assets." The
partnership interests in the Operating Partnership will not be
publicly-offered securities. Nevertheless, if the Shares constitute
publicly-offered securities, the indirect investment in the Partnership and
the Subsidiary Partnerships by ERISA Plans, IRAs, or Non-ERISA Plans subject
to section 4975 of the Code through their ownership of

<PAGE>

Shares will not cause the assets of the Operating Partnership or the
Subsidiary Partnerships to be treated as "plan assets" of such shareholders.

MARKET PRICE OF AND DIVIDENDS ON THE TRUST'S
SHARES OF BENEFICIAL INTEREST

MARKET FOR THE SHARES OF BENEFICIAL INTEREST.

No assurance can be given that a purchaser of Trust shares under this
Offering would be able to resell such shares when desired. At the present
time, there is no brokerage firm that "makes a market" for Trust shares. All
resales of Trust shares are now on a "best efforts" basis and the ability of
a shareholder to resell shares is dependent on the broker-dealer locating a
purchaser. At the present time, the Trust itself acts to support the
secondary market in its shares by repurchasing shares upon the following
terms: A repurchase limitation of $100,000 per customer, with a cumulative
total for all shareholders of $600,000. To the extent shares are sold by the
Trust under this Offering, such sales will replenish the repurchasing fund on
a share for share basis. THIS REPURCHASE POLICY MAY BE CHANGED AT ANY TIME
BY THE BOARD OF TRUSTEES AND NO ASSURANCE CAN BE GIVEN OF ITS CONTINUATION.
Sales of Trust shares are handled by Inland National Securities, Inc., 21
South Main, Minot, ND 58701, Financial Advantage Brokerage Services, Inc., 17
South Main, Minot, ND 58701, and Huntingdon Securities, Corporation, 216
South Broadway, Minot, ND 58701. The following is a summary of the total
number of shares sold and repurchased during the past 7 years:

PRICE RANGE
--------------------------------------------------
Shares Repurchased From New Shares Sold
Shareholders By IRET
Year No. of Shares Low High Low High
- ---- ------------- ---- ---- ---- ----
1989 686,847 3.82 4.18 4.35 4.75
1990 396,816 4.18 4.40 4.75 5.00
1991 562,227 4.40 4.75 5.00 5.40
1992 646,779 4.75 5.02 5.40 5.70
1993 911,773 5.02 5.28 5.70 6.00
1994 817,872 5.28 5.63 6.00 6.40
1995 1,266,984 5.89 6.16 6.40 6.70
1996 1,535,122 5.89 6.44 6.70 7.00

As of October 31, 1996, IRET had 3,127 shareholders. No shareholder held
more than 5% of the 13,994,747 shares outstanding and there were no warrants
or stock options outstanding. Dividends are paid on January 5, April 1, July
1, and October 1 of each year.

This is the end of this page

<PAGE>

DIVIDEND AND SHARE PRICE HISTORY. The following is the history of cash
dividends declared and paid by the Trust and the share price on each dividend
payment date from the inception of the Trust on July 31, 1970, to the date of
this Prospectus:

<TABLE>
<CAPTION>
Dividend/ Dividend/ Dividend/
Date Share Price(1) Date Share Price(1) Date Share Price(1)
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/71 $.0125 $1.00 1/1/80 $.03 $1.70 7/1/88 $.075 $3.74
10/30/71 $.015 $1.00 4/1/80 $.0325 $1.70 10/1/88 $.071 $3.83
1/1/72 $.015 $1.00 7/1/80 $.035 $1.70 1/1/89 $.072 $3.92
4/1/72 $.015 $1.10 10/1/80 $.035 $1.80 4/1/89 $.0725 $4.01
7/1/72 $.016 $1.10 1/1/81 $.035 $1.80 7/1/89 $.073 $4.10
10/1/73 $.016 $1.10 4/1/81 $.035 $1.80 10/1/89 $.0735 $4.19
1/1/73 $.016 $1.10 7/1/81 $.035(2) $1.70 1/1/90 $.074 $4.28
4/1/73 $.0165 $1.30 10/1/81 $.035(2) $1.70 4/1/90 $.0745 $4.28
7/1/73 $.0165 $1.30 1/1/82 $.035(2) $1.70 7/1/90 $.075 $4.37
10/1/73 $.0165 $1.30 4/1/82 $.035(2) $1.70 10/1/90 $.0755 $4.50
1/1/74 $.0175 $1.30 7/1/82 $.0375 $1.70 1/5/91 $.076 $4.50
4/1/74 $.0175 $1.40 10/1/82 $.04 $1.70 4/1/91 $.0765 $4.59
7/1/74 $.0175 $1.40 1/1/83 $.0425 $1.90 7/1/91 $.077 $4.68
10/1/74 $.0185 $1.40 4/1/83 $.045 $2.07 10/1/91 $.0775 $4.77
1/1/75 $.02 $1.40 7/1/83 $.0475 $2.20 1/5/92 $.078 $4.86
4/1/75 $.02 $1.50 10/1/83 $.05 $2.61 4/1/92 $.0785 $4.95
7/1/75 $.02 $1.50 1/1/84 $.0525 $2.66 7/1/92 $.079 $4.95
10/1/75 $.02 $1.50 4/1/84 $.055 $2.75 10/1/92 $.0795 $5.04
1/1/76 $.021 $1.50 7/1/84 $.05625 $2.75 1/5/93 $.08 $5.13
4/1/76 $.021 $1.60 10/1/84 $.0575 $2.79 4/1/93 $.0805 $5.22
7/1/76 $.0225 $1.60 1/1/85 $.05875 $2.84 7/1/93 $.081 $5.31
10/1/76 $.0225 $1.70 4/1/85 $.06 $2.88 10/1/93 $.0815 $5.31
1/1/77 $.0225 $1.70 7/1/85 $.06125 $2.97 1/5/94 $.082 $5.40
4/1/77 $.0225 $1.80 10/1/85 $.0625 $3.11 4/1/94 $.0825 $5.49
7/1/77 $.025 $1.80 1/1/86 $.06375 $3.15 7/1/94 $.088 $5.49
10/1/77 $.025 $1.80 4/1/86 $.065 $3.20 10/1/94 $.084 $5.63
1/1/78 $.025 $1.80 7/1/86 $.066 $3.29 1/1/95 $.085 $5.89
4/1/78 $.025 $1.80 10/1/86 $.067 $3.38 4/1/95 $.08625 $5.89
7/1/78 $.0275 $1.90 1/1/87 $.068 $3.47 7/1/95 $.0925 $6.03
10/1/78 $.0275 $1.90 4/1/87 $.069 $3.56 10/1/95 $.08875 $6.16
1/1/79 $.0275 $2.00 7/1/87 $.0695 $3.56 1/5/96 $.09 $6.16
4/1/79 $.0275 $2.10 10/1/87 $.07 $3.65 4/1/96 $.09125 $6.30
7/1/79 $.0275 $2.00 1/1/88 $.07 $3.65 7/1/96 $.0975 $6.30
10/1/79 $.03 $2.00 4/1/88 $.071 $3.74 10/1/96 $.095 $6.44
1/5/97 $.0975 $6.44

</TABLE>

(1)The stock prices shown are the prices at which Trust Shares of Beneficial
Interest were available for purchase on the date shown by then shareholders
under the Trust's Dividend Reinvestment Plan (after 1/1/80) or from the Trust
(prior to 1/1/80).

(2)In addition to the cash dividend shown, a stock dividend of .0175 share
for each share then owned.

DIVIDEND REINVESTMENT PLAN

The Trust is registering 400,000 of its shares of Beneficial Interest to
distribute to its shareholders who elect to participate in its Dividend
Reinvestment Plan.

Each shareholder shall have the option to receive dividends in the form of
additional shares instead of in cash. In order to participate in the
Dividend Reinvestment Plan, the shareholder must affirmatively elect to do so
by notifying the Transfer Agent and Registrar, Odell-Wentz & Associates,
L.L.C., 12 South Main, Minot, ND 58701, (701) 852-1756. The shareholder may
terminate participation at any time by notifying the Transfer Agent.

The price at which shares will be issued under the Dividend Reinvestment Plan
is equal to 92% of the price at which the Trust is then offering its shares
for sale to the public on the dividend declaration date ($7.20 X 92% = $6.62
per share as of the date of this Prospectus).

The dividend is taxable to the shareholders whether received in cash or
shares.

DESCRIPTION OF THE TRUST'S SECURITIES

DESCRIPTION OF SHARES. The shares of beneficial interests of the Trust are
of one class without par value. There is no limit on the number of shares
that may be

<PAGE>

issued. All shares participate equally in dividends and distributions when
and as declared by the trustees and in net assets upon liquidation. The
shares of beneficial interests offered hereby will be fully paid and
non-assessable by the Trust upon issuance and will have no preference,
conversion, exchange, pre-emptive or redemption rights. Annual meetings of
shareholders are held on the second Wednesday of August and special meetings
may be called by the Chairman of the trustees or by a majority of the
trustees or upon written request of shareholders holding not less than 20
percent of the issued and outstanding shares. At any meeting a shareholder
is entitled to one vote for each share of beneficial interest owned.

The shares of beneficial interests are transferable in the same manner as are
shares of a North Dakota business corporation.

With respect to the election of trustees, the shares have cumulative voting
rights which allow each shareholder one vote in person or by written proxy
for each share registered in his name for as many persons as there are
trustees to be elected.

RESTRICTIONS ON TRANSFER. Section 7 of Article 2 of the Declaration of Trust
provides: "To insure compliance with the Internal Revenue Code provision
that no more than 50% of the outstanding Shares may be owned by five or fewer
individuals, the Trustees may at any time redeem Shares from any Shareholder
at the fair market value thereof (as determined in good faith by the Trustees
based on an independent appraisal of Trust assets made within six months of
the redemption date). Also, the Trustee may refuse to transfer Shares to any
Person who acquisition of additional Shares might, in the opinion of the
Trustees, violate the above requirement."

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of May 31, 1996, no persons, or any Trustee or officer individually was
known by the Trust to own beneficially more than 5% of the outstanding shares
of Beneficial Interest.

Collectively, the Trustees owned 8.38% of such shares on May 31, 1996.

Name and Position Principal Occupations Trustee Shares Beneficially
With Trust During Past 5 Years Since Owned As Of 5-31-96

C. Morris Anderson President of North Hill
Trustee, Age 67 Bowl, Inc.; Director of
International Inn, Inc.,
Norwest Bank - Minot, N.A.
and a Partner in Magic
City Realty, Ltd. 1970 11,164(1)

Ralph A. Christensen Retired Rancher; Director of
Trustee and Chairman First Bank - Minot, N.A.;
Age 67 Chairman of IRET 1970 40,361(2)

John D. Decker
Trustee, Age 79 Investor 1970 40,352(3)

Mike F. Dolan
Trustee and Vice Investor;
Chairman, Age 84 Vice-Chairman of IRET 1978 224,867(4)

J. Norman Ellison, Jr. Businessman; Managing
Trustee, Age 73 Partner of Ellison Realty
Co.; Former Director of
First Bank - Minot, N.A. 1970 18,067(5)

<PAGE>

Daniel L. Feist Realtor, Broker, Real Estate
Trustee, Age 64 Developer, Builder, General
Contractor; President of Feist
Construction & Realty, Inc.;
Director of First Bank -
Minot, N.A. and N.D.
Holdings, Inc., Minot, ND 1985 275,314(6)

Patrick G. Jones Investor; Former President
Trustee, Age 48 of Central Venture Capital,
Inc.; former Manager and
Director of Minot Daily
News 1986 74,392(7)

Jeff L. Miller Investor; Businessman; President
Trustee and Vice of M & S Concessions, Inc., and
Chairman, Age 52 former president of Coca-Cola
Bottling Co. of Minot; and Director
of First Bank - Minot 1985 129,401(8)

Roger R. Odell Realtor; President of IRET;
Trustee and Partner in Odell-Wentz &
President, Age 70 Associates (Advisor of IRET);
Director of Investors Manage-
ment & Marketing, Inc. and Inland
National Securities, Inc.; Partner
in Magic City Realty, Ltd. 1970 143,866(9)

Thomas A. Wentz, Jr. Attorney, Pringle & Herigstad,
Trustee P.C.; Sole General Partner
of WENCO, a North Dakota
Limited Partnership 1996 162,672(10)

Thomas A. Wentz, Sr. Attorney, Pringle & Herigstad,
Trustee and Vice P.C.; Vice-President of IRET;
President, Age 61 Partner in Odell-Wentz &
Associates (Advisor to the
Trust). 1970 45,503(11)

(1)Owned by Mr. Anderson and his wife as Joint Tenants.

(2)Includes shares held in Mr. Christensen's IRA, and also his wife's IRA,
which is comprised of 567 shares; the balance is owned by Mr. Christensen and
his wife as Joint Tenants. Mr. Christensen's children own 16,679 shares as
to which Mr. Christensen does not have beneficial ownership or any
dispositive powers.

(3)Owned by Mr. Decker with his wife as Tenants in Common. Mr. Decker's
children own 3,384 shares as to which Mr. Decker does not have beneficial
ownership or dispositive powers.

(4)Mr. Dolan's children own 12,428 shares, as to which Mr. Dolan disclaims
beneficial ownership or dispositive powers.

(5)Includes 4,416 shares held by Mr. Ellison's wife. Mr. Ellison disclaims
beneficial ownership of such shares.

(6)Includes 34,372 shares held by Mr. Feist's wife and in her IRA. Mr. Feist
disclaims beneficial ownership of such shares. Mr. Feist's children own
74,913 shares as to which Mr. Feist does not have beneficial ownership or
dispositive powers.

<PAGE>

(7)Includes 37,112 shares held by Mr. Jones' wife in her IRA. Mr. Jones
disclaims beneficial ownership of such shares. Mr. Jones' children own
10,925 shares as to which Mr. Jones disclaims beneficial ownership.

(8)42,764 of such shares are owned by Mr. Miller's wife. Mr. Miller
disclaims beneficial ownership of such shares.

(9)Includes 9,275 shares owned by Magic City Realty and 19,548 shares owned
by Investors Management & Marketing, Inc. Also includes 67,897 shares owned
by Mr. Odell's wife as to which shares Mr. Odell disclaims beneficial
ownership. Mr. Odell's children own 64,317 shares as to which Mr. Odell does
not have beneficial ownership or dispositive powers.

(10)Includes 161,680 shares owned by WENCO, a North Dakota Limited
Partnership.

(11)Includes 27,214 shares held by Pringle & Herigstad Retirement Fund of
which Mr. Wentz is Trustee. Also includes 12,452 shares held by Mr. Wentz's
wife outright and 5,837 shares in her IRA. Mr. Wentz disclaims beneficial
ownership of such shares. Mr. Wentz's children own 992 shares as to which Mr.
Wentz does not have beneficial ownership or dispositive powers.

As of May 31, 1996, all of the above trustees as a group owned or held voting
control of 1,120,456 shares of Beneficial Interest of IRET, representing
8.38% of the 12,365,393 shares then outstanding.

During the fiscal year ending April 30, 1996, there were twelve regular
meetings of the Board of Trustees. All of the Trustees attended 75% or more
of the meetings held during said fiscal year.

There are no separate audit, nominating or compensation committees of the
Board of Trustees, which duties are performed by the Board as a whole.

The last shareholder meeting at which Trustees were elected was held on
August 21, 1996, at which meeting shareholders owning 60.59% of the shares of
IRET entitled to vote were present in person, or by proxy. The ten nominees
received 100% of the total shares voted at such meeting.

EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS

The Trust has no employees and has contracted with Odell-Wentz & Associates,
L.L.C., to provide management services for it. See "Advisory Agreement." In
addition to the advisory fee paid for these managements services, the Trust
also incurs administrative expenses for trustees' fees, accountants' fees,
printing and postage, filing fees and other related expenses incurred in
connection with administering the Trust assets and its communications with
its shareholders and regulatory authorities. During the past five fiscal
years, the following is a summary of the administrative expenses of the Trust
paid to the Advisor, the trustees and the other administrative expenses:

<TABLE>
<CAPTION>
Fiscal Years Ending April 30
----------------------------
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Advisor's and Trustees'
Compensation $233,356 $252,013 $304,898 $336,142 $458,019
Other Administrative
Expenses 52,322 58,253 46,557 79,974 162,588
-------- -------- -------- -------- --------
TOTAL $285,678 $310,266 $351,455 $416,116 $620,607
</TABLE>

<PAGE>

For the Fiscal Years 1992-1996, the amount of these acquisition fees were
$22,680, $56,140, $89,514, $49,836 and $117,506, respectively.

The following tabulation shows the cash compensation paid by IRET to its
trustees and officers during its fiscal year ending April 30, 1996. The
Trust has no retirement, bonus, or deferred compensation plan and no other
compensation will accrue, directly or indirectly, to any of the Trustees
except as noted below.

Cash Compensation
Capacity in for Year Ending
Name Which Served April 30, 1996
- ---- ------------ --------------
C. Morris Anderson Trustee $ 6,816.50
Ralph A. Christensen Trustee & Chairman 8,794.25
John D. Decker Trustee 6,916.50
Mike F. Dolan Trustee & Vice Chairman 7,806.00
J. Norman Ellison, Jr. Trustee 7,216.50
Daniel L. Feist Trustee 7,116.50
Jeff L. Miller Trustee & Vice Chairman 7,806.00
Patrick G. Jones Trustee 7,016.50
Thomas A. Wentz, Sr. Trustee & Vice President (1 & 2)
Roger R. Odell Trustee & President (1)

(1) Mr. Odell is the President and a member of Odell-Wentz & Associates,
L.L.C., the Advisor to the Trust. Under the Advisory Contract between IRET
and Odell-Wentz & Associates, L.L.C., IRET pays an Advisor's fee based on the
net assets of the Trust and, in addition, a percentage fee for investigating
and negotiating the acquisition of new investments. For the year ending
April 30, 1996, Odell-Wentz & Associates received compensation and
reimbursement of disbursements under said Agreement of $516,036. The terms
of said Advisory Agreement are explained below. Investors Management &
Marketing, Inc., a firm in which Mr. Odell is a minority shareholder also
furnishes real estate management services to the Trust and receives as
compensation four percent (4%) of rents received from such real estate. For
the fiscal year ending April 30, 1996, Investors Management & Marketing,
Inc., received $281,717 as real estate management commissions. In addition,
Inland National Securities, Inc., a corporation in which Mr. Odell and
members of his family are shareholders, acts as the broker-dealer for the
sale of Trust securities. During the fiscal year ending April 30, 1996, the
Trust paid Inland National Securities, Inc. $269,656 as security sales fees.

(2) Mr. Wentz is the Vice-President and a member of Odell-Wentz &
Associates, L.L.C. He is also a member of the law firm of Pringle &
Herigstad, P.C., counsel for the Trust. During the fiscal year ending April
30, 1996, the Trust paid Pringle & Herigstad, P.C., the sum of $23,488 for
legal services rendered and disbursements made on behalf of the Trust.

ADVISORY AGREEMENT

Roger R. Odell has served as advisor to IRET since its formation in 1970. As
of January 1, 1986, a revised Advisory Agreement was entered into between
IRET and Odell-Wentz & Associates, a partnership of Roger R. Odell and Thomas
A. Wentz, Sr., and on January 1, 1994, with Odell-Wentz & Associates, L.L.C.,
a North Dakota Limited Liability Company. Mr. Odell serves as president and
Mr. Wentz serves as vice president of IRET. Mr. Wentz has also served as
attorney for IRET since its formation as a member of the law firm of Pringle
& Herigstad, P.C.

Under the Advisory Agreement, the advisor has the following duties and
responsibilities:

Advisor, at its expense, shall provide suitable office facilities for IRET in
Minot, North Dakota, and shall provide sufficient staff and other equipment
to conduct the day-to-day operations of IRET. Advisor shall furnish a
computer and all other

<PAGE>

office equipment necessary to conduct the operations of IRET and shall pay
for all routine supplies, postage, and other costs of operating said office.
IRET shall be billed by the Advisor for stationery and other forms and
documents printed especially for IRET, the printing of the annual report and
quarterly reports and other communications to shareholders, and also for the
postage for mailing reports, checks and other documents to shareholders.

The Advisor, under the direction of Trustees, shall be responsible to conduct
all operations of IRET, including:

Collection of rent, contract and mortgage payments and depositing the same in
IRET bank accounts;

Payment of bills;

Disbursement of dividends;

Preparing monthly reports to the Trustees;

Preparing quarterly and annual reports to shareholders;

Preparing notices of shareholders' meetings and proxies and proxy statements;
and

Advising the Trustees as to investment decisions, including acquisition and
disposition of real estate and other permissible investments.

For providing the above services, the Advisor is compensated as follows:

BASIC COMPENSATION. Advisor shall receive monthly as its basic compensation
for the above described services a percentage of "net invested assets" of
IRET held on the last day of the month for which the payment is made as
follows:

1/12th of .9% of net invested assets up to $10,000,000; and,

1/12th of .8% of net invested assets over $10,000,000, but less than
$20,000,000; and,

1/12th of .7% of net invested assets in excess of $20,000,000.

For the purpose of this agreement, "net invested assets" shall be determined as
follows:

Add: +total assets at cost
+depreciation reserve
+unearned contract receivable discount
+deferred gain account

Subtract: -cash
-marketable securities, less margin accounts
-total liabilities

ADDITIONAL COMPENSATION. For its services in investigating and negotiating
the acquisition of real estate equities, mortgages or contracts for deed by
IRET, the Advisor shall receive a fee of 1/2 of 1 percent of the first
$2,500,000 of value of any such asset which is recommended to and acquired by
IRET, except on new construction projects for which the fee is 1/2 of 1
percent of the total cost.

LIMITATION. Notwithstanding the foregoing, the total compensation received
by the Advisor set forth above during any one fiscal year of IRET when added
to trustees' fees and other administrative costs of IRET shall not exceed the
lesser of the following: 2 percent of net invested assets (as set forth
above) or 25 percent of the net taxable income of IRET for such fiscal year.

<PAGE>

Said Advisory Agreement is for a term of one year to continue for successive
terms on the same conditions until terminated by written notice of either party
and is also subject to a 60 day termination by either party and by the
shareholders holding a majority interest in IRET. The Agreement is renewable
annually and was last renewed for the calendar year 1997 by action of the Board
of Trustees at its December, 1996 regular meeting.

ROGER R. ODELL. Mr. Odell's address is 1445 SW 15th St., Minot, North Dakota
58701, (701) 839-4631. Mr. Odell is a graduate of the University of Texas,
receiving his B.A. degree in 1947. He has been a resident of Minot, North
Dakota, since 1947. From 1947 to 1954, he was employed by Minot Federal Savings
& Loan Association, serving as Secretary of the Association from 1952 to 1954.
Since 1954, Mr. Odell has been a realtor in Minot, serving as an officer and
stockholder of Watne Realty Trust from 1954 to January 1, 1970, and since that
time as the owner of his own realty firm.

Mr. Odell is President and a member of Odell-Wentz & Associates, L.L.C., the
Advisor to the Trust. Under the Advisory Contract between IRET and Odell-Wentz
& Associates, L.L.C., IRET pays an Advisor's fee based on the net assets of the
Trust and, in addition, a percentage fee for investigating and negotiating the
acquisition of new investments. For the year ending April 30, 1996, Odell-Wentz
& Associates, L.L.C., received compensation and reimbursement of disbursements
under said Agreement of $516,036. The terms of said Advisory Agreement are
explained above. Investors Management & Marketing, Inc., a firm in which Mr.
Odell is a minority shareholder also furnishes real estate management services
to the Trust and receives as compensation four percent (4%) of rents received
from such real estate. For the fiscal year ending April 30, 1996, Investors
Management & Marketing, Inc., received $281,717 as real estate management
commissions. In addition, Inland National Securities, Inc., a corporation in
which Mr. Odell and members of his family are shareholders, acts as the
broker-dealer for the sale of Trust securities. During the fiscal year ending
April 30, 1996, the Trust paid Inland National Securities, Inc., $269,656 as
security sales fees.

THOMAS A. WENTZ, SR.. Mr. Wentz's address is 505 8th Ave. SE, Minot, North
Dakota 58701, (701) 838-0811. Mr. Wentz is a graduate of Harvard College and
Harvard Law School, receiving his A.B. degree in 1957 and his L.L.B. degree in
1960. He has been a resident of Minot, North Dakota, since 1962.

Mr. Wentz is Vice-President and a member of Odell-Wentz & Associates, L.L.C.,
the Advisor to the Trust. Under the Advisory Contract between IRET and
Odell-Wentz & Associates, L.L.C., IRET pays an Advisor's fee based on the net
assets of the Trust and, in addition, a percentage fee for investigating and
negotiating the acquisition of new investments. For the year ending April
30, 1996, Odell-Wentz & Associates, L.L.C., received compensation and
reimbursement of disbursements under said Agreement of $516,036. The terms of
said Advisory Agreement are explained above.

He is also a member of the law firm of Pringle & Herigstad, P.C., counsel for
the Trust. During the fiscal year ending April 30, 1996, the Trust paid Pringle
& Herigstad, P.C., the sum of $23,488 for legal services rendered and
disbursements made on behalf of the Trust.

SELECTION, MANAGEMENT AND CUSTODY OF TRUST'S INVESTMENTS

MANAGEMENT OF TRUST'S INVESTMENTS. The Trust contracts with various local
management companies for the sole purpose of leasing, maintaining and monitoring
the Trust's interests. All other management is the responsibility of the
Advisor.

POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS

No trustee, officer or advisor of the Trust, or any person affiliated with any
such persons, shall sell any property or assets to the Trust or purchase any
property or

<PAGE>

assets from the Trust, directly or indirectly, nor shall any such person receive
any commission or other remuneration, directly or indirectly, in connection with
the purchase or sale of Trust assets, except pursuant to transactions that are
fair and reasonable to the Shareholders and that relate to:

a. the acquisition of property or assets at the formation
of the Trust or shortly thereafter and fully disclosed
in the prospectus filed with the North Dakota State
Securities Commissioner;

b. The acquisition of federally insured or guaranteed
mortgages at prices not exceeding the currently quoted
prices at which the Federal National Mortgage
Association is purchasing comparable mortgages;

c. The acquisition of other mortgages on terms not less
favorable to the Trust than similar transactions
involving unaffiliated parties; or,

d. The acquisition by the Trust of other property at prices
not exceeding) or disposition of other property at
prices not less than) the fair value thereof as
determined by independent appraisal.

All such transactions and all other transactions in which any such persons have
any direct or indirect interest shall be approved by a majority of the trustees,
including a majority of the independent trustees. All brokerage commissions or
remuneration received by any such person from the Trust in connection with any
such transactions shall be deemed a part of the fee payable under any management
or advisory contract.

No trustee or affiliate of the trustee shall receive a brokerage commission or
other such remuneration in connection with the acquisition or disposition of
Trust assets.

LIMITATIONS OF LIABILITY

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.

The governing instrument of the Trust provides as follows:

SECTION 12. LIABILITY AND INDEMNIFICATION.

A. NON LIABILITY OF TRUSTEES, ADVISORS OR AFFILIATES.

No TRUSTEE, ADVISOR or AFFILIATE shall be liable individually for any act
or omission of any other TRUSTEE or agent or representative of IRET, or for
negligence, error in judgment, or any act or omission except his own
willful misfeasance, bad faith, or gross negligence in the conduct of his
duties. Every act or thing done or omitted, and every power exercised or
obligation incurred by the TRUSTEES, ADVISOR or AFFILIATE or any of them in
the administration of IRET or in connection with any business or property
of IRET whether ostensibly in their own names or in their trust or agency
capacity, shall be deemed done, omitted, exercised, or incurred by them as
TRUSTEES or agents and not as individuals; and upon any debt, claim,
demand, judgment, decree, or obligation of any nature whatsoever against or
incurred by the TRUSTEES, ADVISOR or AFFILIATE in their capacities as such,
whether founded upon contract, tort or otherwise, resort shall be had
solely to the property of IRET.

<PAGE>

B. INDEMNIFICATION OF TRUSTEES.

1. IRET shall indemnify and hold harmless each TRUSTEE, ADVISOR or
AFFILIATE from and against all claims and liabilities, whether they
proceed to judgment or are settled, to which such TRUSTEE, ADVISOR or
AFFILIATE may become subject by reason of his being or having been a
TRUSTEE, ADVISOR or AFFILIATE, or by reason of any action alleged to
have been taken or omitted by him as TRUSTEE, ADVISOR or AFFILIATE,
and shall reimburse him for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability. IRET
shall not provide for indemnification of the TRUSTEES, ADVISORS or
AFFILIATES for any liability or loss suffered by the TRUSTEES,
ADVISORS or AFFILIATES, nor shall it provide that the TRUSTEES,
ADVISORS or AFFILIATES be held harmless for any loss or liability
suffered by IRET, unless all of the following condition are met:

a. The TRUSTEES, ADVISORS or AFFILIATES have determined, in good
faith, that the course of conduct which caused the loss or
liability was in the best interests of IRET.

b. The TRUSTEES, ADVISORS or AFFILIATES were acting on behalf of or
performing services for IRET.

c. Such liability or loss was not the result of:

i. negligence or misconduct by the TRUSTEES, excluding the
INDEPENDENT TRUSTEES, ADVISORS or AFFILIATES; or

ii. gross negligence or willful misconduct by the INDEPENDENT
TRUSTEES.

d. Such indemnification or agreement to hold harmless is recoverable
only out of IRET NET ASSETS and not from SHAREHOLDERS.

2. Notwithstanding anything to the contrary contained in this document or
elsewhere, the TRUSTEES, ADVISORS or AFFILIATES and any PERSONS acting
as a broker-dealer shall not be indemnified by IRET for any losses,
liabilities or expenses arising from or out of an alleged violation of
federal or state securities laws by such party unless one or more of
the following conditions are met:

a. There has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the particular
indemnitee.

b. Such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee.

c. A court of competent jurisdiction approves a settlement of the
claims against a particular indemnitee and finds that indemnification
of the settlement and the related costs should be made, and the court
considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the
published position of any state securities regulatory authority in
which securities of IRET were offered or sold as to indemnification
for violations of securities laws.

3. The advancement of IRET funds to the TRUSTEES, ADVISORS or AFFILIATES
for legal expenses and other costs incurred for which indemnification
is being sought is permissible only if all of the following conditions
are satisfied:

<PAGE>

a. The legal action relates to acts or omissions with respect to the
performance of duties or services on behalf of IRET.

b. The legal action is initiated by a third party who is not a
SHAREHOLDER or the legal action is initiated by a SHAREHOLDER acting
in his or her capacity as such and a court of competent jurisdiction
specifically approves such advancement.

c. The TRUSTEES, ADVISORS or AFFILIATES undertake to repay the
advanced funds to IRET, together with the applicable legal rate of
interest thereon, in cases in which such TRUSTEES, ADVISORS or
AFFILIATES are found not to be entitled to indemnification.

LEGAL MATTERS

The validity of the Shares of Beneficial Interest offered under the Prospectus,
the federal and state tax aspects of the organization and operation of the Trust
and the Operating Partnership and other legal matters will be passed upon for
the Trust by Pringle & Herigstad, P.C., Minot, North Dakota. Thomas A. Wentz,
Sr., is the President and a member and Thomas A. Wentz, Jr., is a member of said
law firm and also serve as the Vice-President and as a Trustee, respectively, of
the Trust. See "Conflicts of Interest."

EXPERTS

The balance sheets of the Trust as of April 30, 1995, and April 30, 1996, the
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended April 30, 1996, as listed on the Index to Financial
Statements on page F-1, included in this Prospectus, have been included herein
in reliance on the reports of Brady-Martz & Associates, P.C., Minot, North
Dakota, independent accountants, given on the authority of that firm as experts
in accounting and auditing.

<PAGE>

GLOSSARY OF TERMS

Unless a different definition is provided immediately following a term used in
this documents, the following definitions shall apply:

ADMINISTRATOR: The official or agency administering the Securities laws of a
jurisdiction.

ACQUISITION EXPENSES: Expenses including but not limited to legal fees and
expenses, travel and communications expenses, costs of appraisals, nonrefundable
option payments on property not acquired, accounting fees and expenses, title
insurance, and miscellaneous expenses related to selection and acquisition of
properties, whether or not acquired.

ACQUISITION FEE: The total of all fees and commissions paid by any party to any
party in connection with making or investing in mortgage loans or the purchase,
development or construction of property by the Trust. Included in the
computation of such fees or commissions shall be any real estate commission,
selection fee, DEVELOPMENT FEE, CONSTRUCTION FEE, nonrecurring management fee,
loan fees or points or any fee of a similar nature, however designated.
Excluded shall be DEVELOPMENT FEES and CONSTRUCTION FEES paid to PERSONS not
affiliated with the ADVISOR in connection with the actual development and
construction of a project.

ADVISOR: Odell-Wentz & Associates, L.L.C., a North Dakota Limited Liability
Company, 12 South Main, Minot, North Dakota, the entity responsible for
directing and performing the day-to-day business affairs of the TRUST.

ADVISORY AGREEMENT: The contract between the TRUST and the ADVISOR which is
summarized in this Prospectus. See "Advisory Agreement."

AFFILIATE: An AFFILIATE of another PERSON includes any of the following:

a. any PERSON directly or indirectly owning, controlling, or holding,
with power to vote ten percent or more of the outstanding voting
securities of such other PERSON.

b. any PERSON ten percent or more of whose outstanding voting securities
are directly or indirectly owned, controlled, or held, with power to
vote, by such other PERSON.

c. any PERSON directly or indirectly controlling, controlled by, or under
common control with such other PERSON.

d. any executive officer, director, trustee or general partner of such
other PERSON.

e. any legal entity for which such PERSON acts as an executive officer,
director, trustee or general partner.

AVERAGE INVESTED ASSETS: For any period the average of the aggregate book value
of the assets of the TRUST invested, directly or indirectly, in equity interests
in and loans secured by real estate, before reserves for depreciation or bad
debts or other similar non-cash reserves computed by taking the average of such
values at the end of each month during such period.

BOARD OF TRUSTEES: The ten member BOARD OF TRUSTEES of the TRUST.

COMPETITIVE REAL ESTATE COMMISSION: Real estate or brokerage commission paid
for the purchase or sale of a property which is reasonable, customary and
competitive in light of the size, type and location of such property.

<PAGE>

CONTRACT PRICE FOR THE PROPERTY: The amount actually paid or allocated to the
purchase, development, construction or improvement of a property exclusive of
ACQUISITION FEES and ACQUISITION EXPENSES.

CONSTRUCTION FEE: A fee or other remuneration for acting as general contractor
and/or construction manager to construct improvements, supervise and coordinate
projects or to provide MAJOR REPAIRS OR REHABILITATION to the TRUST's property.

DECLARATION OF TRUST: The Restated Declaration of Trust dated October 24, 1996,
for the TRUST.

DEVELOPMENT FEE: A fee for the development of the TRUST's property, including
negotiating and approving plans, and undertaking to assist in obtaining zoning
and necessary variances and necessary financing for the specific property,
either initially or at a later date.

ERISA: The Employee Retirement Income Security Act of 1974, as amended.

EXCHANGE RIGHT: The right of limited partners in the OPERATING PARTNERSHIP to
exchange their limited partnership UNITS on a one-for-one basis for SHARES of
the TRUST.

FUNDS FROM OPERATIONS: Net income (computed in accordance with Generally
Accepted Accounting Principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures calculated
on the same basis.

GAAP: Generally Accepted Accounting Principles.

INDEPENDENT EXPERT: A PERSON with no material current or prior business or
personal relationship with the ADVISOR or TRUSTEES who is engaged to a
substantial extent in the business of rendering opinions regarding the value of
assets of the type held by the TRUST.

INDEPENDENT TRUSTEE(S): The TRUSTEE(S) of the TRUST who are not associated and
have not been associated within the last two years, directly or indirectly, with
the ADVISOR of the TRUST, or AFFILIATES of the ADVISOR.

a. A TRUSTEE shall be deemed to be associated with the ADVISOR if he or
she:

- is employed by the ADVISOR or any of its AFFILIATES; or

- is an officer or director of the ADVISOR or any of its AFFILIATES;
or

- performs services, other than as a TRUSTEE, for the TRUST; or

- is a TRUSTEE for more than three REITS organized by or advised by
the ADVISOR; or

- has any material business or professional relationship with the
ADVISOR, or any of its AFFILIATES.

b. For purposes of determining whether or not the business or
professional relationship is material, the gross revenue derived by
the prospective INDEPENDENT TRUSTEE from the ADVISOR and AFFILIATES
shall be deemed material per se if it exceeds 5% of the prospective
INDEPENDENT TRUSTEE'S:

i. annual gross revenue, derived from all sources, during either of
the last two years; or

<PAGE>

ii. net worth, on a fair market value basis.

c. An indirect relationship shall include circumstances in which a
TRUSTEE'S spouse, parents, children, siblings, mothers-or fathers-in-
laws, sons-or daughters-in-laws, or brothers-or sisters-in-law is or
has been associated with the ADVISOR, any of its AFFILIATES, or the
TRUST.

IRET: Investors Real Estate Trust, a North Dakota Business Trust.

IRET, INC.: The general partner of the OPERATING PARTNERSHIP.

IRET, PROPERTIES: The OPERATING PARTNERSHIP.

IRS: The United States Internal Revenue Service.

LEVERAGE: The aggregate amount of indebtedness of the TRUST for money borrowed
(including purchase money mortgage loans) outstanding at any time, both secured
and unsecured.

LIMITED PARTNERS: The limited partners of the OPERATING PARTNERSHIP.

NET ASSETS: The total assets (other than intangibles) at cost before deducting
depreciation or other non-cash reserves less total liabilities, calculated at
least quarterly on a basis consistently applied.

NET INCOME: For any period total revenues applicable to such period, less the
expenses applicable to such period other than additions to reserves for
depreciation or bad debts or other similar non-cash reserves. If the ADVISOR
receives an incentive fee, NET INCOME, for purposes of calculation TOTAL
OPERATING EXPENSES in Section IV.D shall exclude the gain from the sale of the
REIT'S assets.

NET OPERATING INCOME: The total gross income from a real estate property, less
all operating expenses attributable to that property but excluding interest
expense, depreciation and any other non-cash deductions.

OFFERING: The offering of SHARES of beneficial interest of the TRUST to the
public pursuant to this PROSPECTUS.

OFFERING EXPENSES: All expenses incurred by and to be paid from the assets of
the TRUST in connection with registration and offering and distributing its
shares to the public, including, but not limited to, total underwriting and
brokerage discounts and commissions (including fees of the underwriters'
attorneys), expenses for printing, engraving, mailing, salaries of employees
while engaged in sales activity, charges of transfer agents, registrars,
trustees, escrow holders, depositories, experts, expenses of qualification of
the sale of the securities under Federal and State laws, including taxes and
fees, accountants' and attorneys' fees.

OPERATING PARTNERSHIP: IRET Properties, a North Dakota Limited Partnership.

OPERATING PARTNERSHIP AGREEMENT: The agreement of limited partnership for IRET
Properties, a North Dakota Limited Partnership.

PERSON: Any natural persons, partnership, corporation, association, trust,
limited liability company or other legal entity.

PROSPECTUS: Shall have the meaning given to that term by Section 2(10) of the
Securities Act of 1933, including a preliminary Prospectus; provided however,
that such term as used herein shall also include an offering circular as
described in Rule 256 of the General Rules and Regulations under the Securities
Act of 1933 or, in the case of an intrastate offering, any document by whatever
name known, utilized for the purpose of offering and selling securities to the
public.

<PAGE>

REAL ESTATE INVESTMENT TRUST ("REIT"): A corporation, trust, association or
other legal entity (other than a real estate syndication) which is engaged
primarily in investing in equity interests in real estate (including fee
ownership and leasehold interests) or in loans secured by real estate or both.

SHARES: The shares of beneficial interest of the TRUST being offered under this
PROSPECTUS.

SHAREHOLDERS: The registered holders of the TRUST's SHARES.

TOTAL OPERATING EXPENSES: Aggregate expenses of every character paid or
incurred by the TRUST as determined under Generally Accepted Accounting
Principles, including ADVISORS' fees, but excluding:

a. The expenses of raising capital such as ORGANIZATION AND OFFERING
EXPENSES, legal, audit, accounting, underwriting, brokerage, listing,
registration and other fees, printing and other such expenses, and tax
incurred in connection with the issuance, distribution, transfer,
registration, and stock exchange listing of the TRUST's SHARES;

b. interest payments;

c. non-real estate taxes;

d. non-cash expenditures such as depreciation, amortization and bad debt
reserves;

e. ACQUISITION FEES, ACQUISITION EXPENSES, real estate commissions on
resale of property and other expenses connection with the acquisition,
disposition, and ownership of real estate interests, mortgage loans,
or other property, (such as the costs of foreclosure, insurance
premiums, legal services, maintenance, repair, and improvement of
property).

TRUSTEE(S): The members of the BOARD OF TRUSTEES which manages the TRUST.

UNIMPROVED REAL PROPERTY: The real property of the TRUST which has the
following three characteristics:

a. an equity interest in real property which was not acquired for the
purpose of producing rental or other operating income;

b. has no development or construction in process on such land;

c. and no development or construction on such land is planned in good
faith to commence on such land within one year.

UNITS: The limited partnership units of the OPERATING PARTNERSHIP.

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS

MINOT, NORTH DAKOTA

CONSOLIDATED FINANCIAL STATEMENTS

AS OF

APRIL 30, 1996 AND 1995

AND

INDEPENDENT AUDITOR'S REPORT

F-1

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
TABLE OF CONTENTS

Pages
-----

INDEPENDENT AUDITOR'S REPORT 1

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets 2-3

Consolidated Statements of Operations 4

Consolidated Statements of Shareholders' Equity 5

Consolidated Statements of Cash Flows 6-7

Notes to Consolidated Financial Statements 8-16

ADDITIONAL INFORMATION

Independent Auditor's Report on Additional Information 17

Marketable Securities 18

Noncurrent Indebtedness of Related Parties -
Mortgage Loans Receivable 19

Supplemental Income Statement Information 20

Real Estate and Accumulated Depreciation 21-23

Investments in Mortgage Loans on Real Estate 24-26

Selected Financial Data 27

Gain from Property Dispositions 28

Mortgage Loans 29

Significant Property Acquisitions 30

Quarterly Results of Consolidated Operations (Unaudited) 31
OTHER SCHEDULES ARE OMITTED DUE TO INAPPLICABILITY
F-2

<PAGE>

INDEPENDENT AUDITOR'S REPORT

Board of Trustees
Investors Real Estate Trust
and Affiliated Partnerships
Minot, North Dakota

We have audited the accompanying consolidated balance sheets of Investors Real
Estate Trust and Affiliated Partnerships as of April 30, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended April 30, 1996, 1995 and 1994. These consolidated
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Investors Real Estate Trust and Affiliated Partnerships at April 30, 1996 and
1995, and the consolidated results of its operations and cash flows for the
years ended April 30, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.

BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota

May 20, 1996

F-3

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1996 AND 1995

ASSETS

1995
1996 (Restated)
-------------- -------------
REAL ESTATE INVESTMENTS
Property owned $ 131,447,734 $ 90,892,662
Less accumulated depreciation (13,551,571) (11,732,655)
-------------- -------------
$ 117,896,163 $ 79,160,007
Mortgage loans receivable
- related parties - 1,449,312
- other 4,932,138 4,366,460
Less
- unearned discounts and deferred interest (18,222) (34,792)
- deferred gain from property dispositions (165,074) (641,987)
- allowance for loan losses (267,096) (293,365)
-------------- -------------
Total real estate investments $ 122,377,909 $ 84,005,635

OTHER ASSETS
Cash 2,715,274 4,765,445
Marketable securities 4,411,857 4,829,809
Accounts receivable 30,269 60,260
Real estate deposits - 175,000
Investment in partnership 85,576 166,955
Prepaid insurance 128,541 99,426
Tax and insurance escrow 1,151,527 317,520
Deferred charges 454,685 196,694
-------------- -------------

TOTAL ASSETS $ 131,355,638 $ 94,616,744
-------------- -------------
-------------- -------------

F-4

<PAGE>

LIABILITIES AND SHAREHOLDERS' EQUITY

1995
1996 (Restated)
-------------- --------------
<S> <C> <C>
LIABILITIES
Accounts payable and accrued expenses $ 3,142,190 $ 1,922,419
Mortgages payable 71,699,059 49,996,207
Investment certificates issued 5,802,469 4,862,464
-------------- --------------
Total liabilities $ 80,643,718 $ 56,781,090
-------------- --------------

SHAREHOLDERS' EQUITY
Shares of beneficial interest (unlimited authorization,
no par value, 13,258,908 shares outstanding in 1996
and 11,187,786 shares outstanding in 1995) $ 54,263,917 $ 41,560,587
Accumulated distributions in excess of net income (3,551,997) (3,724,933)
-------------- --------------
Total shareholders' equity $ 50,711,920 $ 37,835,654
-------------- --------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 131,355,638 $ 94,616,744
-------------- --------------
-------------- --------------
</TABLE>

F-5

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994

1995 1994
1996 (Restated) (Restated)
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE
Real estate rentals $ 17,635,297 $ 12,280,738 $ 9,765,701
Interest, discounts and fees 1,024,368 1,520,385 1,817,307
------------- ------------- -------------
Total revenue $ 18,659,665 $ 13,801,123 $ 11,583,008
------------- ------------- -------------

EXPENSES
Interest $ 5,547,739 $ 3,484,310 $ 2,652,400
Depreciation 2,261,724 1,767,294 1,323,474
Utilities and maintenance 3,167,560 2,352,968 2,146,120
Taxes and insurance 2,065,017 1,220,434 1,054,880
Property management expenses 1,281,311 779,024 641,054
Advisory and trustee services 458,019 336,142 304,898
Operating expenses 162,588 79,974 46,557
Amortization 97,900 20,659 28,199
Provision for loan losses - 200,000 250,000
------------- ------------- -------------
Total expenses $ 15,041,858 $ 10,240,805 $ 8,447,582
------------- ------------- -------------

OPERATING INCOME $ 3,617,807 $ 3,560,318 $ 3,135,426

GAIN ON SALE OF PROPERTIES 994,163 407,512 64,962
------------- ------------- -------------

NET INCOME $ 4,611,970 $ 3,967,830 $ 3,200,388
------------- ------------- -------------
------------- ------------- -------------

Net income per share:
Operating income $ .30 $ .34 $ .35
Gain on sale of investments .08 .04 .01
------ ------ ------
Net income $ .38 $ .38 $ .36
------ ------ ------
------ ------ ------

</TABLE>

F-6

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
Accumulated
Shares of Distributions Total
Beneficial in excess of Shareholders'
Interest Net Income Equity
------------- ------------- -------------
<S> <C> <C> <C>
BALANCE, MAY 1, 1993, AS
PREVIOUSLY REPORTED $ 27,663,010 $ (3,917,567) $ 23,745,443

Adjustment for the cumulative
effect on prior years of a change
in the reporting entity - (361,537) (361,537)
------------- ------------- -------------

BALANCE, MAY 1, 1993, AS RESTATED $ 27,663,010 $ (4,279,104) $ 23,383,906

Net income - 3,200,388 3,200,388
Dividends distributed - (3,021,061) (3,021,061)
Dividends reinvested 1,853,356 - 1,853,356
Sale of shares 4,580,600 - 4,580,600
------------- ------------- -------------

BALANCE, APRIL 30, 1994 $ 34,096,966 $ (4,099,777) $ 29,997,189
------------- ------------- -------------
------------- ------------- -------------

BALANCE, MAY 1, 1994, AS
PREVIOUSLY REPORTED $ 34,096,966 $ (3,776,565) $ 30,320,401

Adjustment for the cumulative
effect on prior years of a change
in the reporting entity - (323,212) (323,212)
------------- ------------- -------------

BALANCE, MAY 1, 1994, AS RESTATED $ 34,096,966 $ (4,099,777) $ 29,997,189

Net income - 3,967,830 3,967,830
Dividends distributed - (3,592,986) (3,592,986)
Dividends reinvested 2,175,278 - 2,175,278
Sale of shares 5,288,343 - 5,288,343
------------- ------------- -------------

BALANCE, APRIL 30, 1995 $ 41,560,587 $ (3,724,933) $ 37,835,654
------------- ------------- -------------
------------- ------------- -------------

BALANCE, MAY 1, 1995, AS
PREVIOUSLY REPORTED $ 41,560,587 $ (3,466,443) $ 38,094,144

Adjustment for the cumulative
effect on prior years of a change
in the reporting entity - (258,490) (258,490)
------------- ------------- -------------

BALANCE, MAY 1, 1995,
AS RESTATED $ 41,560,587 $ (3,724,933) $ 37,835,654

Net income - 4,611,970 4,611,970
Dividends distributed - (4,439,034) (4,439,034)
Dividends reinvested 3,100,988 - 3,100,988
Sale of shares 9,820,470 - 9,820,470
Shares repurchased (218,128) - (218,128)
------------- ------------- -------------

BALANCE, APRIL 30, 1996 $ 54,263,917 $ (3,551,997) $ 50,711,920
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-7

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994

1995 1994
1996 (Restated) (Restated)
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,611,970 $ 3,967,830 $ 3,200,388
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,359,624 1,787,953 1,351,673
Provision for loan losses - - 250,000
Accretion of discount on contracts (16,570) (14,670) (120,485)
Gain on sale of properties (994,163) (407,512) (64,962)
Interest reinvested in investment certificates 161,813 205,491 237,415
Changes in other assets and liabilities:
Increase in other assets (273,636) (119,685) (39,067)
Increase in tax and insurance escrow (834,007) (3,603) (49,720)
Increase (decrease) in accounts payable
and accrued expenses 1,219,771 (108,444) 163,195
------------- ------------- -------------
Net cash provided from operating activities $ 6,234,802 $ 5,307,360 $ 4,928,437
------------- ------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of investment securities $ 417,952 $ 441,644 $ 992,872
Principal payments on mortgage loans receivable 2,642,346 4,059,328 4,808,981
Proceeds from sale of other assets 389,784 - -
Payments for acquisition and
improvement of properties (32,462,846) (10,584,694) (8,372,346)
Purchase of investment securities - - (3,035,142)
Investment in mortgage loans receivable (1,784,981) (653,952) (3,159,230)
------------- ------------- -------------
Net cash used for investing activities $ (30,797,745) $ (6,737,674) $ (8,764,865)
------------- ------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $ 9,820,470 $ 5,288,343 $ 4,580,600
Repurchase of shares (218,128) - -
Proceeds from investment certificates issued 1,695,924 947,093 896,657
Proceeds from mortgages payable 29,025,001 2,092,266 3,453,849
Loan on margin account - - 2,250,000
Dividends paid (1,338,046) (1,417,708) (1,167,705)
Redemption of investment certificates (917,732) (695,803) (1,488,070)
Principal payments on mortgage loans (15,554,717) (1,979,111) (1,355,233)
Payments on margin account - - (2,250,000)
------------- ------------- -------------
Net cash provided from financing activities $ 22,512,772 $ 4,235,080 $ 4,920,098
------------- ------------- -------------

NET INCREASE (DECREASE) IN CASH $ (2,050,171) $ 2,804,766 $ 1,083,670

CASH AT BEGINNING OF YEAR 4,765,445 1,960,679 877,009
------------- ------------- -------------

CASH AT END OF YEAR $ 2,715,274 $ 4,765,445 $ 1,960,679
------------- ------------- -------------
------------- ------------- -------------

</TABLE>

F-8

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Dividends reinvested $ 3,100,988 $ 2,175,278 $ 1,853,356
Real estate investment and mortgage
loans receivable acquired through
assumption of mortgage loans payable
and accrual of costs 8,232,568 15,917,788 9,510,351
Proceeds from sale of properties
deposited directly with escrow agent 426,352 940,258 -
Mortgages paid directly by
owner of contract - 543,598 18,826
Interest reinvested directly in
investment certificates 161,813 205,491 237,415

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest paid on mortgages $ 4,642,186 $ 3,109,727 $ 2,215,752
Interest paid on investment certificates 292,660 157,233 192,450
------------- ------------- -------------
$ 4,934,846 $ 3,266,960 $ 2,408,202
------------- ------------- -------------
------------- ------------- -------------

</TABLE>

F-9

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1996, 1995 AND 1994

NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS - Investors Real Estate Trust qualifies under
Section 856 of the Internal Revenue Code of 1954 as a real estate
investment trust. The Trust has properties located throughout the
Upper Midwest, with principal offices located in Minot, North Dakota.

The company invests in commercial and residential real estate, real
estate contracts and real estate related governmental backed
securities (GNMA).

PRINCIPALS OF CONSOLIDATION - The consolidated financial statements
include the accounts of Investors Real Estate Trust and all limited
partnerships in which Investors Real Estate Trust is a general partner
and maintains a controlling interest. Due to the immaterial
involvement of the limited partners, the trust's general partnership
interest provides it with substantial influence over operations of the
partnerships. These limited partnerships are as follows:

Eastgate Properties, Ltd.
Bison Properties, Ltd.
First Avenue Building, Ltd.
Sweetwater Properties, Ltd.
Hill Park Properties, Ltd.
Colton Heights, Ltd.

All material intercompany transactions and balances have been
eliminated in the consolidated financial statements.

ACCOUNTING POLICIES

USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

PROPERTY OWNED - Real estate is stated at cost. Expenditures for
renewals and improvements that significantly add to the productive
capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs which do not add to the value
or extend the useful life are charged to expense as incurred.

F-10

<PAGE>

NOTE 1 - (CONTINUED)

DEPRECIATION is provided to amortize the cost of individual assets
over their estimated useful lives using principally the straight-line
method. Useful lives range from 15 to 40 years for buildings and
improvements.

MORTGAGE LOANS RECEIVABLE are shown at cost less unearned discount.
Discounts on contracts are accreted using the straight-line method
over the term of the contract which approximates the effective
interest method. Deferred gain is recognized as income on the
installment method when principal payments are received. Interest
income is accrued and reflected in the related balance.

ALLOWANCE FOR LOAN LOSSES - The Trust evaluates the need for an
allowance for loan losses periodically. In performing its evaluation,
management assesses the recoverability of individual real estate loans
by a comparison of their carrying amount with their estimated net
realizable value.

MARKETABLE SECURITIES - The Trust's investments in securities are
classified as securities to be held to maturity. These securities
consist of Government National Mortgage Association securities for
which the Trust has the positive intent and ability to hold to
maturity. They are reported at cost, adjusted by amortization of
premiums and accretion of discounts which are recognized in interest
income using the straight line method over the period to maturity
which approximates the effective interest method. Gains or losses on
marketable securities are recognized on the basis of specific
identification.

INVESTMENT IN PARTNERSHIP - As described in Note 11, the Trust is
accounting for its investment in Chateau Properties, Ltd. under the
equity method of accounting, wherein the appropriate portion of the
earnings or loss is recognized currently. The Trust has a general
partnership interest in the limited partnership. Chateau Properties,
Ltd. has invested in real estate properties.

NET INCOME PER SHARE of beneficial interest has been computed based on
the weighted average number of shares outstanding during the year.

INCOME TAXES - The Trust intends to continue to qualify as a real
estate investment trust as defined by the Internal Revenue Code and,
as such, will not be taxed on the portion of the income that is
distributed to the shareholders, provided at least 95% of its real
estate investment trust taxable income is distributed and other
requirements are met. The Trust intends to distribute all of its
taxable income and realized capital gains from property dispositions
within the prescribed time limits and, accordingly, there is no
provision or liability for income taxes shown on the financial
statements.

INCOME RECOGNITION - In accordance with Statement of Financial
Accounting Standards No. 66, "Accounting for Sales of Real Estate",
profit shall be recognized in full when real estate is sold, provided:
a. The profit is determinable, that is, the collectibility of the
sales price is reasonably assured or the amount that will be
collectible can be estimated.
b. The earnings process is virtually complete, that is, the seller
is not obliged to perform significant activities after the sale
to earn the profit.
Based on the economic climate and the terms of many contracts, the
collectibility of the sales price is not reasonably assured as
required by Statement of Financial Accounting Standards No. 66.
Consequently, the Trust uses the installment method of accounting for
profits on several property sales as it more fairly reflects earned
revenue.

F-11

<PAGE>

NOTE 1 - (CONTINUED)

Interest on mortgage loans receivable is recognized in income as it
accrues during the period the loan is outstanding. In the case of
non-performing loans, income is recognized in conformity with FASB
Statement No. 114, as discussed in Note 4. Rent from leases of real
estate is recognized in income as it accrues on the straight-line
basis. Advance rental deposits are recorded as deferred income.

NOTE 2 - OFF-BALANCE-SHEET RISK

The Trust had deposits at Norwest Bank, North Dakota, N.A., and First
American Bank which exceeded Federal Deposit Insurance Corporation
limits by $1,286,202 and $779,367, respectively, at April 30, 1996.

NOTE 3 - PROPERTY OWNED UNDER LEASE

Property consisting principally of real estate owned under lease is
stated at cost less accumulated depreciation and is summarized as
follows:

April 30,1995
April 30, 1996 (Restated)
-------------- -------------
Residential $ 96,029,855 $ 62,241,542
Less accumulated depreciation (9,620,990) (8,065,367)
-------------- -------------
$ 86,408,865 $ 54,176,175
-------------- -------------

Commercial $ 35,417,879 $ 28,651,120
Less accumulated depreciation (3,930,581) (3,667,288)
-------------- -------------
$ 31,487,298 $ 24,983,832
-------------- -------------

Remaining cost $ 117,896,163 $ 79,160,007
-------------- -------------
-------------- -------------

There were no repossessions during the years ended April 30, 1996 and
1995.

The above cost of residential real estate owned included construction
in progress of $12,544,357 and $3,863,141 as of April 30, 1996 and
1995, respectively. The above cost of commercial real estate owned
included construction in progress of $968,163 as of April 30, 1995.

Construction period interest of $690,665 has been capitalized for the
year ended April 30, 1996. Construction period interest of $94,313
was capitalized for the year ended April 30, 1995.

Residential apartment units are rented to individual tenants with
lease terms up to one year. Gross revenues from residential rentals
totaled $12,286,492, $9,076,477 and $7,313,780 for the years ended
April 30, 1996, 1995 and 1994, respectively.

Commercial properties are leased to tenants under terms of leases
expiring at various dates through 2015. Lease terms often include
renewal options. In addition, a number of the commercial leases
provide for a base rent plus a percentage rent based on gross sales in
excess of a stipulated amount. Rents based on a percentage of sales
totaled $25,054, $16,586 and $22,943 for the years ended April 30,
1996, 1995 and 1994, respectively.

F-12

<PAGE>

NOTE 3 - (CONTINUED)

The future minimum lease payments to be received under these operating
leases for the commercial properties as of April 30, 1996, are as
follows:

Year ending April 30,
1997 $ 3,155,683
1998 2,817,310
1999 2,621,910
2000 2,564,304
2001 2,540,964
Thereafter 18,461,882
-------------
$ 32,162,053
-------------
-------------

NOTE 4 - MORTGAGE LOANS RECEIVABLE

Mortgage loans receivable consists of approximately thirty contracts
which are collateralized by real estate. Contract terms call for
monthly payments of principal and interest. Interest rates range from
7 to 14%. Mortgage loans receivable have been evaluated for possible
losses considering repayment history, market value of underlying
collateral, deferred gains and economic conditions.

Future principal payments due under the mortgage loan contracts as of
April 30, 1996 are as follows:

Year ending April 30,
1997 $ 2,722,999
1998 1,002,768
1999 195,884
2000 104,529
2001 71,943
Later years 834,015
------------
$ 4,932,138
------------
------------

Details concerning mortgage loans receivable from related parties can
be found in Note 9.

Non-performing mortgage loans receivable were $377,464 at April 30,
1996. These loans are recognized as impaired in conformity with FASB
Statement No. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN.
The total allowance for credit losses related to those loans was
approximately $151,800 at April 30, 1996. The average balance of
impaired loans for the year ended April 30, 1996 was approximately
$447,600. For impairment recognized in conformity with FASB Statement
No. 114, the entire change in present value of expected cash flows is
reported as bad debt expense in the same manner in which impairment
initially was recognized or as a reduction in the amount of bad debt
expense that otherwise would be reported. Additional interest income
that would have been earned on these loans if they had not been
non-performing amounted to approximately $31,600 in 1996. Interest
income on non-performing loans recognized on a cash basis amounted to
approximately $18,600 in 1996.

F-13

<PAGE>

NOTE 5 - MARKETABLE SECURITIES

Marketable securities consist of Governmental National Mortgage
Association (GNMA) securities bearing interest from 6.5% to 9.5% with
maturity dates ranging from May 15, 2016 to June 15, 2023. The
details of the amortized cost and approximate market value of
marketable securities at April 30, 1996 and 1995 are as follows:

1996 1995
-------------------------------- --------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
GNMA
Due after 10 years $ 4,411,857 $ 4,282,445 $ 4,829,809 $ 4,588,905
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

The amortized cost and estimated market values with unrealized gains
and losses of marketable securities at April 30, 1996 and 1995 are as
follows:

1996 Gross Gross
------ Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Issuer ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
GNMA $ 4,411,857 $ - $ 129,412 $ 4,282,445
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

1996 Gross Gross
------ Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Issuer ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
GNMA $ 4,829,809 $ - $ 240,904 $ 4,588,905
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

There were no realized gains or losses on sales of securities for the
years ended April 30, 1996, 1995 and 1994.

NOTE 6 - MORTGAGES PAYABLE

Mortgages payable as of April 30, 1996, included mortgages on
properties owned totaling $71,327,918, and mortgages of $371,141 on
property sold on contract. The carrying value of the related real
estate owned was $106,653,490 and the carrying value of the related
mortgage loans receivable was $905,752 as of April 30, 1996.

Mortgages payable as of April 30, 1995, included mortgages on
properties owned totaling $48,134,856, and mortgages of $1,861,351 on
property sold on contract. The carrying value of the related real
estate owned was $74,840,061 and the carrying value of the related
mortgage loans receivable was $1,990,167 as of April 30, 1995.

Monthly installments are due on the mortgages with interest rates
ranging from 7.19% to 10.25% and with varying maturity dates thru
November 30, 2034.

F-14

<PAGE>

NOTE 6 - (CONTINUED)

The aggregate amount of required future principal payments on
mortgages payable is as follows:

Years ending April 30,
1997 $ 2,165,211
1998 2,155,476
1999 2,223,016
2000 2,193,352
2001 2,302,104
Later years 60,659,900
-------------
Total payments $ 71,699,059
-------------
-------------

NOTE 7 - INVESTMENT CERTIFICATES ISSUED

The Trust has placed investment certificates with the public. The
interest rates vary from 7% to 11% per annum, depending on the term of
the security. Total securities maturing within fiscal years ending
April 30 are shown below. Interest is paid annually, semiannually, or
quarterly on the anniversary date of the security.

DUE IN YEARS ENDING APRIL 30
----------------------------

1997 $ 3,111,167
1998 672,693
1999 930,624
2000 1,008,839
2001 79,146
-------------
$ 5,802,469
-------------
-------------

NOTE 8 - DEFERRED GAIN FROM PROPERTY DISPOSITIONS

Deferred gain represents gain from property dispositions that have
been reported on the installment method. With the installment method
of reporting, the proportionate share of the gain is recognized at the
point cash is received. Deferred gain recognized on the installment
basis was $54,788, $15,499, and $69,380 for the years ended April 30,
1996, 1995 and 1994, respectively.

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES

Mr. Roger R. Odell and Mr. Thomas A. Wentz, Sr., officers and
shareholders of the Trust, are partners in Odell-Wentz & Associates,
the advisor to the Trust. Under the Advisory Contract between the
Trust and Odell-Wentz & Associates, the Trust pays an advisor's fee
based on the net assets of the Trust and a percentage fee for
investigating and negotiating the acquisition of new investments. For
the year ended April 30, 1996, Odell-Wentz & Associates received total
fees under said agreement of $484,086. The fees for April 30, 1995
were $339,128, and for April 30, 1994 were $350,812. For the years

F-15

<PAGE>

NOTE 9 - (CONTINUED)

ended April 30, 1996, 1995 and 1994, the Trust has capitalized
$115,993, $49,323 and $95,772, respectively, of these fees, with the
remainder of $368,093, $289,805 and $255,040, respectively, expensed
as advisory and trustee fees on the statement of operations. The
advisor is obligated to provide office space, staff, office equipment
and computer services and other services necessary to conduct the
business affairs of the Trust.

Investors Management and Marketing (IMM) provides property management
services to the Trust. Roger R. Odell is a shareholder in IMM. IMM
received $281,717, $212,018 and $170,870 for services rendered for
years ended April 30, 1996, 1995 and 1994, respectively. In addition,
IMM owed the Trust $118,137 at April 30, 1995. This receivable was
paid in November, 1995.

Inland National Securities is a corporation that provides underwriting
services in the sale of additional shares for the Trust. Roger R.
Odell is also a shareholder in Inland National Securities. Fees for
services totaled $269,656 for the year ended April 30, 1996, $272,615
for the year ended April 30, 1995, and $507,036 for the year ended
April 30, 1994.

The Trust paid fees and expense reimbursements to the law firm in
which Thomas A. Wentz, Sr. is a partner totaling $23,488, $4,890 and
$4,692 for the years ended April 30, 1996, 1995 and 1994,
respectively.

The Trust had a mortgage loan receivable from Jenner Properties 1978,
a limited partnership in which Roger R. Odell and Thomas A. Wentz, Sr.
are investors. This contract was paid off during the year ended April
30, 1995.

The Trust had a mortgage loan receivable from Chateau Properties,
Ltd., a limited partnership, in which the Trust is a general partner
as described in Note 1 and Note 11. This contract was paid off during
the year ended April 30, 1996. The contract balance at April 30, 1995
was $1,331,175.

Investment certificates issued by the Trust to officers and trustees
totaled $1,258,133 at April 30, 1996 and $1,179,324 at April 30, 1995.

NOTE 10 - MARKET PRICE RANGE OF SHARES

Investors Real Estate Trust shares are traded on the
Over-The-Counter-Market, with sales handled by Inland National
Securities, 21 South Main, Minot, North Dakota and Financial Advantage
Brokerage Services, Inc., 17 South Main, Minot, North Dakota. The
price range is as follows:

Bid Ask
----------------- -----------------
Low High Low High
------ ------- ------- -------
1994 $ 5.22 $ 5.49 $ 5.80 $ 6.10
1995 5.49 5.89 6.10 6.40
1996 5.89 6.30 6.40 6.85

F-16

<PAGE>

NOTE 11 - CHANGE IN THE REPORTING ENTITY

The consolidated financial statements have previously included the
accounts of Investors Real Estate Trust and all limited partnerships
in which the Trust was a general partner and maintained a controlling
interest. Due to the control exerted by the Trust in their position
as general partner and the limited liability of the other partners
involved, all limited partnerships were included in the consolidated
financial statements. For the current year ended April 30, 1996, the
control exerted over Chateau Properties, Ltd. has been reduced to a
level not requiring consolidation under current accounting guidelines.
As of April 30, 1996, the Trust is accounting for its interest in
Chateau Properties, Ltd. under the equity method of accounting. Prior
period financial statements included in this report have been restated
to properly reflect this change in the reporting entity.

The effect of the change in the reporting entity on income previously
reported is shown as follows:

Increase (Decrease)
------------------------------
1995 1994
------------ ------------
Assets $ (274,250) $ (338,300)
Liabilities (15,760) (15,088)
Shareholders' equity (258,490) (323,212)
Income before extraordinary
item and net income (3,278) (42,675)
Earnings per share - -

NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:

Mortgage loans receivable - Fair values are based on the
discounted value of future cash flows expected to be received for
a loan using current rates at which similar loans would be made
to borrowers with similar credit risk and the same remaining
maturities.

Cash - The carrying amount approximates fair value because of the
short maturity of those instruments.

Marketable securities - The fair values of these instruments are
estimated based on quoted market prices for these instruments.

Mortgages payable - For variable rate loans that reprice
frequently, fair values are based on carrying values. The fair
value of fixed-rate loans is estimated based on the discounted
cash flows of the loans using current market rates.

Investment certificates issued - The fair value is estimated
using a discounted cash flow calculation that applies interest
rates currently being offered on deposits with similar remaining
maturities.

F-17

<PAGE>

NOTE 12 - (CONTINUED)

Accrued interest payable - The carrying amount approximates fair
value because of the short-term nature of when interest will be
paid.

The estimated fair values of the Company's financial instruments are
as follows:

1995
---------------------------
Carrying Fair
Amount Value
FINANCIAL ASSETS ------------ ------------
----------------
Mortgage loans receivable $ 4,932,138 $ 4,949,278
Cash 2,715,274 2,715,274
Marketable securities 4,411,857 4,282,445

FINANCIAL LIABILITIES
---------------------
Mortgages payable $ 71,699,059 $ 70,694,035
Investment certificates issued 5,802,469 5,692,317
Accrued interest payable 656,080 656,080

F-18

<PAGE>

ADDITIONAL INFORMATION

F-19

<PAGE>

INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION

Board of Trustees
Investors Real Estate Trust
and Affiliated Partnerships
Minot, North Dakota

Our report on our audit of the basic consolidated financial statements of
Investors Real Estate Trust and Affiliated Partnerships for the years ended
April 30, 1996, 1995 and 1994, appears on page 1. Those audits were made for
the purpose of forming an opinion on such consolidated financial statements
taken as a whole. The information on pages 18 through 31 related to the 1996,
1995 and 1994 consolidated financial statements is presented for purposes of
additional analysis and is not a required part of the basic consolidated
financial statements. Such information, except for information on page 31 that
is marked "unaudited" on which we express no opinion, has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements, and, in our opinion, the information is fairly stated in all
material respects in relation to the basic consolidated financial statements for
the years ended April 30, 1996, 1995 and 1994, taken as a whole.

We also have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Investors Real Estate Trust and
Affiliated Partnerships as of April 30, 1993, and 1992, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the two years ended April 30, 1993 and 1992, none of which is presented
herein, and we expressed unqualified opinions on those consolidated financial
statements. In our opinion, the information on page 26 relating to the 1993 and
1992 consolidated financial statements is fairly stated in all material respects
in relation to the basic consolidated financial statements from which it has
been derived.

BRADY, MARTZ & ASSOCIATES, P.C.

May 20, 1996

F-20

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1996 AND 1995

Schedule I
MARKETABLE SECURITIES

April 30, 1996 April 30, 1995
--------------------------- ---------------------------
Principal Principal
Amount Market Amount Market
------------- ------------ ------------- ------------

GNMA Pools $ 4,411,857 $ 4,282,445 $ 4,829,809 $ 4,588,905
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------

F-21

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1996 AND 1995

Schedule IV
NONCURRENT INDEBTEDNESS OF RELATED PARTIES

MORTGAGE LOANS RECEIVABLE

Beginning Ending
Balance Additions Deductions Balance
------------ ------------ ------------ ------------
Year ended April 30, 1996
<S> <C> <C> <C> <C>
Chateau Properties, Ltd. $ 1,331,175 $ - $ 1,331,175 $ -
Investors Management
and Marketing 118,137 - 118,137 -
------------ ------------ ------------ ------------
$ 1,449,312 $ - $ 1,449,312 $ -
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Year ended April 30, 1995 (Restated)

Chateau Properties, Ltd. $ 1,358,413 $ - $ (27,238) $ 1,331,175
Jenner Properties 1978, Ltd. 543,598 - (543,598) -
Investors Management
and Marketing 119,793 - (1,656) 118,137
------------ ------------ ------------ ------------
$ 2,021,804 $ - $ 572,492 $ 1,449,312
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

</TABLE>

F-22

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994

Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION

Charged to Costs and Expenses
------------------------------------------
1996 1995 1994
------------ ------------ ------------
Item
<S> <C> <C> <C>
Maintenance and repairs $ 1,702,365 $ 1,338,236 $ 1,236,251
Taxes, other than payroll and
income taxes
Property taxes 1,873,720 1,078,712 928,600
Royalties * * *
Advertising costs * * *

</TABLE>

* Less than 1 percent of total revenues

F-23

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1996
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION

Cost Capitalized Subsequent
Initial Cost To Trust To Acquisition
--------------------------------- ---------------------------------
Buildings and Carrying
Description Encumbrances Land Improvements Improvements Costs
- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Apartments:
Hutchinson $ 6,577 $ 24,772 $ 332,250 $ 46,314 $ -
Century - Williston 2,700,000 200,000 3,166,750 198,755 -
Beulah - 6,360 336,589 78,734 -
Century - Dickinson 1,595,000 100,000 1,564,598 77,021 -
Waseca, MN - 40,000 634,737 131,957 -
Virginia 2,378 37,600 163,036 16,447 -
Parkway - 7,000 40,738 34,648 -
4301-4313 9th Ave. 546,353 52,870 908,727 36,045 -
Marshall 135,872 35,000 275,000 89,278 -
Scottsbluff 196,024 60,000 570,000 80,039 -
Oak Manor 238,264 25,000 225,000 35,917 -
177 10th Ave. E 234,661 40,000 318,109 2,768 -
312 12th Ave. NW 45,670 20,000 236,750 - -
405 Grand Avenue - 13,584 157,211 1,089 -
Sweetwater 251,014 90,767 1,208,847 54,616 -
Bison 152,946 100,210 1,348,127 41,798 -
Eastgate - 23,917 1,490,181 179,091 -
Colton Heights 381,682 80,000 734,286 2,275 -
Hill Park 1,470,000 224,750 2,562,296 35,430 -
Candlelight Apts. 539,961 80,040 757,977 - -
Forest Park 4,177,577 810,000 5,579,164 207,100 -
Oakwood Estates 2,250,000 342,800 2,783,950 196,555 -
Prairie Winds 1,388,480 144,097 1,816,011 - -
Crestview Apts. 2,880,049 235,000 4,290,031 47,848 -
Pointe West 2,395,789 240,000 3,537,775 34,828 -
Oxbow Apts. 3,565,000 404,072 4,494,441 44,137 -
96 Units, Billings, MT - 655,985 3,098,103 - -
49 units, Bismarck, ND 1,382,528 143,500 2,244,100 - -
South Pointe, Minot, ND - 275,000 4,514,552 - -
Stonehill, St. Cloud, MN 8,186,235 939,000 10,167,355 - -
Pine Cone, Ft. Collins, CO 10,645,576 904,545 12,167,093 - -
South View, Minot, ND - 185,000 468,585 363
1112 32nd Ave. S 414,283 50,000 543,147 - -
South Winds 3,721,568 400,000 5,033,683 - -
Columbia Park - G.F. Phase I - 700,000 2,673,754 - -
Southpointe, Minot Phase II 2,775,212 275,000 4,015,062 - -
Circle 50 - Billings,MT - 491,247 - - -
Columbia Park - G.F. Phase II - 661,855 - - -
Office Buildings:
114 S. Main 18,389 27,055 76,076 774 -
408 1st St. SE - 10,000 34,836 2,037 -
401 South Main - 70,600 334,308 69,778 -
Lester Building - 25,000 243,916 - -
First Avenue - 30,000 219,496 530,321 -
Creekside 946,452 311,310 1,088,149 171,676 -
Commercial:
Arrowhead Shopping Center 145,277 100,359 1,063,925 1,233,130 -
Superpumper, Emerado, ND - 25,000 225,564 46,500 -
Superpumper, Langdon, ND - 59,674 151,500 28,038 -
Superpumper, Bottineau, ND - 15,000 186,013 100,000 -
Superpumper, Crookston, MN - 13,125 214,152 201,500 -
Superpumper,
Grand Forks, ND - 80,000 405,007 - -
Superpumper, New Town - 69,900 180,100 - -
Pioneer Hi-Bred 350,023 56,925 548,075 48,876 -
Lindberg Building 851,838 198,000 1,154,404 103,385 -
Superpumper, Sidney, MT - 12,000 108,600 - -
Hutchinson Tech 2,470,548 244,800 4,029,426 154,800 -
Minot Plaza - 50,000 452,898 - -
Smith's, Boise, ID 3,629,797 765,000 4,874,576 - -
Midco Theatre, Grand Forks, ND 1,703,010 183,515 2,359,721 2,500 -
Pet Foods, Fargo, ND 834,130 324,148 927,570 25,058 -
Barnes & Noble, Fargo, ND 4,828,123 540,000 2,752,012 - -
Stone Container, Fargo, ND 3,271,632 440,251 4,498,235 - -
Barnes & Noble, Omaha, NE - 600,000 3,099,101 - -
------------- ------------- ------------- ------------- -------------

$ 71,327,918 $ 13,370,633 $ 113,685,675 $ 4,391,426 $ -
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------

</TABLE>

F-24

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS

Schedule XI (Continued)

Gross Amount at Which
Carried at Close of Period
-------------------------------------------------
Life on Which
Buildings Latest Income
and Accumulated Date Statement
Description Land Improvements Total Depreciation Acquired Is Computed
- ----------- ------------- ------------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Apartments:
Hutchinson $ 25,551 $ 377,785 $ 403,336 $ 188,006 1977 33 1/2-40 years
Century - Williston 274,970 3,290,535 3,565,505 964,800 1985 35-40 years
Beulah 78,327 343,356 421,683 269,854 1983 15-40 years
Century - Dickinson 126,738 1,614,881 1,741,619 450,420 1986 35-40 years
Waseca, MN 40,000 766,694 806,694 241,601 1987 27 1/2-40 years
Virginia 37,600 179,483 217,083 51,821 1987 27 1/2-40 years
Parkway 11,446 70,940 82,386 8,762 1988 5-40 years
4301-4313 9th Ave. 66,912 930,730 997,642 180,492 1988 40 years
Marshall 35,360 363,918 399,278 58,166 1988 40 years
Scottsbluff 60,000 650,039 710,039 118,134 1988 40 years
Oak Manor 29,012 256,905 285,917 41,121 1989 40 years
177 10th Ave. E 40,218 320,659 360,877 52,012 1989 40 years
312 12th Ave. NW 20,000 236,750 256,750 38,472 1989 40 years
405 Grand Avenue 14,674 157,210 171,884 21,579 1991 40 years
Sweetwater 94,270 1,259,960 1,354,230 897,854 1972 20-33 years
Bison 100,210 1,389,925 1,490,135 1,029,078 1972 25-33 years
Eastgate 28,638 1,664,551 1,693,189 1,214,428 1970 33 years
Colton Heights 80,000 736,561 816,561 300,453 1984 33 years
Hill Park 245,653 2,576,823 2,822,476 982,436 1985 33 years
Candlelight Apts. 80,040 757,977 838,017 66,323 1993 40 years
Forest Park 811,954 5,784,310 6,596,264 497,045 1993 40 years
Oakwood Estates 342,800 2,980,505 3,323,305 254,287 1993 40 years
Prairie Winds 144,097 1,816,011 1,960,108 158,901 1993 40 years
Crestview Apts. 235,000 4,337,879 4,572,879 268,725 1994 40,years
Pointe West 240,000 3,572,603 3,812,603 221,546 1994 40 years
Oxbow Apts. 404,072 4,538,578 4,942,650 169,094 1994 40 years
96 units, Billings, MT 655,985 3,098,103 3,754,088 -
49 units, Bismarck, ND 143,500 2,244,100 2,387,600 26,505 1995 40 years
South Pointe, Minot, ND 275,000 4,514,552 4,789,552 52,943 1995 40 years
Stonehill, St. Cloud, MN 939,000 10,167,355 11,106,355 127,092 1995 40 years
Pine Cone, Ft. Collins, CO 904,545 12,167,093 13,071,638 304,177 1994 40 years
South View, Minot, ND 185,000 468,948 653,948 19,889 1994 40 years
1112 32nd Ave. SW 50,000 543,147 593,147 6,789 1996 40 years
South Winds 400,000 5,033,683 5,433,683 62,921 1996 40 years
Columbia Park - G.F. Phase I 700,000 2,673,754 3,373,754 - 1996 40 years
Southpointe, Minot Phase II 275,000 4,015,062 4,290,062 - 1996 40 years
Circle 50 - Billings,MT 491,247 - 491,247 - 1996 40 years
Columbia Park - G.F. Phase II 661,855 - 661,855 - 1996 40 years
Office Buildings:
114 S. Main 27,829 76,076 103,905 68,347 1978 20 years
408 1st St. SE 10,016 36,857 46,873 18,256 1986 19-40 years
401 South Main 70,722 403,964 474,686 101,657 1987 31 1/2-40 years
Lester Building 25,000 243,916 268,916 45,912 1988 40 years
First Avenue 67,711 712,106 779,817 275,265 1981 33 years
Creekside 311,310 1,259,825 1,571,135 130,347 1992 40 years
Commercial:
Arrowhead Shopping Ctr. 100,412 2,297,002 2,397,414 1,993,595 1973 15-40 years
Superpumper, Emerado, ND 25,000 272,064 297,064 121,328 1986 19-40 years
Superpumper, Langdon, ND 59,674 179,538 239,212 45,527 1987 31 1/2-40 years
Superpumper, Bottineau, ND 15,000 286,013 301,013 43,271 1989 40 years
Superpumper, Crookston, MN 13,125 415,652 428,777 59,074 1988 40 years
Superpumper
Grand Forks, ND 80,000 405,007 485,007 55,688 1991 40 years
Superpumper, New Town, ND 69,900 180,100 250,000 20,261 1992 40 years
Pioneer Hi-Bred 56,925 596,951 653,876 62,336 1992 40 years
Lindberg Building 198,000 1,257,789 1,455,789 132,113 1992 40 years
Superpumper, Sidney, MT 12,000 108,600 120,600 9,502 1993 40 years
Hutchinson Tech 244,800 4,184,226 4,429,026 358,406 1993 40 years
Minot Plaza 50,000 452,898 502,898 39,629 1993 40 years
Smith's, Boise, ID 765,000 4,874,576 5,639,576 304,661 1994 40 years
Midco Theatre, Grand Forks, ND 183,515 2,362,221 2,545,736 88,521 1994 40 years
Pet Foods, Fargo, ND 324,148 952,628 1,276,776 35,097 1994 40 years
Barnes & Noble, Fargo, ND 540,000 2,752,012 3,292,012 103,200 1994 40 years
Stone Container, Fargo, ND 440,251 4,498,235 4,938,486 55,113 1995 40 years
Barnes & Noble, Omaha, NE 600,000 3,099,101 3,699,101 38,739 1995 40 years
------------- ------------- ------------- -------------

$ 13,639,012 $ 117,808,722 $ 131,447,734 $ 13,551,571
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

F-25

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS

Schedule XI (Continued)

Reconciliations of total real estate carrying value for the three years ended
April 30, 1996, 1995 and 1994 are as follows:

1995 1994
1996 (Restated) (Restated)
-------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of year $ 90,892,662 $ 63,861,793 $ 46,319,398
Additions during year
- acquisitions 40,660,975 27,371,289 17,094,188
- improvements 635,791 344,255 448,207
-------------- ------------- -------------
$ 132,189,428 $ 91,577,337 $ 63,861,793
Deductions during year
- cost of real estate sold (741,694) (684,675) -
-------------- ------------- -------------
Balance at close of year $ 131,447,734 $ 90,892,662 $ 63,861,793
-------------- ------------- -------------
-------------- ------------- -------------

</TABLE>

Reconciliations of accumulated depreciation for the three years ended April 30,
1996, 1995 and 1994 are as follows:

1995 1994
1996 (Restated) (Restated)
------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of year $ 11,732,655 $ 10,097,374 $ 8,773,900
Additions during year
- provisions for depreciation 2,261,724 1,767,294 1,323,474
Deduction during year
- accumulated depreciation
on real estate sold (442,808) (132,013) -
------------- ------------- -------------
Balance at close of year $ 13,551,571 $ 11,732,655 $ 10,097,374
------------- ------------- -------------
------------- ------------- -------------

</TABLE>

F-26

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1996

Schedule XII
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE

Interest Final Maturity Payment Prior
Rate Date Terms Liens
-------- -------------- ------- ---------
Residential
- -----------
<S> <C> <C> <C> <C>
Billings, MT - 144 units 9% 9-1-98 Monthly -
Higley Heights, Phoenix, AZ 8% 3-31-04 Monthly -
North Park - Writer Corp. 14% 1-4-98 Monthly -
Centerbrooke Homes 12% 1-14-94 Monthly -
Marcella Knutt 11% 6-1-08 Monthly -
Sweetwater Springs Balloon
Retirement Center 9% 7-15-96 Payment -
Melanie Bentsinger 8% 6-1-25 Monthly -
Rolland Hausman 9% 2-1-16 Monthly -
Other - over $100,000 9-10 1/4% 5-1-96 to
8-1-07 Monthly -
- from $50,000 - 99,999 8-12% 7-1-96 to
1-1-00 Monthly -
- from $20,000 - 49,999 8-12% 9-1-97 to
12-1-03 Monthly -
- less than $20,000 7-12% 9-4-97 to
3-1-02 Monthly

Total

Less - Unearned discounts
- Deferred gain from property dispositions
- Allowance for bad debts

</TABLE>

F-27

<PAGE>

<TABLE>
<CAPTION>
Principal Amount
Face Carrying of Loans Subject to
Amounts of Amounts of Delinquent Principal
Residential Mortgages Mortgages or Interest
- ----------- ------------- ------------ --------------------
<S> <C> <C> <C>
Billings, MT - 144 units $ 1,500,000 $ 320,938 $ -
Higley Heights, Phoenix, AZ 809,786 681,032 -
North Park - Writer Corp. 1,550,000 618,810 -
Centerbrooke Homes 1,900,000 205,512 141,345
Marcella Knutt 300,000 236,880 -
Sweetwater Springs
Retirement Center 2,810,000 1,254,810 -
Melanie Bentsinger 217,761 216,154 -
Rolland Hausman 315,659 314,710 -
Other - over $100,000
678,814 448,029 -
- from $50,000 - 99,999
1,340,381 360,998 3,473
- from $20,000 - 49,999
768,088 252,315 -
- less than $20,000
293,304 21,950 -
------------ ------------ ------------
Total
$ 12,483,793 $ 4,932,138 $ 144,818
------------ ------------
------------ ------------

Less - Unearned discounts (18,222)
- Deferred gain from property dispositions (165,074)
- Allowance for bad debts (267,096)
------------
$ 4,481,746
------------
------------
</TABLE>

F-28

<PAGE>

Schedule XII (CONTINUED)

1995 1994
1996 (Restated) (Restated)
------------ ------------- -------------
<S> <C> <C> <C>
MORTGAGE LOANS RECEIVABLE,
BEGINNING OF YEAR $ 5,815,772 $ 11,212,354 $ 12,869,463

New participations in and advances
on mortgage loans 1,790,070 653,952 3,170,698
------------ ------------- -------------
$ 7,605,842 $ 11,866,306 $ 16,040,161
Collections (2,647,434) (5,850,534) (4,827,807)
Write-off through allowance (26,270) (200,000) -
------------ ------------- -------------

MORTGAGE LOANS RECEIVABLE,
END OF YEAR $ 4,932,138 $ 5,815,772 $ 11,212,354
------------ ------------- -------------
------------ ------------- -------------

</TABLE>

F-29

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
SELECTED FINANCIAL DATA

Year Ended April 30
-----------------------------------------------------------------------------
1995 1994 1993 1992
1996 (Restated) (Restated) (Restated) (Restated)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data
Revenue $ 18,659,665 $ 13,801,123 $ 11,583,008 $ 8,048,916 $ 6,955,404
Operating income 3,617,807 3,560,318 3,135,426 2,222,313 1,612,231
Gain on repossession/
sale of investments 994,163 407,512 64,962 145,165 34,408
Net income 4,611,970 3,967,830 3,200,388 2,367,478 1,646,639

Consolidated Balance Sheet Data
Total real estate investments $ 122,377,909 $ 84,005,635 $ 63,972,042 $ 49,492,380 $ 33,707,171
Total assets 131,355,638 94,616,744 72,391,548 54,248,011 38,555,050
Shareholders' equity 50,711,920 37,835,654 29,997,189 23,347,449 18,420,243

Consolidated Per Share Data
Operating income $ .30 $ .34 $ .35 $ .28 $ .23
Gain on repossession/
sale of investments .08 .04 .01 .01 .00
Dividends .37 .34 .33 .31 .30
Tax status of dividend
Capital gain 1.6% 11.0% 7.4% 4.1% 1.0%
Ordinary income 98.4% 89.0% 92.6% 74.0% 67.8%
Return of capital 0.0% 0.0% 0.0% 21.9% 31.2%

</TABLE>

F-30

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1996, 1995 AND 1994

GAIN FROM PROPERTY DISPOSITIONS

Total
Original Unrealized Realized Realized Realized
Property Gain 4/30/96 4/30/96 4/30/95 4/30/94
- -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Brooklyn Addition * $ 25,000 $ 4,000 $ 1,000 $ 1,000 $ 1,000
1411 South 20th * 34,696 - 1,177 3,292 3,039
1302 South 19 1/2 * 87,669 22,444 6,215 5,739 5,299
600 Maple * 60,025 - 41,253 859 766
406 17th Street - Mandan * 233,522 138,629 5,143 4,609 4,131
1320 19 1/2 South* 74,424 - - - 50,727
419 and 404 - Minot 82,053 - - 82,053 -
Yankton, SD 305,542 - - 305,542 -
108 4th Avenue SE - Minot 173,211 - 173,244 - -
Mobridge, SD 293,035 - 293,035 - -
Lantern Court 50,971 - 50,971 - -
Chateau 684,914 - 422,125 4,418 -
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

$ - $ 994,163 $ 407,512 $ 64,962
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

</TABLE>

* The gain from the sale of these properties is being realized based on the
installment method. The amount of deferred gain realized was $476,913,
$19,917 and $64,962 for the years ended April 30, 1996, 1995 and 1994,
respectively.

F-31

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1995

MORTGAGE LOANS

Final Periodic Carrying Delinquent
Interest Maturity Payment Face Amount Amount of Principal
Rate Date Terms of Mortgage Mortgages or interest
---------- ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arrowhead Shopping
Center, Minot, ND 10.00% 10-1-97 Monthly $ 1,152,278 $ 145,277 $ -
Century Apartments,
Williston,
196 unit complex 7.50 3-1-06 Monthly 2,700,000 2,700,000 -
Century Apartments,
Dickinson,
120 unit complex 7.50 3-1-06 Monthly 1,595,000 1,595,000 -
Colton Heights Assoc.,
Billings, MT 9.00 3-1-97 Monthly 1,291,000 142,541 -
Sweetwater Properties,
Grafton, Devils 2003 to
Lake, 114 units 9.75 2004 Monthly 914,138 251,014 -
Bison Properties,
Jamestown, Carrington,
Cooperstown, 1999 to
125 units 10.00 2000 Monthly 1,001,650 152,946 -
Hill Park Properties, Ltd.
Bismarck, ND, 96 units 7.50 3-1-06 Monthly 1,470,000 1,470,000 -
Colton Heights, Ltd.
Minot, ND, 18 units 9.50 1-1-00 Monthly 730,000 381,682 -
Residential Properties,
Single family - 7.50 to 6-1-96 to
36 unit complexes 10.50 3-1-03 Monthly 4,017,631 1,634,398 -
Commercial Properties,
Retail stores 9.00 5-1-98 Monthly 97,500 18,389 -
Pioneer Hi-Bred,
Moorhead, MN 8.625 11-1-01 Monthly 425,000 350,023 -
Creekside Office Complex
Billings, MT 8.35 12-1-16 Monthly 1,023,750 946,482 -
Hutchinson Tech
Sioux Falls, SD 8.50 8-1-99 Monthly 2,800,000 2,470,548 -
Candlelight Apts. 8.25 12-1-04 Monthly 578,000 539,961 -
Oakwood Apts. 7.50 3-1-06 Monthly 2,250,000 2,250,000 -
Prairie Winds 7.19 5-1-18 Monthly 1,470,000 1,388,452 -
Forest Park 9.75 5-1-03 Monthly 4,500,000 4,177,577 -
Pointe West Apts. 8.34 1-1-14 Monthly 2,625,000 2,395,789 -
Crestview Apts. 8.30 1-1-14 Monthly 3,150,000 2,880,049 -
Midco Theatre 8.65 7-1-14 Monthly 1,750,000 1,703,009 -
Oxbow, Sioux Falls, SD 7.50 3-1-06 Monthly 3,565,000 3,565,000 -
Smith's Home Furnishings 9.75 3-29-03 Monthly 3,750,000 3,629,797 -
Lindberg Building 8.50 4-1-00 Monthly 950,000 851,838 -
Barnes & Noble, Fargo, ND 7.98 11-20-10 Monthly 4,900,000 4,828,123 -
Pine Cone 7.125 12-20-34 Monthly 10,685,215 10,645,576 -
1112 32nd Ave. SW - 18 plex 9.00 9-1-10 Monthly 425,000 414,283
West Stonehill, St. Cloud, MN 9.21 2-1-98 to
1-1-00 Monthly 8,232,569 8,186,235 -
North Pointe Apts, Bismarck, ND 8.18 8-1-15 Monthly 1,400,000 1,382,528 -
Southpointe Apts, I, Minot, ND 8.01 9-1-15 Monthly 2,800,000 2,775,212 -
Southwind Apts, Grand Forks, ND 7.84 11-1-10 Monthly 3,780,000 3,721,568 -
Stone Container, Fargo, ND 8.25 12-1-10 Monthly 3,300,000 3,271,632 -
Pet Food Warehouse, Fargo, ND 8.31 12-1-10 Monthly 840,000 834,130 -
------------- ------------- -------------

$ 80,168,731 $ 71,699,059 $ -
------------- ------------- -------------
------------- ------------- -------------

</TABLE>

F-32

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1996

SIGNIFICANT PROPERTY ACQUISITIONS

Acquisition for cash and assumptions of mortgages
Commercial:
Barnes & Noble, Omaha, NE ** $ 3,627,206
Store Container, Fargo, ND ** 4,042,217
-------------
$ 7,669,423
-------------

Apartments:
96 Units, Billings, MT * $ 3,727,440
North Pointe, Bismarck, ND ** 927,450
South Point I, Minot, ND ** 2,727,085
West Stonehill, St. Cloud, MN ** 10,765,830
1112 - 32nd Avenue SW, Minot, ND 593,147
Columbia Park Phase I, Grand Forks, ND * 3,373,754
Southwinds, Grand Forks, ND 5,433,683
South Point II, Minot, ND * 4,290,061
Circle 50, Billings, MT * 491,247
Columbia Park II, Grand Forks, ND * 661,855
-------------
$ 32,991,552
-------------

Total $ 40,660,975
-------------
-------------

* Property not placed in service at April 30, 1996. Additional costs are
still to be incurred.

** Represents costs to complete a project started in year ending April 30,
1995.

F-33

<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

QUARTER ENDED
--------------------------------------------------------
7-31-95 10-31-95 1-31-96 4-30-96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 3,782,061 $ 4,715,186 $ 5,104,409 $ 5,058,009
Income before gains on
sale of investments 1,009,468 1,058,136 1,082,506 467,697
Net gain on sale of investments - - 522,001 472,162
Net income 1,009,468 1,058,136 1,604,507 939,859

Per share
Income before gains on
sale of investments .09 .09 .09 .04
Net gain on sale of
investments - - .04 .04

QUARTER ENDED
--------------------------------------------------------
7-31-94 10-31-94 1-31-95 4-30-95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 3,247,910 $ 3,529,364 $ 3,492,941 $ 3,530,908
Income before gains on
sale of investments 794,755 1,066,229 1,014,011 685,323
Net gain on sale of investments - 305,543 - 101,969
Net income 794,755 1,371,772 1,014,011 787,292

Per share
Income before gains on
sale of investments .07 .10 .10 .07
Net gain on sale of
investments - .03 - .01

QUARTER ENDED
--------------------------------------------------------
7-31-93 10-31-93 1-31-94 4-30-94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 2,619,795 $ 2,831,487 $ 2,898,989 $ 3,232,737
Income before gains on
sale of investments 841,939 852,618 872,875 567,994
Net gain on sale of investments - - - 64,962
Net income 841,939 852,618 872,875 632,956

Per share
Income before gains on
sale of investments .10 .10 .10 .05
Net gain on sale of
investments - - - .01

</TABLE>

F-34

<PAGE>

INVESTORS REAL ESTATE TRUST

UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIOD

ENDED OCTOBER 31, 1996

The following Financial Statements have been prepared from the records of
Investors Real Estate Trust and its six affiliated limited partnerships and have
not been audited or reviewed by the Trust's independent certified public
accountants. Accordingly, these statements are subject to adjustments upon
audit, which audit will be conducted for the Fiscal Year ending April 30, 1997.
Reference is made to the footnotes to the Statements prepared by the Trust's
auditors for the Fiscal Year ended April 30, 1996, contained in the Consolidated
Financial Report for Fiscal 1996. In the opinion of the Trust, there have been
no developments requiring footnote disclosure for the periods covered by the
Financial Statements set forth below that are not adequately disclosed in the
footnotes to the April 30, 1996 statements included herein on pages F-1 to F-34.

F-35

<PAGE>

INVESTORS REAL ESTATE TRUST

BALANCE SHEETS
FOR THE PERIODS ENDED OCTOBER 31, 1996 & 1995

ASSETS: OCTOBER 31, 1996 OCTOBER 31, 1995
---------------------------------------
<S> <C> <C>
Cash $ 1,344,519 $ 747,787
Marketable Securities
GNMA's 4,157,371 4,615,430
Other REIT's 596,961 0
Tax & Insurance Escrow 1,414,320 968,399
Deferred Charges 748,770 414,551
Prepaid Insurance 172,432 159,356
Deposits 320,000 50,000
General Partnerships 85,576 0
- ------------------------------------------------------------------------------------------------------
$ 8,839,949 $ 6,955,523
- ------------------------------------------------------------------------------------------------------
Real Estate Investments
Real Estate Owned $ 147,288,224 $ 123,515,461
Less Accumulated Depreciation (14,773,341) (14,088,483)
- ------------------------------------------------------------------------------------------------------
Net Real Estate Owned 132,514,883 109,426,978
- ------------------------------------------------------------------------------------------------------
Real Estate Mortgages (related) 0 117,235
Real Estate Mortgages (unrelated) 2,791,154 3,336,992
Less Unearned Discounts (14,373) (34,792)
Less Deferred Gain from Property Dispositions (165,074) (219,861)
Less Reserve for Bad Debts (197,096) (267,096)
- ------------------------------------------------------------------------------------------------------
Net Mortgages & Contracts 2,414,610 2,932,478
- ------------------------------------------------------------------------------------------------------
Total Real Estate Investments $ 134,929,494 $ 112,359,456
- ------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 143,769,442 $ 119,319,979
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------

LIABILITIES:
Accounts Payable & Other Liabilities $ 2,534,382 $ 4,302,183
Mortgages Payable 79,214,615 62,972,317
Investment Certificates Payable 6,991,458 5,440,733
Due on Margin Account 0 3,981,937

- ------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 88,740,456 $ 75,697,170
- ------------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of 10-31-96 10-31-95
13,994,747 as of 10/31/96
12,071,256 as of 10/31/95 $ 54,263,917 $ 41,560,587
Undistributed Net Income (3,921,613) (3,525,300)
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 55,028,986 $ 43,616,809
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 143,769,442 $ 119,313,979
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------

</TABLE>

F-36

<PAGE>

INVESTORS REAL ESTATE TRUST

- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE THREE- AND SIXTH-MONTH PERIODS ENDED OCTOBER 31, 1996 AND 1995
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31 OCTOBER 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
OPERATING INCOME
Real Estate Rentals $ 5,235,244 $ 4,508,952 $ 9,985,638 $ 8,051,435
Interest Income 233,448 183,034 448,096 398,212
Mortgage Discount & Fees 5,335 23,200 6,798 47,600
- ----------------------------------------------------------------------------------------------
$ 5,474,027 $ 4,715,186 $ 10,440,502 $ 8,497,247
- ----------------------------------------------------------------------------------------------
OPERATING EXPENSE
Interest $ 1,633,486 $ 1,384,224 $ 3,054,669 $ 2,500,412
Utilities & Maintenance 826,003 764,719 1,600,434 1,260,006
Property Management 407,893 357,718 758,701 521,581
Taxes & Insurance 638,858 482,777 1,191,608 854,339
Advisory & Trustees Fees 138,104 114,340 267,321 212,523
Operating Expenses 48,637 45,272 91,346 76,782
- ----------------------------------------------------------------------------------------------
$ 3,693,071 $ 3,149,050 $ 6,991,079 $ 5,425,643
- ----------------------------------------------------------------------------------------------
OPERATING INCOME
(BEFORE RESERVES) $ 1,780,956 $ 1,566,136 $ 3,449,423 $ 3,071,604
- ----------------------------------------------------------------------------------------------
DEPRECIATION/AMORTIZATION (732,802) (508,000) (1,423,162) (1,004,000)
- ----------------------------------------------------------------------------------------------
OPERATING INCOME (AFTER RESERVES) $ 1,048,154 $ 1,058,136 $ 2,026,261 $ 2,067,604
GAIN ON SALE OF INVESTMENTS $ (2,867) 0 252,062 0
- ----------------------------------------------------------------------------------------------
NET INCOME $ 1,045,287 $ 1,058,136 $ 2,278,323 $ 2,067,604
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
NET INCOME PER SHARE:
Operating Income (after
depreciation) .08 .09 .15 .18
Gain on Sale of Investments .00 0 .02 0
- ----------------------------------------------------------------------------------------------
Total Net Income/Share .08 .09 .17 .18
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
DIVIDENDS PAID PER SHARE .0950 .08875 .1925 .18125
Average Number of Shares
Outstanding 13,882,377 11,958,672 13,721,089 11,668,888
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS*
Net Taxable Income $ 1,045,287 1,058,136 2,278,323 2,067,604
Adjustments
Depreciation of real estate
owned 732,802 508,000 1,423,162 1,004,000
Gain (loss) on sale of
investments 2,867 0 (252,062) 0
- ----------------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS $ 1,780,956 1,566,136 3,449,423 3,071,604
per share .13 .13 .25 .26
- ----------------------------------------------------------------------------------------------

</TABLE>

*"Funds from Operations" is defined as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures calculated
on the same basis.

F-37

<PAGE>

INVESTORS REAL ESTATE TRUST

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED OCTOBER 31, 1996 AND 1995 (UNAUDITED)

1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,278,323 $ 2,067,604
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,423,163 1,004,000
Interest reinvested in investment certificates 61,471 55,706
Changes in other assets and liabilities:
(Increase) decrease in other assets (903,345) (358,230)
Increase in accounts payable and accrued expenses 824,265 185,280
- --------------------------------------------------------------------------------------------------

NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 3,329,857 $ 2,954,360
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of REIT stock $ (596,961) $ 0
Proceeds from sale of securities 255,861 154,190
Principal payments on mortgage loans receivable 1,419,511 1,586,110
Payments for acquisition of properties (12,565,971) (32,123,437)
Investment in mortgage loans receivable (559,450) (164,516)
- --------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES $ (11,994,784) $ (30,547,653)
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line of Credit $ 900,000 $ 3,000,000
Proceeds from loan refinance 5,835,467 12,857,569
Proceeds from sale of shares 2,960,557 5,195,392
Dividends paid (934,150) (809,331)
Proceeds from investment certificates issued 1,639,602 517,813
Loan on margin account 0 6,473,437
Redemption of investment certificates (506,542) (221,701)
Principal payments on mortgage loans and notes
payable (2,259,365) (1,008,857)
Payments on margin account 0 (2,436,984)
- --------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES $ 7,635,569 $ 23,567,338
- --------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash $ (1,003,245) $ (4,025,955)
- --------------------------------------------------------------------------------------------------
Cash at April 30 $ 2,337,764 $ 4,772,742
- --------------------------------------------------------------------------------------------------
CASH AT OCTOBER 31 $ 1,334,519 $ 746,787
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------

</TABLE>

F-38

<PAGE>

GLOSSARY

Unless a different definition as provided immediately following a term used in
this document, the following definitions shall apply:

1. ADMINISTRATOR: The official or agency administering the Securities
laws of a jurisdiction.

2. ACQUISITION EXPENSES: Expenses including but not limited to legal fees
and expenses, travel and communications expenses, costs of appraisals,
nonrefundable option payments on property not acquired, accounting
fees and expenses, title insurance, and miscellaneous expenses related
to selection and acquisition of properties, whether or not acquired.

3. ACQUISITION FEE: The total of all fees and commissions paid by any
party to any party in connection with making or investing in mortgage
loans or the purchase, development or construction of property by a
REIT. Included in the computation of such fees or commissions shall be
any real estate commission, selection fee, DEVELOPMENT FEE,
CONSTRUCTION FEE, nonrecurring management fee, loan fees or points or
any fee of a similar nature, however designated. Excluded shall be
DEVELOPMENT FEES and CONSTRUCTION FEES paid to PERSONS not affiliated
with the SPONSOR in connection with the actual development and
construction of a project.
4. ADVISOR: The PERSON responsible for directing or performing the
day-to-day business affairs of a REIT, including a PERSON to which an
Advisor subcontracts substantially all such functions. To the extent
the provisions of this Statement of Policy are germane they shall
apply to self-administered REITS.

5. AFFILIATE: An AFFILIATE of another PERSON includes any of the
following:

a. any PERSON directly or indirectly owning, controlling, or
holding, with power to vote ten percent or more of the
outstanding voting securities of such other PERSON.

b. any PERSON ten percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held,
with power to vote, by such other PERSON.

c. any PERSON directly or indirectly controlling, controlled by, or
under common control with such other PERSON.

d. any executive officer, director, trustee or general partner of
such other PERSON.

e. any legal entity for which such PERSON acts as an executive
officer, director, trustee or general partner.

6. AVERAGE INVESTED ASSETS: For any period the average of the aggregate
book value of the assets of the Trust invested, directly or
indirectly, in equity interests in and loans secured by real estate,
before reserves for depreciation or bad debts or other similar
non-cash reserves computed by taking the average of such values at the
end of each month during such period.

<PAGE>

7. COMPETITIVE REAL ESTATE COMMISSION: Real estate or brokerage
commission paid for the purchase or sale of a property which is
reasonable, customary and competitive in light of the size, type and
location of such property.

8. CONTRACT PRICE FOR THE PROPERTY: The amount actually paid or allocated
to the purchase, development, construction or improvement of a
property exclusive of ACQUISITION FEES and ACQUISITION EXPENSES.

9. CONSTRUCTION FEE: A fee or other remuneration for acting as
general contractor and/or construction manager to construct
improvements, supervise and coordinate projects or to provide MAJOR
REPAIRS OR REHABILITATION on a REITs property.

10. CROSS REFERENCE SHEET: A complication of the STATEMENT OF POLICY
sections, referenced to the page of the PROSPECTUS and DECLARATION OF
TRUST, or other exhibits, and justification for any deviation from the
STATEMENT OF POLICY. Such compilation shall comply with the provisions
set forth on the CROSS reference sheet.

11. DECLARATION OF TRUST: The declaration of trust, by-laws, certificate,
articles of incorporation or other governing instrument pursuant to
which a REIT is organized.

12. DEVELOPMENT FEE: A fee for the packaging of a REIT'S property,
including negotiating and approving plans, and undertaking to assist
in obtaining zoning and necessary variances and necessary financing
for the specific property, either initially or at a later date.

13. INDEPENDENT EXPERT: A PERSON with no material current or prior
business or personal relationship with the ADVISOR or TRUSTEES who is
engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the REIT.

14. INDEPENDENT TRUSTEE(S): The TRUSTEE(S) of a REIT who are not
associated and have not been associated within the last two years,
directly or indirectly, with the SPONSOR or ADVISOR of the REIT.

a. A TRUSTEE shall be deemed to be associated with the SPONSOR Or
ADVISOR if he or she:

i. AFFILIATES; or

ii. is employed by the SPONSOR, ADVISOR or any of their
AFFILIATES; or

iii. is an officer or director of the SPONSOR, ADVISOR, or any
of their AFFILIATES; or

iv. performs services, other than as a TRUSTEE, for the REIT;
or

v. is a TRUSTEE for more than three REITS organized by the
SPONSOR or advised the ADVISOR; or

vi. has any material business or professional relationship with
the SPONSOR, ADVISOR, or any of their AFFILIATES.

b. For purposes of determining whether or not the business or
professional relationship is material, the gross revenue derived
by the prospective INDEPENDENT TRUSTEE from the SPONSOR and
ADVISOR and AFFILIATES shall be deemed material per se if it
exceeds 5% of the prospective INDEPENDENT TRUSTEE'S:

<PAGE>

i. annual gross revenue, derived from all sources, during
either of the last two years; or

ii. net worth, on a fair market value basis.

c. An indirect relationship shall include circumstances in which a
TRUSTEE'S spouse, parents, children, siblings, mothers-or
fathers-in-laws, sons-or daughters-in-laws, or brothers-or
sisters-in-law is or has been associated with the SPONSOR,
ADVISOR, any of their AFFILIATES, or the REIT.

15. INITIAL INVESTMENT: That portion of the initial capitalization of the
REIT contributed by the SPONSOR, or its AFFILIATES pursuant to Section
II.A of this Statement of Policy.

16. LEVERAGE: The aggregate amount of indebtedness of a REIT for money
borrowed (including purchase money mortgage loans) outstanding at any
time, both secured and unsecured.

17. NET ASSETS: The total assets (other than intangibles) at cost before
deducting depreciation or other non-cash reserves less total
liabilities, calculated at least quarterly on a basis consistently
applied.

18. NET INCOME: For any period total revenues applicable to such period,
less the expenses applicable to such period other than additions to
reserves for depreciation or bad debts or other similar non-cash
reserves. If the ADVISOR receives an incentive fee, NET INCOME, for
purposes of calculation TOTAL OPERATING EXPENSES in Section IV.D shall
exclude the gain from the sale of the REIT'S assets.

19. ORGANIZATION AND OFFERING EXPENSES: All expenses incurred by and to be
paid from the assets of the REIT in connection with and in preparing a
REIT for registration and subsequently offering and distributing it to
the public, including, but not limited to, total underwriting and
brokerage discounts and commissions (including fees of the
underwriters' attorneys), expenses for printing, engraving, mailing,
salaries of employees while engaged in sales activity, charges of
transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of the securities under
Federal and State laws, including taxes and fees, accountants' and
attorneys' fees.

20. PERSON: Any natural persons, partnership, corporation, association,
trust, limited liability company or other legal entity.

21. PROSPECTUS: Shall have the meaning given to that term by Section 2(10)
of the Securities Act of 1933, including a preliminary Prospectus;
provided however, that such term as used herein shall also include an
offering circular as described in Rule 256 of the General Rules and
Regulations under the Securities Act of 1933 or, ml he case of an
intrastate offering, any document by whatever name known, utilized for
the purpose of offering and selling securities to the public.

22. REAL ESTATE INVESTMENT TRUST ("REIT"): A corporation, trust,
association or other legal entity (other than a real estate
syndication) which is engaged primarily in investing in equity
interests in real estate (including fee ownership and leasehold
interests) or in loans secured by real estate or both.

<PAGE>

23. ROLL-UP: A transaction involving the acquisition, merger, conversion,
or consolidation either directly or indirectly of the REIT and the
issuance of securities of a ROLL-UP ENTITY. Such term does not
include:

a. a transaction involving securities of REIT that have been for at
least 12 months listed on a national securities exchange or
traded through the National Association of Securities Dealers
Automated Quotation National Market System; or

b. a transaction involving the conversion to corporate, trust, or
association form of only the REIT if, as a consequence of the
transaction there will be no significant adverse change in any of
the following:

i. SHAREHOLDERS' voting rights;

ii. the term of existence of the REIT;

iii. SPONSOR, or ADVISOR compensation;

iv. the REIT'S investment objectives.

24. ROLL-UP ENTITY: A partnership, real estate investment trust,
corporation, trust, or other entity that would be created or would
survive after the successful completion of a proposed ROLL-UP
transaction.

25. SHARES: Shares of beneficial interest or of common stock of a REIT of
the class that has the right to elect the Trustees of such REIT.

26. SHAREHOLDERS: The registered holders of a REIT'S SHARES.

27. SPECIFIED ASSET REIT: A PROGRAM where, at the time a securities
registration is ordered effective, at least 75% of the net proceeds
from the sale of SHARES are allocable to the purchase, construction,
renovation, or improvement of individually identified assets. Reserves
shall not be included in the 75%.

28. SPONSOR: Any PERSON directly or indirectly instrumental in organizing,
wholly or in part, a REIT or any PERSON who will control, manage or
participate in the management of a REIT, and any AFFILIATE of such
PERSON. Not included is any PERSON whose only relationship with the
REIT is as that of an independent property manager of REIT assets, and
whose only compensation is as such. SPONSOR does not include wholly
independent third parties such as attorneys, accountants and
underwriters whose only compensation is for professional services. A
PERSON may also be deemed a SPONSOR of the REIT by:

a. taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the REIT; either alone
or in conjunction with one or more other PERSONS;

b. receiving a material participation in the REIT in connection with
the founding or organizing of the business of the REIT, in
consideration of services or property, or both services and
property;

<PAGE>

c. having a substantial number of relationships and contacts with
the REIT;

d. possessing significant rights to control REIT properties;

e. receiving fees for providing services to the REIT which are paid
on a basis that is not customary in the industry; or providing
goods or services to the REIT on a basis which was not negotiated
at arms length with the REIT.

29. TOTAL OPERATING EXPENSES: Aggregate expenses of every character paid
or incurred by the REIT as determined under Generally Accepted
Accounting Principles, including ADVISORS' fees, but excluding:

a. the expenses of raising capital such as ORGANIZATION AND OFFERING
EXPENSES, legal, audit, accounting, underwriting, brokerage,
listing, registration and other fees, printing and other such
expenses, and tax incurred in connection with the issuance,
distribution, transfer, registration, and stock exchange listing
of the REIT'S SHARES;

b. interest payments;

c. taxes;

d. non-cash expenditures such as depreciation, amortization and bad
debt reserves;

e. incentive fees paid in compliance with Section IV. F.,
notwithstanding Section I.B.29.(f);

f. ACQUISITION FEES, ACQUISITION EXPENSES, real estate commissions
on resale of property and other expenses connected with the
acquisition, disposition, and ownership of real estate interests,
mortgage loans, or other property, (such as the costs of
foreclosure, insurance premiums, legal services, maintenance,
repair, and improvement of property.

30. TRUSTEE(S): The members of the board of trustees or directors or other
body which manages the REIT.

31. UNIMPROVED REAL PROPERTY: The real property of a REIT which has the
following three characteristics:

a. an equity interest in real property which was not acquired for
the purpose of producing rental or other operating income;

b. has no development or construction in process on such land;

c. and no development or construction on such land is planned in
good faith to commence on such land within one year.

<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemization of the anticipated cost to the Trust in
connection with the issuance and distribution of the securities to be
registered.

Legal: $25,000
Printing: 5,000
Accounting: 1,000
Registration Fees: 6,000
-------
$37,000

ITEM 31. SALES TO SPECIAL PARTIES

There is no person or class of persons to whom any securities have been sold
within the past six months, or are to be sold, by the registrant or any security
holder for whose account any of the securities being registered are to be
offered, at a price varying from that at which securities of the same class are
to be offered to the general public pursuant to this registration.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES

Until July 9, 1996, the shares of Beneficial Interest of IRET were sold in the
over-the-counter market only within the State of North Dakota by Inland National
Securities, Inc., 21 South Main, Minot, ND 58701, and Financial Advantage
Brokerage Services, Inc., 17 South Main, Minot, ND 58701. Set forth below, by
quarter-year, are the total number of IRET shares sold and repurchased and the
high and low reported sales prices for the period beginning July 1, 1994:

Shares Repurchased New Shares Sold
Calendar No. of From Shareholders by IRET
Year Months Shares Sold Low High Low High
---- ------ ----------- --- ---- --- ----
1994 July-September 134,529 5.37 5.63 6.10 6.25
1994 October-December 335,518 5.63 5.89 6.25 6.40
1995 January-March 210,106 5.89 5.89 6.40 6.40
1995 April-June 137,766 5.89 6.03 6.40 6.55
1995 July -September 452,665 5.89 6.03 6.40 6.55
1995 October-December 466,447 5.89 6.16 6.40 6.70
1996 January-March 516,179 5.89 6.30 6.40 6.85
1996 April-July 9 394,234 6.30 6.30 6.85 6.85

During said period, IRET shares were sold on the primary market only for cash to
bona-fide residents of the State of North Dakota by Inland National Securities,
Inc., and Financial Advantage Brokerage Services, Inc., which are securities
dealers registered with the State of North Dakota. IRET claims exemption from
the registration of its shares of Beneficial Interest under the Securities Act
of 1933 under Section 3(a)(11) of said Act. All of said securities were offered
and sold only to persons resident within the State of North Dakota.

The Trust has a policy allowing its Trustees and employees of its Advisor -
Odell-Wentz & Associates, L.L.C. - and their spouses to purchase its shares of
beneficial interest at a price equal to the net price then received by IRET for
its shares, after payment of the brokerage commission, when sold to the public.
During the three-year period ended January 31, 1997, 490,362 shares were
purchased by eligible individuals. No commissions or other discounts were paid
or given in connection with such sales. The Trust claims exemption from the
registration of said shares under Section 4(2) of the Securities Act of 1933.

<PAGE>

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The governing provisions of the Trust provide nonliability of and
indemnification to the Board of Trustees and officers except for willful
misfeasance, bad faith, gross negligence, or any liability imposed by the
Securities Act of 1933. The Trust currently provides no insurance coverage for
the errors or omissions of Board members, officers or the Advisor.

The Advisor currently maintains no insurance coverage for its errors or
omissions as Advisor to the Trust.

ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED

No portion of the consideration to be received by the registrant for such shares
is to be credited to an account other than the appropriate capital share
account.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS

a) List of all financial statements filed as part of this
registration statement

FINANCIAL STATEMENT FILED INCLUDED IN PROSPECTUS

Financial Statement by Investors Real See F-1 through F-35
Estate Trust for the period ended
April 30, 1995, prepared by Brady
Martz & Associates, P.C., Certified
Public Accountants

Interim Financial Statement by
Investors Real Estate Trust for the
six-month period ended October 31,
1996 (unaudited) See F-35 through F-38

b) Exhibit Index

DESCRIPTION OF EXHIBIT LOCATION IN FORM S-11 FILING

(1) Security Sales Agreements Ex-1(i), (ii) & (iii), Pages 123-126b

(2) Plan of acquisition, Not Applicable
reorganization, arrangement,
liquidation or succession

(3) (i) Restated Declaration of
Trust dated October 24,
1996 Ex-3(i), Pages 132-161

(ii) IRET Properties Partnership
Agreement Ex-3(ii), Pages 161-197

(4) Instruments defining the See #3
rights of security holders,
including indentures

(5) Opinion re legality Ex-5, Pages 127-128

(6) Opinion re discount on Not Applicable
capital shares

(7) Opinion re liquidation Not Applicable
preference

(8) Opinion re tax matters Ex-8, Page 131

<PAGE>

(9) Voting trust agreement Not Applicable

(10) Material Contracts Advisory Agreement with
the Registrant and
Odell-Wentz &
Associates, filed as
Exhibit 10 to said Form
10 and incorporated
herein by reference
(File No. 0-14851)

(11) Statement re computation Not Applicable
of per share earnings

(12) Statement re computation Not Applicable
of ratios

(15) Letter re unaudited Not Applicable
interim financial information

(16) Letter re change in Not Applicable
certifying accountant

(21) Subsidiaries of the List of affiliated
Registrant partnerships filed as
Item 7 of Form 10 filed
for the Registrant
(File No. 0-14851) and
incorporated herein by
reference

(23) Consent of experts and counsel
(i) Pringle & Herigstad, P.C. Ex-23(i), Page 129
(ii) Brady Martz & Associates, Ex-23(ii), Page 130
P.C.

(24) Power of Attorney Not Applicable

(25) Statement of eligibility Not Applicable
of trustee

(27) Financial Data Schedule Ex-27, Page 122

(99) Additional Exhibits Ex-99, Page 114

UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

<PAGE>

(2) That for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) of (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certified that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this registration to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minot, State of North Dakota.

INVESTORS REAL ESTATE TRUST

BY /s/ Timothy P. Mihalick
-------------------------
Timothy P. Mihalick
Its Secretary

<PAGE>

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
the dated indicated.

SIGNATURE TITLE DATE

/s/ _____________________ Trustee and Chairman February 12, 1997
Ralph A. Christensen

/s/ _____________________ Trustee and Vice Chairman February 12, 1997
Mike F. Dolan

/s/ _____________________ Trustee February 12, 1997
Patrick G. Jones

/s/ _____________________ Trustee February 12, 1997
J. Norman Ellison

/s/ _____________________ Trustee February 12, 1997
Daniel L. Feist

/s/ _____________________ Trustee February 12, 1997
Thomas A. Wentz, Jr.

/s/ _____________________ Trustee February 12, 1997
Jeff Miller

/s/ _____________________ Vice-President February 12, 1997
Thomas A. Wentz

/s/ _____________________ Secretary February 12, 1997
Timothy P. Mihalick

/s/ _____________________ Trustee February 12, 1997
John D. Decker

<PAGE>

INDEX OF EXHIBITS

DESCRIPTION OF EXHIBIT LOCATION IN FORM S-11 FILING

(1) Security Sales Agreements Ex-1(i), (ii) & (iii),
Pages 123-126b

(2) Plan of acquisition, Not Applicable
reorganization, arrangement,
liquidation or succession

(3) (i) Restated Declaration of
Trust dated October 24,
1996 Ex-3(i), Pages 132-161

(ii) IRET Properties Partnership
Agreement Ex-3(ii), Pages 161-197

(4) Instruments defining the See #3
rights of security holders,
including indentures

(5) Opinion re legality Ex-5, Pages 127-128

(6) Opinion re discount on Not Applicable
capital shares

(7) Opinion re liquidation Not Applicable
preference

(8) Opinion re tax matters Ex-8, Page 131

(9) Voting trust agreement Not Applicable

(10) Material Contracts Advisory Agreement with
the Registrant and
Odell-Wentz &
Associates, filed as
Exhibit 10 to said Form
10 and incorporated
herein by reference
(File No. 0-14851)

(11) Statement re computation Not Applicable
of per share earnings

(12) Statement re computation Not Applicable
of ratios

(15) Letter re unaudited Not Applicable
interim financial information

(16) Letter re change in Not Applicable
certifying accountant

(21) Subsidiaries of the List of affiliated
Registrant partnerships filed as
Item 7 of Form 10 filed
for the Registrant
(File No. 0-14851) and
incorporated herein by
reference

<PAGE>

(23) Consent of experts and counsel
(i) Pringle & Herigstad, P.C. Ex-23(i), Page 129
(ii) Brady Martz & Associates, Ex-23(ii), Page 130
P.C.

(24) Power of Attorney Not Applicable

(25) Statement of eligibility Not Applicable
of trustee

(27) Financial Data Schedule Ex-27, Page 122

(99) Additional Exhibits Ex-99, Page 114

<PAGE>

EX-1(i) FORM S-11 INVESTORS REAL ESTATE TRUST

SECURITY SALES AGREEMENT

THIS AGREEMENT, made this 12th day of February, 1997, between INVESTORS REAL
ESTATE TRUST, A North Dakota Business Trust, 12 South Main, Minot, North
Dakota 58701 (hereinafter ("IRET"), and INLAND NATIONAL SECURITIES, INC., 21
South Main, Minot, North Dakota 58701 (hereinafter "INLAND").

WHEREAS, IRET intends to file a Form S-11 with the Securities and Exchange
Commission to register for sale to the public 1,000,000 shares of its shares
of Beneficial Interest; and,

WHEREAS, INLAND is a broker registered with the National Association of
Securities Dealers and is also registered in states in which said shares of
Beneficial Interest will also be registered for sale by IRET;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, it
is agreed as follows:

1. IRET hereby employs INLAND as a Broker to offer said shares of
Beneficial Interest for sale for $7.20 per share with a minimum purchase of
100 shares. INLAND agrees to use its best efforts to conduct the sales
effort necessary to market said securities subject to the terms and
conditions of this agreement. This agreement shall become effective only
upon the effectiveness of the registration of said securities by the
Securities and Exchange Commission and the applicable state Securities
Commissioners and shall terminate contemporaneously with the termination or
completion of said registration.

2. IRET shall be responsible for paying all costs and expenses relating
to the registration of said securities, including the preparation, printing
and filing of the Prospectus and Registration Statements and all amendments
and exhibits, all filing and registration fees and costs, and all legal,
accounting, printing and filing fee expenses in connection therewith.

3. All solicitation expenses including travel, telephone and other
expenses incurred by INLAND and its salesmen shall be the responsibility of
INLAND and its salesmen. In the event the offering is terminated, INLAND
will NOT be reimbursed for any out-of-pocket expenses.

4. As compensation for its services hereunder, INLAND shall receive 8%
of the proceeds of all of the securities sold by it and paid for.

5. IRET represents and warrants to INLAND as follows:

- IRET is a North Dakota Business Trust duly organized and in good
standing under the laws of the State of North Dakota and duly
authorized to conduct its business in the states in which it
operates.

- The shares of Beneficial Interest described in the Prospectus
filed in connection with the above described Offering have the
characteristics set forth in said Prospectus and IRET is
authorized to issue an unlimited number of its shares of
Beneficial Interest under its trust powers.

- The Financial Statements contained in the Prospectus and by
reference incorporated herein are true, correct and complete, and
no material, adverse changes have occurred since the issuance of
such statement.

<PAGE>

IRET hereby indemnifies and will hold INLAND harmless from all claims,
demands, liabilities and expenses (including legal expenses) arising out of
or based on any of the representations or warranties made by IRET herein.

This agreement shall be binding upon and shall inure to the benefit of the
parties, their successors and assigns.

INVESTORS REAL ESTATE TRUST

BY /s/ Thomas A. Wentz, Sr.
------------------------------------
Thomas A. Wentz, Sr., Vice President

INLAND NATIONAL SECURITIES, INC.

BY /s/ David J. Theusch
------------------------------------
David J. Theusch, President

<PAGE>

EX-1(ii) FORM S-11 INVESTORS REAL ESTATE TRUST

SECURITY SALES AGREEMENT

THIS AGREEMENT, made this 12th day of February, 1997, between INVESTORS REAL
ESTATE TRUST, A North Dakota Business Trust, 12 South Main, Minot, North
Dakota 58701 (hereinafter ("IRET"), and FINANCIAL ADVANTAGE BROKERAGE
SERVICES, INC., 17 South Main, Minot, North Dakota 58701 (hereinafter
"FABSI").

WHEREAS, IRET intends to file a Form S-11 with the Securities and Exchange
Commission to register for sale to the public 1,000,000 shares of its shares
of Beneficial Interest; and,

WHEREAS, FABSI is a broker registered with the National Association of
Securities Dealers and is also registered in states in which said shares of
Beneficial Interest will also be registered for sale by IRET;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, it
is agreed as follows:

1. IRET hereby employs FABSI as a Broker to offer said shares of
Beneficial Interest for sale for $7.20 per share with a minimum purchase of
100 shares. FABSI agrees to use its best efforts to conduct the sales effort
necessary to market said securities subject to the terms and conditions of
this agreement. This agreement shall become effective only upon the
effectiveness of the registration of said securities by the Securities and
Exchange Commission and the applicable state Securities Commissioners and
shall terminate contemporaneously with the termination or completion of said
registration.

3. All solicitation expenses including travel, telephone and other
expenses incurred by FABSI and its salesmen shall be the responsibility of
FABSI and its salesmen. In the event the offering is terminated, FABSI will
NOT be reimbursed for any out-of-pocket expenses.

4. As compensation for its services hereunder, FABSI shall receive 8%
of the proceeds of all of the securities sold by it and paid for.

5. IRET represents and warrants to FABSI as follows:

- IRET is a North Dakota Business Trust duly organized and in good
standing under the laws of the State of North Dakota and duly
authorized to conduct its business in the states in which it
operates.

<PAGE>

IRET hereby indemnifies and will hold FABSI harmless from all claims,
demands, liabilities and expenses (including legal expenses) arising out of
or based on any of the representations or warranties made by IRET herein.

This agreement shall be binding upon and shall inure to the benefit of the
parties, their successors and assigns.

INVESTORS REAL ESTATE TRUST

BY /s/ Thomas A. Wentz, Sr.
------------------------------------
Thomas A. Wentz, Sr., Vice President

FINANCIAL ADVANTAGE BROKERAGE SERVICES,
INC.

BY /s/ BRADLEY P. WELLS
------------------------------------
Bradley P. Wells, President

<PAGE>

EX-1(iii) FORM S-11 INVESTORS REAL ESTATE TRUST

SECURITY SALES AGREEMENT

THIS AGREEMENT, made this 12th day of February, 1997, between INVESTORS REAL
ESTATE TRUST, A North Dakota Business Trust, 12 South Main, Minot, North
Dakota 58701 (hereinafter ("IRET"), and HUNTINGDON SECURITIES CORPORATION,
216 South Broadway, Suite 101, Minot, North Dakota 58702-0656 (hereinafter
"HUNTINGDON").

WHEREAS, IRET has filed a Form S-11 with the Securities and Exchange
Commission to register for sale to the public 1,000,000 shares of its shares
of Beneficial Interest; and

WHEREAS, HUNTINGDON is a broker registered with the National Association of
Securities Dealers and is also registered in states in which said shares of
Beneficial Interest will also be registered for sale by IRET;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, it
is agreed as follows:

1. IRET hereby employs HUNTINGDON as a Broker to offer said
shares of Beneficial Interest for sale of $7.20 per share, minimum purchase
of 100 shares. HUNTINGDON agrees to use its best efforts to conduct the
sales effort necessary to market said securities subject to the terms and
conditions of this agreement. This agreement shall become effective only
upon the effectiveness of the registration of said securities by the
Securities and Exchange Commission and the applicable state Securities
Commissioners and shall terminate contemporaneously with the termination or
completion of said registration.

2. IRET shall be responsible for paying all costs and expenses
relating to the registration of said securities, including the preparation,
printing and filing of the Prospectus and Registration Statements and all
amendments and exhibits, all filing and registration fees and costs, and all
legal, accounting, printing and filing fee expenses in connection therewith.

3. All solicitation expenses including travel, telephone and
other expenses incurred by HUNTINGDON and its salesmen shall be the
responsibility of HUNTINGDON and its salesmen.

4. As compensation for its service hereunder, HUNTINGDON shall
receive 8% of the proceeds of all of the securities sold and paid for.

5. IRET represents and warrants to HUNTINGDON as follows:

- IRET is a North Dakota Business Trust duly organized and
in good standing under the laws of the State of North Dakota
and duly authorized to conduct its business in the states in
which it operates.

- The Financial Statements contained in the Prospectus and by
reference incorporated herein are true, correct and complete,
and no material, adverse changes have occurred since the
issuance of such statement.

Page 126(a)

<PAGE>

IRET hereby indemnifies and will hold HUNTINGDON harmless from all claims,
demands, liabilities and expenses (including legal expenses) arising out of
or based on any of the representations or warranties made by IRET herein.

This agreement shall be binding upon and shall inure to the benefit of the
parties, their successors and assigns.

INVESTORS REAL ESTATE TRUST

By
------------------------------------
Thomas A. Wentz, Vice President

HUNTINGDON SECURITIES CORPORATION

By
------------------------------------
Roger W. Domres, President

Page 126(b)

<PAGE>
EX-3(I)

RESTATED DECLARATION OF TRUST
INVESTORS REAL ESTATE TRUST

WHEREAS, Under the Declaration of Trust made on the 31st day of July,
1970, by the undersigned as trustees of Investors Real Estate Trust
(hereinafter referred to as IRET), there was granted to the undersigned under
Article 1, Section 5 of said Declaration of Trust, the power to amend said
Declaration without prior approval of the Shareholders in order to conform
said Trust Agreement to the requirements of the regulatory authority with
jurisdiction over the issuance of the Trust securities, and

WHEREAS, Said governmental authority has requested certain amendments to
said Declaration of Trust,

NOW, THEREFORE, Pursuant to said reserved power to them granted under
said Declaration of Trust, the undersigned do hereby amend and restate said
Declaration of Trust as follows:

RESTATED DECLARATION OF TRUST made as of this 22nd day of October, 1996,
by the trustees of Investors Real Estate Trust, creating a trust to invest
directly or through an operating partnership in real estate, interests in
real estate, leasehold interests, mortgages, and interests in mortgages
secured by real estate using funds invested in the trust by individuals in
exchange for a beneficial interest in the trust (hereinafter called
Shareholders).

The trustees agree to hold and manage the assets of this Trust; and

The Trustees for the purpose of defining the respective interests of the
Shareholders in the Trust, have agreed to issue to each Shareholder
negotiable certificates of beneficial interest or shares (hereinafter called
Shares) in the respective amounts and with the designations and form as
hereinafter provided:

Now, therefore, the trustees hereby declare that they assume the duties
of trustees hereunder and will hold all assets of the Trust, including those
to be received as hereinafter provided, and all rents, income, profits, and
gains therefrom, from whatever source derived, in trust for the Shareholders
in accordance with the terms and conditions hereinafter in this instrument
provided and all amendments thereto (called the Restated Declaration) to
wit:

<PAGE>

TABLE OF CONTENTS

ARTICLE 1 - THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Nature of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Particular Policies . . . . . . . . . . . . . . . . . . . . . . . . . 11
Conflicts of Interest and Investment Restrictions . . . . . . . . . . 11
Sales and Leases to IRET . . . . . . . . . . . . . . . . . . . . 11
Sales and Leases to SPONSOR, ADVISOR, TRUSTEES or any AFFILIATE . 12
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . 13
Multiple PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . 13
Other Transactions . . . . . . . . . . . . . . . . . . . . . . . 13
Appraisal of Real Property . . . . . . . . . . . . . . . . . . . 13
Roll-Up Transaction . . . . . . . . . . . . . . . . . . . . . . . 14
Borrowing Limitations . . . . . . . . . . . . . . . . . . . . . . 15
Other Limitations . . . . . . . . . . . . . . . . . . . . . . . . 15
Fees, Compensation and Expenses . . . . . . . . . . . . . . . . . . . 17
TRUSTEE'S Review . . . . . . . . . . . . . . . . . . . . . . . . 17
ACQUISITION FEES and ACQUISITION EXPENSES . . . . . . . . . . . . 18
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . 18
Real Estate Commissions on Resale of Property . . . . . . . . . . 19
Incentive Fees . . . . . . . . . . . . . . . . . . . . . . . . . 19
ADVISOR Compensation . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE 2 - SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SHARES: Certificates of Beneficial Interest . . . . . . . . . . . . . 21
Sale of SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Offering of SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SHARES Purchased by IRET . . . . . . . . . . . . . . . . . . . . . . . 21
Transferability of SHARES . . . . . . . . . . . . . . . . . . . . . . 22
Effect of Transfer of SHARES or Death, Insolvency, or Incapacity of
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Redemption and Prohibition on Transfer . . . . . . . . . . . . . . . . 22

ARTICLE 3 - SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 22
Rights and Obligations of SHAREHOLDERS . . . . . . . . . . . . . . . . 22
Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Voting Rights of SHAREHOLDERS . . . . . . . . . . . . . . . . . . 23
Liability of SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 24
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Access to Records . . . . . . . . . . . . . . . . . . . . . . . . 26
Distribution Reinvestment Plans . . . . . . . . . . . . . . . . . 27
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Election of TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE 4 - THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . 28
Number, Term of Office, Qualification, and Compensation of TRUSTEES . 28

<PAGE>

Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Successor TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Actions by TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . 29
Title and Authority of TRUSTEES . . . . . . . . . . . . . . . . . . . 30
The ADVISOR and Independent Contractor . . . . . . . . . . . . . . . . 30
Written Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Powers of TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 31
TRUSTEES' Right to Own SHARES in Trust . . . . . . . . . . . . . . . . 34
Liability and Indemnification . . . . . . . . . . . . . . . . . . . . 34
Non liability of TRUSTEES, ADVISORS or AFFILIATES . . . . . . . . 34
Indemnification of TRUSTEES . . . . . . . . . . . . . . . . . . . 35
PERSONS Dealing with TRUSTEES . . . . . . . . . . . . . . . . . . . . 36
Administrative Powers of TRUSTEES . . . . . . . . . . . . . . . . . . 37

ARTICLE 5 - DURATION AND TERMINATION OF IRET . . . . . . . . . . . . . . . 37
Termination of IRET . . . . . . . . . . . . . . . . . . . . . . . . . 37
Organization as a Corporation . . . . . . . . . . . . . . . . . . . . 38

ARTICLE 6 - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 38
When No SHARES are outstanding . . . . . . . . . . . . . . . . . . . . 38
When SHARES are Outstanding . . . . . . . . . . . . . . . . . . . . . 38

ARTICLE 7 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 39
Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Headings for Reference Only . . . . . . . . . . . . . . . . . . . . . 39

<PAGE>

ARTICLE 1 - THE TRUST

SECTION 1. DEFINITIONS. Unless a term contained in this document is
defined immediately following its use, the following definition shall apply:

1. ADMINISTRATOR: The official or agency administering the Securities
laws of a jurisdiction.

2. ACQUISITION EXPENSES: Expenses including but not limited to legal
fees and expenses, travel and communications expenses, costs of
appraisals, nonrefundable option payments on property not acquired,
accounting fees and expenses, title insurance, and miscellaneous
expenses related to selection and acquisition of properties,
whether or not acquired.

4. ADVISOR: The PERSON responsible for directing or performing the
day-to-day business affairs of IRET, including a PERSON to which an
ADVISOR subcontracts substantially all such functions.

5. AFFILIATE: An AFFILIATE of another PERSON includes any of the
following:

A. any PERSON directly or indirectly owning, controlling, or
holding, with power to vote ten percent or more of the outstanding
voting securities of such other PERSON.

B. any PERSON ten percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held,
with power to vote, by such other PERSON.

C. any PERSON directly or indirectly controlling, controlled by,
or under common control with such other PERSON.

D. any executive officer, director, TRUSTEE or general partner of
such other PERSON.

E. any legal entity for which such PERSON acts as an executive
officer, director, TRUSTEE or general partner.

6. AVERAGE INVESTED ASSETS: For any period the average of the
aggregate book value of the assets of the Trust invested, directly
or indirectly, in equity interests in and loans secured by real
estate, before reserves for depreciation or bad debts or other
similar non-cash reserves computed by taking the average of such
values at the end of each month during such period.

<PAGE>

8. CONTRACT PRICE FOR THE PROPERTY: The amount actually paid or
allocated to the purchase, development, construction or improvement
of a property exclusive of ACQUISITION FEES and ACQUISITION
EXPENSES.

9. CONSTRUCTION FEE: A fee or other remuneration for acting as general
contractor and/or construction manager to construct
improvements, supervise and coordinate projects or to provide MAJOR
REPAIRS OR REHABILITATION on IRET's property.

10. DECLARATION OF TRUST: The DECLARATION OF TRUST, by-laws,
certificate, articles of incorporation or other governing
instrument pursuant to which IRET is organized.

11. DEVELOPMENT FEE: A fee for the packaging of IRET'S property,
including negotiating and approving plans, and undertaking to
assist in obtaining zoning and necessary variances and necessary
financing for the specific property, either initially or at a later
date.

12. INDEPENDENT EXPERT: A PERSON with no material current or prior
business or personal relationship with the ADVISOR or TRUSTEES who
is engaged to a substantial extent in the business of rendering
opinions regarding the value of assets of the type held by IRET.

13. INDEPENDENT TRUSTEE(S): The TRUSTEE(S) of IRET who are not
associated and have not been associated within the last two years,
directly or indirectly, with the SPONSOR or ADVISOR of IRET.

A. A TRUSTEE shall be deemed to be associated with the SPONSOR or
ADVISOR if he or she

i. owns an interest in the SPONSOR, ADVISOR, or any of their
AFFILIATES; or

ii. is employed by the SPONSOR, ADVISOR or any of their
AFFILIATES; or

iii. is an officer or director of the SPONSOR, ADVISOR, or any
of their AFFILIATES; or

iv. performs services, other than as a TRUSTEE, for IRET; or

v. is a TRUSTEE for more than three REITS organized by the
SPONSOR or advised the ADVISOR; or

vi. has any material business or professional relationship with
the SPONSOR, ADVISOR, or any of their AFFILIATES.

B. For purposes of determining whether or not the business or
professional relationship is material, the gross revenue derived by
the prospective INDEPENDENT TRUSTEE from the SPONSOR and ADVISOR
and AFFILIATES shall be deemed material per se if it exceeds 5% of
the prospective INDEPENDENT TRUSTEE'S:

i. annual gross revenue, derived from all sources, during
either of the last two years; or

ii. net worth, on a fair market value basis.

<PAGE>

C. An indirect relationship shall include circumstances in which a
TRUSTEE'S spouse, parents, children, siblings, mothers-or
fathers-in-laws, sons-or daughters-in-laws, or brothers - or
sisters-in-law is or has been associated with the SPONSOR, ADVISOR,
any of their AFFILIATES, or IRET.

14. INITIAL INVESTMENT: That portion of the initial capitalization of
IRET contributed by the SPONSOR, or its AFFILIATES.

15. IRET: Investors Real Estate Trust.

16. LEVERAGE: The aggregate amount of indebtedness of IRET for money
borrowed (including purchase money mortgage loans) outstanding at
any time, both secured and unsecured.

17. NET ASSETS: The total assets (other than intangibles) at cost
before deducting depreciation or other non-cash reserves
less total liabilities, calculated at least quarterly on a basis
consistently applied.

18. NET INCOME: For any period total revenues applicable to such
period, less the expenses applicable to such period other than
additions to reserves for depreciation or bad debts or other
similar non-cash reserves. If the ADVISOR receives an incentive
fee, NET INCOME, for purposes of calculating TOTAL OPERATING
EXPENSES shall exclude the gain from the sale of IRET'S assets.

19. ORGANIZATION AND OFFERING EXPENSES: All expenses incurred by and to
be paid from the assets of IRET in connection with and in preparing
IRET for registration and subsequently offering and distributing
it to the public, including, but not limited to, total underwriting
and brokerage discounts and commissions (including fees of the
underwriters' attorneys), expenses for printing, engraving,
mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, TRUSTEES, escrow holders,
depositories, experts, expenses of qualification of the sale of the
securities under Federal and State laws, including taxes and fees,
accountants' and attorneys' fees.

20. PERSON: Any natural person, partnership, corporation, association,
trust, limited liability company or other legal entity.

21. PROSPECTUS: Shall have the meaning given to that term by Section
2(10) of the Securities Act of 1933, including a preliminary
PROSPECTUS; provided however, that such term as used herein shall
also include an offering circular as described in Rule 256 of the
General Rules and Regulations under the Securities Act of 1933 or,
in the case of an intrastate offering, any document by whatever
name known, utilized for the purpose of offering and selling
securities to the public.

23. ROLL-UP: A transaction involving the acquisition, merger,
conversion, or consolidation either directly or indirectly of the
REIT and the issuance of securities of a ROLL-UP ENTITY. Such term
does not include:

<PAGE>

A. a transaction involving securities of REIT that have been for
at least 12 months listed on a national securities exchange or
traded through the National Association of Securities Dealers
Automated Quotation National Market System; or

B. a transaction involving the conversion to corporate, trust, or
association form of only the REIT if, as a consequence of the
transaction there will be no significant adverse change in any of
the following:

i. SHAREHOLDERS' voting rights;

ii. the term of existence of the REIT;

iii. SPONSOR, or ADVISOR compensation;

iv. the REIT'S investment objectives.

24. ROLL-UP ENTITY: A partnership, REAL ESTATE INVESTMENT TRUST,
corporation, trust, or other entity that would be created or would
survive after the successful completion of a proposed ROLL-UP
transaction.

25. SHARES: SHARES of beneficial interest or of common stock of a REIT
of the class that has the right to elect the TRUSTEES of such REIT.

26. SHAREHOLDERS: The registered holders of IRET'S SHARES.

27. SPECIFIED ASSET REIT: A PROGRAM where, at the time a securities
registration is ordered effective, at least 75% of the net proceeds
from the sale of SHARES are allocable to the purchase,
construction, renovation, or improvement of individually identified
assets. Reserves shall not be included in the 75%.

28. SPONSOR: Any PERSON directly or indirectly instrumental in
organizing, wholly or in part, a REIT or any PERSON who will
control, manage or participate in the management of a REIT, and any
AFFILIATE of such PERSON. Not included is any PERSON whose only
relationship with the REIT is as that of an independent property
manager of REIT assets, and whose only compensation is as such.
SPONSOR does not include wholly independent third parties such as
attorneys, accountants and underwriters whose only compensation is
for professional services. A PERSON may also be deemed a SPONSOR of
the REIT by:

A. taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the REIT; either alone or
in conjunction with one or more other PERSONS;

B. receiving a material participation in the REIT in connection
with the founding or organizing of the business of the REIT, in
consideration of services or property, or both services and property

C. having a substantial number of relationships and contacts with
the REIT;

D. possessing significant rights to control REIT properties;

<PAGE>

E. receiving fees for providing services to the REIT which are
paid on a basis that is not customary in the industry; or providing
goods or services to the REIT on a basis which was not negotiated
at arms length with the REIT.

29. TOTAL OPERATING EXPENSES: Aggregate expenses of every character
paid or incurred by IRET as determined under Generally Accepted
Accounting Principles, including ADVISORS' fees, but excluding:

A. the expenses of raising capital such as ORGANIZATION AND
OFFERING EXPENSES, legal, audit, accounting, underwriting,
brokerage, listing, registration and other fees, printing and such
other expenses, and tax incurred in connection with the issuance,
distribution, transfer, registration, and stock exchange listing of
IRET'S SHARES;

B. interest payments;

C. taxes;

D. non-cash expenditures such as depreciation, amortization and
bad debt reserves;

E. incentive fees;

F. ACQUISITION FEES, ACQUISITION EXPENSES, real estate commissions
on resale of property and other expenses connected with the
acquisition, disposition, and ownership of real estate interests,
mortgage loans, or other property, (such as the costs of
foreclosure, insurance premiums, legal services, maintenance,
repair, and improvement of property.

30. TRUSTEE(S): The members of the board of TRUSTEES or directors or
other body which manages IRET.

31. UNIMPROVED REAL PROPERTY: The real property of a REIT which has the
following three characteristics:

A. an equity interest in real property which was not acquired for
the purpose of producing rental or other operating income;

B. has no development or construction in process on such land;

C. and no development or construction on such land is planned in
good faith to commence on such land within one year.

SECTION 2. NAME. The Trust shall be known as "Investors Real Estate
Trust," in which name the TRUSTEES may conduct business, sue and be sued and
otherwise do all things and take all action deemed by them appropriate to
carry out the business and preserve the assets of the Trust.

SECTION 3. LOCATION. The principal office of the Trust shall be at 12
South Main Street, Minot, North Dakota 58701, or at such other address, city,
or locality as the TRUSTEES shall from time to time determine. The Trust may
have such other offices or places of business as the TRUSTEES may from time
to time determine.

SECTION 4. NATURE OF TRUST. The Trust shall be of the type commonly
termed a business trust and shall not be a general partnership, limited
partnership, partnership association or corporation. The

<PAGE>

SHAREHOLDERS are beneficial owners hereunder. Neither the TRUSTEES nor the
SHAREHOLDERS nor any of them shall ever be deemed or treated in any way
whatsoever to be liable or responsible hereunder as partners. This Trust is
intended to have the status of a "REAL ESTATE INVESTMENT TRUST" as that term
is defined in Section 856-858 of the Internal Revenue Code of 1986, as now
enacted and as it may be hereafter amended, and the Declaration and all
actions of the TRUSTEES shall be construed in accordance with such intent.

SECTION 5. PURPOSES. IRET will be primarily engaged in the investment
and reinvestment of its funds and other assets in real property, interests in
real property, mortgages secured by real property, leasehold interests in
real property, and interests in mortgages on real property, except that if
the TRUSTEES are of the opinion that investment in real estate assets at any
particular time is not prudent because of market or economic conditions,
IRET's assets may be maintained in cash or government securities, or both.
IRET shall not be primarily engaged in investing, reinvesting, or trading in
securities. It is the express purpose and objective of IRET to have invested
from time to time such percentages of the value of its total assets in real
property, leaseholds thereof, mortgages on real property, or interests
therein, cash, cash items, government securities and securities of other
REITs, and to follow such investment policies, as may be required in order
that IRET qualify (so long as such qualification, in the opinion of the
TRUSTEES, is advantageous to its SHAREHOLDERS) as said "REAL ESTATE
INVESTMENT TRUST."

SECTION 6. PARTICULAR POLICIES. IRET will follow such policies as are
required to maintain its qualification as a REAL ESTATE INVESTMENT TRUST. In
the event that IRET shall desire to issue or sell SHARES or other securities
in any state or jurisdiction in which there shall be in force and effect a
law, rule, or regulation of the ADMINISTRATOR requiring that this Declaration
contain one or more particular limitations or restrictions on the policies or
operations of IRET, then anything else in this Declaration contained to the
contrary notwithstanding, the TRUSTEES may, without the prior approval of the
SHAREHOLDERS, amend this Declaration to incorporate herein any such
limitations or restrictions, including, without affecting the generality of
the foregoing, limitations or restrictions on the issuance of senior
securities, borrowing money, requiring appraisals in particular
circumstances, making loans, underwriting securities of others, investing in
unimproved real estate, investing in mortgages, investing in securities of
other real estate companies, investing in real estate contracts of sale and
commodities, issuing different classes of SHARES or options or redeemable
securities, and on the amount of operating expenses that may be incurred. The
TRUSTEES shall also have the power to provide that no further amendments of
this Declaration may be made without the consent of SHAREHOLDERS.

SECTION 7. CONFLICTS OF INTEREST AND INVESTMENT RESTRICTIONS.

A. SALES AND LEASES TO IRET.

IRET shall not purchase property from the SPONSOR, ADVISOR, TRUSTEE, or
any AFFILIATE thereof, unless a majority of TRUSTEES (including a
majority of INDEPENDENT TRUSTEES) not otherwise interested in such
transaction approve the transaction as being fair and reasonable to IRET
and at a price to IRET no greater than the cost of the asset to such
SPONSOR, ADVISOR, TRUSTEE or any AFFILIATE thereof, or if the price to
IRET is in excess of such cost, that substantial justification for such
excess exists and such excess is reasonable. In no event shall the cost
of such asset to IRET exceed its current appraised value.

B. SALES AND LEASES TO SPONSOR, ADVISOR, TRUSTEES OR ANY AFFILIATE.

1. A SPONSOR, ADVISOR, TRUSTEE or an AFFILIATE thereof shall not
acquire assets from IRET unless approved by a majority of
TRUSTEES (including a majority of INDEPENDENT TRUSTEES), not
otherwise interested in such transaction, as being fair and
reasonable to IRET.

<PAGE>

2. IRET may lease assets to a SPONSOR, ADVISOR, TRUSTEE or any
AFFILIATE thereof only if approved by a majority of TRUSTEES
(including a majority of INDEPENDENT TRUSTEES), not otherwise
interested in such transaction, as being fair and reasonable
to IRET.

C. LOANS.

1. No loans may be made by IRET to the SPONSOR, ADVISOR, TRUSTEE
or any AFFILIATE thereof except as provided under Article I,
Section 7(J)(3).

2. IRET may not borrow money from the SPONSOR, ADVISOR, TRUSTEE,
or any AFFILIATE thereof, unless a majority of TRUSTEES
(including a majority of INDEPENDENT TRUSTEES) not otherwise
interested in such transaction approve the transaction as
being fair, competitive, and commercially reasonable and no
less favorable to IRET than loans between unaffiliated parties
under the same circumstances.

D. INVESTMENTS.

1. IRET shall not invest in joint ventures with the SPONSOR,
ADVISOR, TRUSTEE, or any AFFILIATE thereof, unless a majority
of TRUSTEES (including a majority of INDEPENDENT TRUSTEES) not
otherwise interested in such transactions, approve the
transaction as being fair and reasonable to IRET and on
substantially the same terms and conditions as those received
by the other joint venturers.

2. IRET shall not invest in equity securities unless a majority
of TRUSTEES (including a majority of INDEPENDENT TRUSTEES) not
otherwise interested in such transaction approve the
transaction as being fair, competitive, and commercially
reasonable.

E. INVESTMENT POLICIES.

1 . The primary investment objectives of IRET is to obtain current
income and capital appreciation for its SHARE HOLDERS.

2. The INDEPENDENT TRUSTEES shall review the investment policies
of IRET with sufficient frequency and at least annually to
determine that the policies being followed by IRET at any time
are in the best interests of its SHAREHOLDERS. Each such
determination and the basis therefore shall be set forth in
the minutes of the TRUSTEES.

F. MULTIPLE PROGRAMS.

The method for the allocation of the acquisition of properties by two or
more PROGRAMS of the same SPONSOR or ADVISOR seeking to acquire similar
types of assets shall be reasonable. It shall be the duty of the
TRUSTEES (including the INDEPENDENT TRUSTEES) to ensure such method is
applied fairly to IRET.

G. OTHER TRANSACTIONS.

All other transactions between IRET and the SPONSOR, ADVISOR, TRUSTEE or
any AFFILIATE thereof, shall require approval by a majority of the
TRUSTEES (including a majority of

<PAGE>

INDEPENDENT TRUSTEES) not otherwise interested in such transactions as
being fair and reasonable to IRET and on terms and conditions not less
favorable to IRET than those available from unaffiliated third parties.

H. APPRAISAL OF REAL PROPERTY.

The consideration paid for real property acquired by IRET shall
ordinarily be based on the fair market value of the property as
determined by a majority of the TRUSTEES. In cases in which a majority
of the INDEPENDENT TRUSTEES so determine, and in all cases in which
assets are acquired from the ADVISORS, TRUSTEES, SPONSORS or AFFILIATES
thereof, such fair market value shall be as determined by an INDEPENDENT
EXPERT selected by the INDEPENDENT TRUSTEES.

I. ROLL-UP TRANSACTION.

1. In connection with a proposed ROLL-UP, an appraisal of all
IRET's assets shall be obtained form a competent, INDEPENDENT
EXPERT. IRET assets shall be appraised on a consistent basis.
The appraisal shall be based on an evaluation of all relevant
information, and shall indicate the value of IRET'S assets as
of a date immediately prior to the announcement of the
proposed ROLL-UP transaction. The appraisal shall assume an
orderly liquidation of IRET assets over a 12 month period. The
terms of the engagement of the INDEPENDENT EXPERT shall
clearly state that the engagement is for the benefit of IRET
and its investors. A summary of the independent appraisal,
indicating all material assumptions underlying the appraisal,
shall be included in a report to the investors in connection
with a proposed ROLL-UP.

2. In connection with a proposed ROLL-UP, the PERSON sponsoring
the ROLL-UP shall offer to SHAREHOLDERS who vote "no" on the
proposal the choice of-.

a. accepting the securities of the ROLL-UP ENTITY offered in
the proposed ROLL-UP; or

b. one of the following:

i. remaining as SHAREHOLDERS of IRET and preserving
their interests therein on the same terms and conditions
as existed previously; or

ii. receiving cash in an amount equal to the
SHAREHOLDERS' pro-rata share of the appraised value of
the NET ASSETS of IRET.

3. IRET shall not participate in any proposed ROLL-UP which would
result in SHAREHOLDERS having democracy rights in the ROLL-UP
ENTITY that are less than those provided for in this document
unless approved by a majority of the SHAREHOLDERS.

4. IRET shall not participate in any proposed ROLL-UP which
includes provisions which would operate to materially impede
or frustrate the accumulation of SHARES by any purchaser of
the securities of the ROLL-UP ENTITY (except to the minimum
extent necessary to preserve the tax status of the ROLL-UP
ENTITY). IRET shall not participate in any proposed ROLL-UP
which would limit the ability of an investor to exercise the
voting rights of its securities of the

<PAGE>

ROLL-UP ENTITY on the basis of the number of IRET SHARES held
by that investor.

5. IRET shall not participate in any proposed ROLL-UP in which
investors' rights of access to the records of the ROLL-UP
ENTITY will be less than those provided for by this document.

6. IRET shall not participate in any proposed ROLL-UP in which
any of the costs of the transaction would be borne by IRET if
the ROLL-UP is not approved by the SHAREHOLDERS.

J. BORROWING LIMITATIONS.

The aggregate borrowings of IRET, secured and unsecured, shall be
reasonable in relation to the NET ASSETS of IRET and shall be reviewed
by the TRUSTEES at least quarterly. The maximum amount of such
borrowings in relation to the NET ASSETS shall, in the absence of a
satisfactory showing that a higher level of borrowing is appropriate,
not exceed 300%. Any excess in borrowing over such 300% level shall be
approved by a majority of the INDEPENDENT TRUSTEES and disclosed to
SHAREHOLDERS in the next quarterly report of IRET, along with
justification for such excess.

K. OTHER LIMITATIONS.

IRET may not:

1. Invest more than 10% of its total assets in UNIMPROVED REAL
PROPERTY or mortgage loans on UNIMPROVED REAL PROPERTY.

2. Invest in commodities or commodity future contracts. Such
limitation is not intended to apply to future contracts, when
used solely for hedging purposed in connection with IRET's
ordinary business of investing in real estate assets and
mortgages.

3. Invest in or make mortgage loans unless an appraisal is
obtained concerning the underlying property except for those
loans insured or guaranteed by a government or government
agency. In cases in which a majority of the INDEPENDENT
TRUSTEES so determine, and in all cases in which the
transaction is with the ADVISOR, TRUSTEES, SPONSOR or
AFFILIATES thereof, such an appraisal must be obtained from an
INDEPENDENT EXPERT concerning the underlying property. This
appraisal shall be maintained in IRET's records for at least
five years, and shall be available for inspection and
duplication by any SHAREHOLDER. In addition to the appraisal,
a mortgagee's or owner's title insurance policy or commitment
as to the priority of the mortgage or the condition of the
title must be obtained. Further, the ADVISOR and TRUSTEES
shall observe the following policies in connection with
investing in or making mortgage loans:

a. IRET shall not invest in real estate contracts of sale,
otherwise known as land sale contracts, unless such contracts
of sale are in recordable form and appropriately recorded in
the chain of title.

<PAGE>

b. IRET shall not make or invest in mortgage loans, including
construction loans, on any one property if the aggregate
amount of all mortgage loans outstanding on the property,
including the loans of IRET, would exceed an amount equal to
85% of the appraised value of the property as determined by
appraisal unless substantial justification exists because of
the presence of other underwriting criteria. For purposes of
this subsection, the "aggregate amount of all mortgage loans
outstanding on the property, including the loans of IRET, "
shall include all interest (excluding contingent participation
in income and/or appreciation in value of the mortgaged
property), the current payment of which may be deferred
pursuant to the terms of such loans, to the extent that
deferred interest on each loan exceeds 5% per annum of the
principal balance of the loan;

c. IRET shall not make or invest in any mortgage loans that
are subordinate to any mortgage or equity interest of the
ADVISOR, TRUSTEES, SPONSORS or any AFFILIATE of IRET.

d. The policies outlined in a-c above may be exceeded or
avoided for a particular transaction provided a commercially
reasonable justification exists and approved by a majority of
the TRUSTEES, including a majority of the INDEPENDENT TRUSTEES
not otherwise interested in the transaction.

4. Issue redeemable equity securities.

5. Issue debt securities unless the historical debt service
coverage (in the most recently completed fiscal year) as
adjusted for known changes is sufficient to properly service
that higher level of debt.

6. Issue options or warrants to purchase its SHARES to the
ADVISOR, TRUSTEES, SPONSORS or any AFFILIATE thereof except on
the same terms as such options or warrants are sold to the
general public. IRET may issue options or warrants to PERSONS
not so connected with IRET but not at exercise prices less
than the fair market value of such securities on the date of
grant and for consideration (which may include services) that
in the judgment of the INDEPENDENT TRUSTEES, has a market
value less than the value of such option on the date of grant.
Options or warrants issuable to the ADVISOR, TRUSTEES,
SPONSORS or any AFFILIATE thereof shall not exceed an amount
equal to 10% of the outstanding SHARES of IRET on the date of
grant of any options or warrants.

7. Issue its SHARES on a deferred payment basis or other similar
arrangement.

SECTION 7. FEES, COMPENSATION AND EXPENSES.

A. TRUSTEE'S REVIEW.

1. The INDEPENDENT TRUSTEES will determine, from time to time but
at least annually, that the total fees and expenses of IRET
are reasonable in light of the investment performance of IRET,
its NET ASSETS, its NET INCOME, and the fees and expenses of
other comparable unaffiliated REITS. Each such determination
shall be reflected in the minutes of the meeting of the
TRUSTEES.

<PAGE>

B. ACQUISITION FEES AND ACQUISITION EXPENSES.

1. The total of ACQUISITION FEES and ACQUISITION EXPENSES shall
be reasonable, and shall not exceed an amount equal to 6% of
the contract price of the property, or in the case of a
mortgage loan, 6% of the funds advanced.

2. Notwithstanding the above, a majority of the TRUSTEES
(including a majority of the INDEPENDENT TRUSTEES) not
otherwise interested in the transaction may approve fees in
excess of these limits if they determine the transaction to be
commercially competitive, fair and reasonable to IRET.

C. TOTAL OPERATING EXPENSES.

1. The TOTAL OPERATING EXPENSES of IRET shall (in the absence of
a satisfactory showing to the contrary) be deemed to be
excessive if they exceed in any fiscal year the greater of 2%
of its AVERAGE INVESTED ASSETS or 25% of its NET INCOME for
such year. The INDEPENDENT TRUSTEES shall have the fiduciary
responsibility of limiting such expenses to amounts that do
not exceed such limitations unless such INDEPENDENT TRUSTEES
shall have made a finding that, based on such unusual and
non-recurring factors which they deem sufficient, a higher
level of expenses is justified for such year. Any such finding
and the reasons in support thereof shall be reflected in the
minutes of the meeting the TRUSTEES.

2. Within 60 days after the end of any fiscal quarter of IRET for
which TOTAL OPERATING EXPENSES (for the twelve (12) months
then ended) exceeded 2% of AVERAGE INVESTED ASSETS or 25% of
NET INCOME, whichever is greater, there shall be sent to the
SHAREHOLDERS of IRET a written disclosure of such fact,
together with an explanation of the factors the INDEPENDENT
TRUSTEES considered in arriving at the conclusion that such
higher operating expenses were justified.

3. In the event the INDEPENDENT TRUSTEES do not determine such
excess expenses are justified, the ADVISOR shall reimburse
IRET at the end of the twelve month period the amount by which
the aggregate annual expenses paid or incurred by IRET exceed
the limitations herein provided.

D. REAL ESTATE COMMISSIONS ON RESALE OF PROPERTY.

If an ADVISOR, TRUSTEE, SPONSOR or any AFFILIATE provides a substantial
amount of the services in the effort to sell the property of IRET, then
that PERSON may receive up to one-half of the brokerage commission paid
but in no event to exceed an amount equal to 3% of the contracted for
sales price. In addition, the amount paid when added to the sums paid
to unaffiliated parties in such a capacity shall not exceed the lesser
of the COMPETITIVE REAL ESTATE COMMISSION or an amount equal to 6% of
the contracted for sales price, unless a majority of the TRUSTEES,
including a majority of the INDEPENDENT TRUSTEES, not otherwise
interested in the transaction, approve fees in excess of these limits
upon a determination that such deviation is commercially competitive,
fair and reasonable to IRET.

<PAGE>

E. INCENTIVE FEES.

1. An interest in the gain from the sale of assets of IRET, for
which full consideration is not paid in cash or property of
equivalent value, shall be allowed provided the amount or
percentage of such interest is reasonable. Such an interest in
gain from the sale of IRET assets shall be considered
presumptively reasonable if it does not exceed 15% of the
balance of such net proceeds remaining after payment to
SHAREHOLDERS, in the aggregate, of an amount equal to 100% of
the original issue price of IRET SHARES, plus an amount equal
to 6% of the original issue price of the REIT SHARES per annum
cumulative. For purposes of this Section, the original issue
price of IRET SHARES may be reduce by prior cash distributions
to SHAREHOLDERS of net proceeds from the sale of IRET assets.

2. In the case of multiple ADVISORS, ADVISORS and any AFFILIATE
shall be allowed incentive fees provided such fees are
distributed by a proportional method reasonably designed to
reflect the value added to IRET assets by each respective
ADVISOR or any AFFILIATE. Distribution of incentive fees to
ADVISORS or AFFILIATES, in proportion to the length of time
served as ADVISOR while such property was held by IRET or in
ratio to the fair market value of the asset at the time of the
ADVISOR's termination, and the fair market value of the asset
upon its disposition by IRET shall be considered reasonable
methods by which to apportion incentive fees.

F. ADVISOR COMPENSATION.

INDEPENDENT TRUSTEES shall determine from time to time and at least
annually that the compensation which IRET contracts to pay to the
ADVISOR is reasonable in relation to the nature and quality of services
performed. The INDEPENDENT TRUSTEES shall also supervise the
performance of the ADVISOR and the compensation paid to it by IRET to
determine that the provisions of such contract are being carried out.
Each such determination shall be based on the factors set forth below
and all other factors such INDEPENDENT TRUSTEES may deem relevant and
the findings of such TRUSTEES on each of such factors shall be recorded
in the minutes of the TRUSTEES:

1. The size of the advisory fee in relation to the size,
composition and profitability of the portfolio of IRET.

2. The success of the ADVISOR in generating opportunities that
meet the investment objectives of IRET.

3. The rates charged to other REIT's and to investors other than
REIT'S by ADVISORS performing similar services.

4. Additional revenues realized by the ADVISOR and any AFFILIATE
through their relationship with the IRET, including loan
administration, underwriting or broker commissions, servicing,
engineering, inspection and other fees, whether paid by IRET
or by others with whom IRET does business.

5. The quality and extent of service and advice furnished by the
ADVISOR.

<PAGE>

6. The performance of the investment portfolio of IRET, including
income, conservation or appreciation of capital, frequency of
problem investments and competence in dealing with distress
situations.

7. The quality of the portfolio of IRET in relationship to the
investments generated by the ADVISOR for its own accounts.

ARTICLE 2 - SHARES

SECTION 1. SHARES: CERTIFICATES OF BENEFICIAL INTEREST.

The units into which the beneficial interest in IRET will be divided
shall be designated as SHARES. The certificates evidencing ownership of
SHARES in IRET will be designated as Certificates of Beneficial Interest
or SHARES and shall be in such form as the TRUSTEES may from time to
time prescribe. The registered holders thereof shall be designated as
SHAREHOLDERS. The number of SHARES authorized or issued hereunder shall
be unlimited. All SHARES shall be without par value, shall be of the
same class, shall have equal voting, distribution, liquidation, and
other rights, and shall be fully paid and non assessable. The
SHAREHOLDERS shall have no legal title or interest in the property of
IRET and no right to a partition thereof or to an accounting during the
continuance of IRET but only the rights expressly provided in this
Declaration.

SECTION 2. SALE OF SHARES.

The TRUSTEES may from time to time issue and sell by private or public
offering, or exchange SHARES in IRET in such number or for such sums of
money, real estate assets, or other considerations, and on such terms as
they deem proper. The SHAREHOLDERS shall have no preemptive rights.

SECTION 3. OFFERING OF SHARES.

The TRUSTEES are authorized to cause to be made from time to time
offerings of the SHARES of IRET to the public at public offering prices
deemed appropriate. For this purpose, the TRUSTEES are authorized to
enter into a contract with an underwriter upon such terms and with such
commissions for its services as may be agreed upon by the parties,
provided that the total expenses associated with the offering of any
particular issue of SHARES does not exceed 15% of the gross offering
amount.

SECTION 4. SHARES PURCHASED BY IRET.

IRET may repurchase or otherwise acquire its own SHARES on such terms
and conditions as the TRUSTEES deem appropriate, and for this purpose
IRET may create and maintain such reserves as are deemed necessary and
proper. SHARES issued hereunder and purchased or otherwise acquired for
the account of IRET shall not, so long as they belong to IRET, either
receive distributions (except that they shall be entitled to receive
distributions payable in SHARES of IRET) or be voted at any meeting of
the SHAREHOLDERS. Such SHARES may, in the discretion of the TRUSTEES, be
canceled and the number of SHARES authorized thereby reduced or such
SHARES may, in the discretion of the TRUSTEES, be held in the treasury
and be disposed of by the TRUSTEES at such time or times, to such party
or parties, and for such consideration, as the TRUSTEES may deem
appropriate. The SPONSOR, ADVISOR, TRUSTEES or AFFILIATES are
prohibited from receiving a fee on the repurchase of the SHARES by IRET.

<PAGE>

SECTION 5. TRANSFERABILITY OF SHARES.

SHARES in IRET shall be transferable in accordance with the procedure
prescribed from time to time in the TRUSTEES' Regulations. The PERSONS
in whose names the SHARES are registered on the books of IRET shall be
deemed the absolute owners thereof and, until a transfer is effected on
the books of IRET, the TRUSTEES shall not be affected by any notice,
actual or constructive, of any transfer.

SECTION 6. EFFECT OF TRANSFER OF SHARES OR DEATH, INSOLVENCY, OR
INCAPACITY OF SHAREHOLDERS.

Neither the transfer of SHARES nor the death, insolvency or incapacity
of any Shareholder shall operate to dissolve or terminate IRET, nor
shall it entitle any transferee, legal representative or other PERSON to
a partition of the property of IRET or to an accounting.

SECTION 7. REDEMPTION AND PROHIBITION ON TRANSFER.

To insure compliance with the Internal Revenue Code provision that no
more than 50% of the outstanding SHARES may be, owned by five or fewer
individuals, the TRUSTEES may at any time redeem SHARES from any
Shareholder at the fair market value thereof (as determined in good
faith by the TRUSTEES based on an independent appraisal of Trust assets
made within six months of the redemption date). Also, the TRUSTEE may
refuse to transfer SHARES to any PERSON whose acquisition of additional
SHARES might, in the opinion of the TRUSTEES, violate the above
requirement.

ARTICLE 3 - SHAREHOLDERS

SECTION 1. RIGHTS AND OBLIGATIONS OF SHAREHOLDERS.

A. MEETINGS.

1. There shall be an annual meeting of the SHAREHOLDERS of IRET
upon reasonable notice and within a reasonable period (not
less than 30 days) following delivery of the annual report.
The TRUSTEES, including the INDEPENDENT TRUSTEES, shall be
required to take reasonable steps to ensure that this
requirement is met. The holders of a majority of SHARES in
IRET, present in PERSON or by proxy, shall constitute a quorum
at any meeting.

2. Special meetings of the SHAREHOLDERS may be called by the
chief executive officer, by a majority of the TRUSTEES or by a
majority of the INDEPENDENT TRUSTEES, and shall be called by
an officer of IRET upon written request of the SHAREHOLDERS
holding in the aggregate not less than 10% of the outstanding
SHARES of the IRET entitled to vote at such meeting. Upon
receipt of a written request, either in PERSON or by mail,
stating the purpose or purposes of the meeting, IRET shall
provide all SHAREHOLDERS within ten days after receipt of said
request, written notice, either in PERSON or by mail, of a
meeting and the purpose of such meeting to be held on a date
not less than fifteen nor more than sixty days after the
distribution of such notice, at a time and place specified in
the request, or if none if specified, at a time and place
convenient to SHAREHOLDERS. The holders of a majority of
SHARES in IRET, present in PERSON or by proxy, shall
constitute a quorum at any meeting.

<PAGE>

B. VOTING RIGHTS OF SHAREHOLDERS.

1. The voting rights per share of equity securities of IRET
(other than the publicly held equity securities of IRET) sold
in a private offering shall not exceed voting rights which
bear the same relationship to the voting rights of the
publicly held SHARES of IRET as the consideration paid to IRET
for each privately offered IRET share bears to the book value
of each outstanding publicly held share.

2. The majority of the outstanding SHARES may, without the
necessity of concurrence by the TRUSTEES, vote to:

a. amend the DECLARATION OF TRUST;

b. terminate IRET;

c. remove the TRUSTEES.

3. The majority of SHAREHOLDERS present in PERSON or by proxy at
an Annual Meeting at which a quorum is present, may, without
the necessity of concurrence by the TRUSTEES, vote to elect
the TRUSTEES. A quorum shall be 50% of the then outstanding
SHARES.

5. Without concurrence of a majority of the outstanding SHARES,
the TRUSTEES may not:

a. amend the DECLARATION OF TRUST, except for amendments
which do not adversely affect the rights, preferences and
privileges of SHAREHOLDERS including amendments to provisions
relating to, TRUSTEE qualifications, fiduciary duty, liability
and indemnification, conflicts of interest, investment
policies or investment restrictions;

b. sell all or substantially all of the IRET's assets other
than in the ordinary course of the IRET's business or in
connection with liquidation and dissolution;

c. cause the merger or other reorganization of IRET; or

d. dissolve or liquidate IRET, other than before the INITIAL
INVESTMENT in property. A sale of all or substantially all of
IRET's assets shall mean the sale of two-thirds or more of
IRET's assets based on the total number of properties and
mortgages, or the current fair market value of these assets.

6. With respect to SHARES owned by the ADVISOR, the TRUSTEES, or
any AFFILIATE, neither the ADVISOR, nor the TRUSTEES, nor any
AFFILIATE may vote or consent on matters submitted to the
SHAREHOLDERS regarding the removal of the ADVISOR, TRUSTEES,
or any transaction between IRET and any of them. In
determining the requisite percentage in interest of SHARES
necessary to approve a matter on which the ADVISOR, TRUSTEES,
and any AFFILIATE may not vote or consent, any SHARES owned by
any of them shall not be included.

<PAGE>

C. LIABILITY OF SHAREHOLDERS.

1. The SHARES of IRET shall be non-assessable by IRET whether a
trust, corporation or other entity. The SHAREHOLDERS of IRET
shall not be personally liable on account of any of the
contractual obligations undertaken by IRET. All written
contracts to which IRET is a party shall include a provision
that the SHAREHOLDER shall not be personally liable thereon.

D. REPORTS.

IRET shall cause to be prepared and mailed or delivered to each
SHAREHOLDER as of a record date after the end of the fiscal year and
each holder of other publicly held securities of IRET within 120 days
after the end of the fiscal year to which it relates an annual report
for each fiscal year which shall include:

a. financial statements prepared in accordance with generally
accepted accounting principles which are audited and reported on by
independent certified public accountants;

b. the ratio of the costs of raising capital during the period to
the capital raised;

c. the aggregate amount of advisory fees and the aggregate amount
of other fees paid to the ADVISOR and any AFFILIATE of the ADVISOR
by IRET and including fees or charges paid to the ADVISOR and any
AFFILIATE of the ADVISOR by third parties doing business with IRET;

d. the TOTAL OPERATING EXPENSES of IRET, stated as a percentage of
AVERAGE INVESTED ASSETS and as a percentage of its NET INCOME;

e. a report from the INDEPENDENT TRUSTEES that the policies being
followed by IRET are in the best interests of its SHAREHOLDERS and
the basis for such determination; and

f. separately stated, full disclosure of all material terms,
factors, and circumstances surrounding any and all transactions
involving IRET, TRUSTEES, ADVISORS, SPONSORS and any AFFILIATE
thereof occurring in the year for which the annual report is made.
INDEPENDENT TRUSTEES shall be specifically charged with a duty to
examine and comment in the report on the fairness of such
transactions;

E. ACCESS TO RECORDS.

Any SHAREHOLDER and any designated representative thereof shall be
permitted access to all records of IRET at all reasonable times, and may
inspect and copy any of them. Inspection of IRET's books and records by
the ADMINISTRATOR shall be provided upon reasonable notice and during
normal business hours. Access shall include the following as it pertains
to SHAREHOLDERS:

1. An alphabetical list of the names, addresses, and telephone
numbers of the SHAREHOLDERS of IRET along with the number of SHARES
held by each of them (the "SHAREHOLDER List") shall be maintained
as part of the books and records of IRET and shall be available for
inspection by any SHAREHOLDERS or the SHAREHOLDERS' designated
agent at the home of IRET upon the request of the SHAREHOLDER;

<PAGE>

2. The SHAREHOLDER List shall be updated at least quarterly to
reflect changes in the information contained therein.

3. A copy of the SHAREHOLDER List shall be mailed to any
SHAREHOLDER requesting the SHAREHOLDER List within ten days of the
request. The copy of the SHAREHOLDER List shall be printed in
alphabetical order, on white paper, and in a readily readable type
size (in no event smaller than 10-point type). A reasonable charge
for copy work may be charged by IRET.

4. The purposes for which a SHAREHOLDER may request a copy of the
SHAREHOLDER List include, without limitation, matters relating to
SHAREHOLDERS' voting rights under the IRET DECLARATION OF TRUST,
and the exercise of SHAREHOLDERS' rights under federal proxy laws;
and

5. If the ADVISOR or TRUSTEES of IRET neglects or refuses to
exhibit, produce, or mail a copy of the SHAREHOLDERS' List as
requested, the ADVISOR, and the TRUSTEES shall be liable to any
SHAREHOLDER requesting the list for the costs, including attorneys'
fees, incurred by that SHAREHOLDER for compelling the production of
the SHAREHOLDER List, and for actual damages suffered by any
SHAREHOLDER by reason of such refusal or neglect. It shall be a
defense that the actual purpose and reason for the requests for
inspection or for a copy of the SHAREHOLDER List is to secure such
list of SHAREHOLDERS or other information for the purpose of
selling such list or copies thereof, or of using the same for a
commercial purpose other than in the interest of the applicant as a
SHAREHOLDER relative to the affairs of IRET. IRET may require the
SHAREHOLDER requesting the SHAREHOLDER List to represent that the
list is not requested for a commercial purpose unrelated to the
SHAREHOLDER'S interest in IRET. The remedies provided hereunder to
SHAREHOLDERS requesting copies of the SHAREHOLDER List are in
addition to, and shall not in any way limit, other remedies
available to SHAREHOLDERS under federal law, or the laws of any
state.

F. DISTRIBUTION REINVESTMENT PLANS.

The IRET Distribution Reinvestment Plan shall provide for the following:

1. All material information regarding the distribution to the
SHAREHOLDER and the effect of reinvesting such distribution,
including the tax consequences thereof, shall be provided to the
SHAREHOLDER at least annually.

2. Each SHAREHOLDER participating in the plan shall have a
reasonable opportunity to withdraw from the plan at least annually
after receipt of the information required in subparagraph (1) above.

G. DISTRIBUTIONS.

Distribution shall be determined as follows:

1. DISTRIBUTIONS IN KIND. Distributions in kind shall not be
permitted, except for:

a. distributions of readily marketable securities;

<PAGE>

b. distributions of beneficial interests in a liquidating trust
established for the dissolution of IRET and the liquidation of
its assets in accordance with the terms of the DECLARATION OF
TRUST; or

2. distributions of in-kind property which meet all of the following
conditions:

a. The TRUSTEES advise each SHAREHOLDER of the risks
associated with direct ownership of the property.

b. The TRUSTEES offer each SHAREHOLDER the election of receiving
like-kind property distributions.

c. The TRUSTEES distribute in-kind property only to those
SHAREHOLDERS who accept the TRUSTEE'S offer.

SECTION 3. ELECTION OF TRUSTEES.

All TRUSTEES shall be elected annually by the vote of the SHAREHOLDERS.
Each Shareholder shall be entitled to one vote in PERSON or by proxy for
each Share registered in his name for as many PERSONS as there are
TRUSTEES to be elected. The candidates receiving the highest respective
numbers of votes up to the number of trusteeships to be filled in the
election shall be elected.

ARTICLE 4 - THE TRUSTEES

SECTION 1. NUMBER, TERM OF OFFICE, QUALIFICATION, AND COMPENSATION OF
TRUSTEES.

There shall be not less than five nor more than eleven TRUSTEES, as
fixed in the TRUSTEES' Regulations, a majority of whom shall be
independent and not affiliated with the manager or ADVISOR (or any
AFFILIATE of the manager or ADVISOR) of IRET. The term of office of each
TRUSTEE shall be for one year and shall extend from the date of his
election or appointment until the election and qualification of his
successor by the SHAREHOLDERS. The TRUSTEES shall be individuals of at
least 18 years of age with no less than three years of relevant real
estate experience, and no PERSON shall qualify as a TRUSTEE until he
shall have either signed the Declaration or agreed in writing to be
bound in all respects by the Declaration. The TRUSTEES shall be entitled
to receive reasonable compensation for their services as TRUSTEES.

SECTION 2. RESIGNATION.

A TRUSTEE may resign at any time by giving notice in writing to the
TRUSTEES at the principal office of IRET. Such resignation shall take
effect on the date it is received or any later time specified therein.
Unless otherwise specified therein, the acceptance of a resignation
shall not be necessary to make it effective.

SECTION 3. VACANCIES.

The resignation, incompetency, or death of any or all of the TRUSTEES
shall not terminate IRET or affect its continuity. During a vacancy, the
remaining TRUSTEE or TRUSTEES may exercise the powers of the TRUSTEES
hereunder. Vacancies among the TRUSTEES may be filled by a written
designation signed by a majority of the remaining TRUSTEES, provided a
vacancy among the INDEPENDENT TRUSTEES shall be filled by action of a
majority of only the INDEPENDENT TRUSTEES, and lodged among the records
of IRET. The determination of a vacancy among the

<PAGE>

TRUSTEES by reason of resignation, incompetency, or death, or for any
other reason, when made by a majority of the remaining TRUSTEES and
stated in the instrument filling such vacancy, shall be final and
conclusive for all purposes. If at any time, by reason of resignations,
incompetency, or deaths, there shall be no remaining TRUSTEES, a meeting
of the SHAREHOLDERS shall be forthwith called for the election of
successor TRUSTEES. Any SHAREHOLDER or SHAREHOLDERS owning of record an
aggregate of 10% of the issued and outstanding SHARES of IRET shall be
entitled to call such meeting and to nominate candidates for election as
successor TRUSTEES at any such election.

SECTION 4. SUCCESSOR TRUSTEES.

Title to the property of IRET shall vest in successor TRUSTEES, upon
written acceptance of their election or appointment without any further
act. They shall thereupon have the same powers, duties and exemptions as
though originally named as TRUSTEES in this Declaration. Such written
acceptance shall be filed with the records of IRET, and a certificate
signed by a majority of the TRUSTEES as to who are or were TRUSTEES at
any time shall be conclusive and binding for all purposes.

SECTION 5. ACTIONS BY TRUSTEES.

The TRUSTEES may act with or without a meeting. Any action of a majority
of TRUSTEES in office shall be conclusive and binding as an action of
the TRUSTEES. All agreements, deeds, and other instruments executed by a
majority of the TRUSTEES or executed by one TRUSTEE pursuant to
authorization of a majority of the TRUSTEES given either at a meeting or
in writing shall be effective and binding as if executed by all the
TRUSTEES. The TRUSTEES may establish such committees they deem
appropriate (provided the majority of the members of each committee are
INDEPENDENT TRUSTEES).

SECTION 6. TITLE AND AUTHORITY OF TRUSTEES.

The TRUSTEES, as joint tenants, shall hold the legal title to all
property belonging to IRET in the name of IRET, or in the name of one or
more of the TRUSTEES, as TRUSTEES for IRET, or in the name of one or
more nominees for IRET provided that each such nominee shall execute an
instrument in recordable form recognizing the interest of IRET in the
property so held. The TRUSTEES shall have absolute and exclusive
control, management, and disposition thereof, and absolute and exclusive
control over the management and conduct of the business affairs of IRET.

SECTION 7. THE ADVISOR AND INDEPENDENT CONTRACTOR.

In their exercise of the absolute control and management of all the
assets of IRET, the TRUSTEES may contract for the services of an
advisory firm or corporation (hereinafter referred to as the ADVISOR) to
advise them in respect of investing and reinvesting the funds of IRET in
real property assets, interests in real property, mortgages secured by
real property, leasehold interests in real property, interests in
mortgages, or other assets. Such contract may provide that the ADVISOR
shall act as agent of IRET in the purchase and sale of real estate,
leaseholds, or real estate mortgages, or any interest therein. Such
contract may also provide that the ADVISOR shall act as agent of IRET in
the management of real estate, leaseholds or real estate mortgages, or
any interest therein, and receive commissions or other compensation for
such management services at rates not in excess of those prescribed by
real estate boards or similar organizations in the area in which the
real estate is located, or the TRUSTEES may employ a different firm or
corporation to perform these functions for all or some of IRET's
properties and to receive such commissions and compensations. Such
contracts shall provide that they shall not be assignable without the
written

<PAGE>

consent of IRET and shall be for a term of one year or less. Each
advisory contact shall be terminable by a majority of the INDEPENDENT
TRUSTEES, or the ADVISOR or the holders of a majority of the outstanding
SHARES on sixty (60) days written notice without cause or penalty.

It shall be the duty of the TRUSTEES to evaluate the performance of the
ADVISOR before entering into or renewing an advisory contract. The
criteria used in such evaluation shall be reflected in the minutes of
such meeting.

SECTION 8. WRITTEN POLICIES.

The TRUSTEES shall establish written policies on investments and
borrowing and shall monitor the administrative procedures, investment
operations and performance of the IRET and the ADVISOR to assure that
such policies are carried out.

SECTION 9. FIDUCIARY DUTY.

The TRUSTEES and ADVISOR of IRET shall be deemed to be in a fiduciary
relationship to IRET and the SHAREHOLDERS. The TRUSTEES of IRET shall
also have a fiduciary duty to the SHAREHOLDERS to supervise the
relationship of IRET with the ADVISOR.

SECTION 10. POWERS OF TRUSTEES.

The TRUSTEES shall have all the powers necessary, convenient, or
appropriate to effectuate the purposes of IRET and may take any action
which they deem necessary or desirable and proper to carry out such
purposes. Any determination of the purposes of IRET made by the TRUSTEES
in good faith shall be conclusive. In construing the provisions of the
Declaration, the presumption shall be in favor of the grant of powers to
the TRUSTEES.

Subject to the limitations contained in Article 1 hereof, the TRUSTEES'
powers shall include the following:

1. To purchase, acquire through the issuance of SHARES in IRET,
obligations of IRET, or otherwise, and to mortgage, sell,
acquire on lease, hold, manage, improve, lease to others
(without limitation as to the term of such lease, which may
extend beyond the termination of IRET), option, exchange for
real or personal property, release, and partition interests in
personal property and real estate interests of every nature,
including freehold, leasehold, mortgage, ground rent, and
other interests therein, and to erect, construct, alter,
repair, demolish, or otherwise change buildings and structures
of every nature.

2. To purchase, acquire through the issuance of SHARES in IRET,
obligations of IRET, or otherwise, option, sell, and exchange
stocks, bonds, notes, certificates of indebtedness, and
securities of every nature.

3. To purchase, acquire through the issuance of SHARES in IRET,
obligations of IRET, or otherwise, grant security interests
in, sell, acquire on lease, hold, manage, improve, lease to
others, option, and exchange personal property of every nature.

4. To hold title to the property of IRET as is provided in this
declaration.

5. To borrow money for the purposes of IRET and to give notes,
debentures, including debentures convertible into SHARES,
bonds, and other negotiable or

<PAGE>

nonnegotiable instruments of IRET therefore; to enter into
other obligations on behalf of and for the purposes of IRET;
and to mortgage, grant security interests in, or pledge or
cause to be mortgaged, granted security interests in, or
pledged real and personal property of IRET to secure such
notes, debentures, bonds, instruments, or other obligations;
and to subordinate the interests of IRET in real and personal
property, or interests therein to such other PERSONS and on
such conditions as is deemed desirable.

6. To lend money on behalf of IRET and to invest the funds of
IRET.

7. To create reserve funds for such purposes as they deem
advisable.

8. To deposit funds of IRET in banks and other depositories
without regard to whether such accounts will draw interest.

9. To pay taxes and assessments imposed upon or chargeable
against IRET or the TRUSTEES by virtue of or arising out of
the existence, property, business, or activities of IRET.

10. To purchase, issue, sell, or exchange SHARES of IRET as
provided by this declaration. The good faith determination of
the value of the consideration received by IRET shall be
within the absolute discretion of the TRUSTEES.

11. To adopt and, from time to time, amend TRUSTEES' Regulations
which may include but shall not be limited to provisions
relating to the time, place, and notice of meetings of the
TRUSTEES and of the SHAREHOLDERS; record dates and other
matters relating to voting and the use of proxies designation,
appointment and compensation of representatives and agents and
their number, duties, powers, authorities, and qualifications;
the conditions for replacing lost, mutilated, or stolen
SHARES; and the procedure for amendment of the TRUSTEES'
Regulations.

12. To exercise with respect to property of IRET all options,
privileges and rights, whether to vote, assent, subscribe, or
convert, or of any other nature; to grant proxies; and to
participate in and accept securities issued under any voting
trust agreement.

13. To participate in any reorganization, readjustment,
consolidation, merger, dissolution, sale or purchase of
assets, lease, or similar proceedings of any corporation,
partnership or other organization in which IRET shall have an
interest and in connection therewith to delegate discretionary
powers to any reorganization, protective, or similar committee
and to pay assessments and other expenses in connection
therewith.

14. To engage or employ agents, representatives, and employees of
any nature, or independent contractors, including, without
limiting the generality of the foregoing, transfer agents for
the transfer of SHARES in IRET, registrars, underwriters for
the sale of SHARES in IRET, independent certified public
accountants, attorneys at law, appraisers, and real estate
agents and brokers; and to delegate to one or more TRUSTEES,
agents, representatives, employees, independent contractors,
or other PERSONS such powers and duties as the TRUSTEES deem
appropriate. The same PERSONS may he employed in multiple
capacities and may receive compensation from IRET in as many
capacities as they may be engaged or employed by IRET,

<PAGE>

and if TRUSTEES serve in such capacities they may receive
compensation in addition to that provided in Article 4,
Section 1 hereof.

15. To determine conclusively the allocation between capital and
income of the receipts, holdings, expenses, and disbursements
of IRET, regardless of the allocation which might be
considered appropriate in the absence of this provision.

16. To determine conclusively the value from time to time and to
revalue the real estate, securities, and other property of
IRET, in accordance with such appraisals or other information
as they deem satisfactory.

17. To compromise or settle claims, questions, disputes, and
controversies by, against, or affecting IRET.

18. To solicit proxies of the SHAREHOLDERS.

19. To adopt a fiscal year for IRET and change such fiscal year.

20. To adopt and use a seal.

21. To merge or consolidate or otherwise amalgamate IRET or any
successor thereto with or into any other trust or corporation
engaged or to be engaged in business activities substantially
similar to those engaged in by IRET, subject to the provisions
in this declaration.

22. To deal with IRET property in every way, including the
entering into joint ventures, partnerships, and any other
combinations or associations, that it would be lawful for an
individual to deal with the same, whether similar to or
different from the way herein and hereinabove specified.

SECTION 11. TRUSTEES' RIGHT TO OWN SHARES IN TRUST.

A TRUSTEE may acquire, hold, and dispose of SHARES in IRET for his
individual account and may exercise all rights of a Shareholder to the
same extent and in the same manner as if he were not a TRUSTEE. After
the commencement of any public offering of the SHARES of IRET, TRUSTEES
may purchase SHARES only at the current offer price then prevailing in
connection with such public offering, less all or any part of the
selling or other commission as may be agreed with the distributor.

SECTION 12. LIABILITY AND INDEMNIFICATION.

A. NON LIABILITY OF TRUSTEES, ADVISORS OR AFFILIATES.

No TRUSTEE, ADVISOR or AFFILIATE shall be liable individually for any
act or omission of any other TRUSTEE or agent or representative of IRET,
or for negligence, error in judgment, or any act or omission except his
own willful misfeasance, bad faith, or gross negligence in the conduct
of his duties. Every act or thing done or omitted, and every power
exercised or obligation incurred by the TRUSTEES, ADVISOR or AFFILIATE
or any of them in the administration of IRET or in connection with any
business or property of IRET whether ostensibly in their own names or in
their trust or agency capacity, shall be deemed done, omitted,
exercised, or incurred by them as TRUSTEES or agents and not as
individuals; and upon any debt, claim, demand, judgment, decree, or
obligation of any nature whatsoever against or incurred by the TRUSTEES,
ADVISOR or

<PAGE>

AFFILIATE in their capacities as such, whether founded upon contract,
tort or otherwise, resort shall be had solely to the property of IRET.

B. INDEMNIFICATION OF TRUSTEES.

1. IRET shall indemnify and hold harmless each TRUSTEE, ADVISOR or
AFFILIATE from and against all claims and liabilities, whether they
proceed to judgment or are settled, to which such TRUSTEE, ADVISOR
or AFFILIATE may become subject by reason of his being or having
been a TRUSTEE, ADVISOR or AFFILIATE, or by reason of any action
alleged to have been taken or omitted by him as TRUSTEE, ADVISOR or
AFFILIATE, and shall reimburse him for all legal and other expenses
reasonably incurred by him in connection with any such claim or
liability. IRET shall not provide for indemnification of the
TRUSTEES, ADVISORS or AFFILIATES for any liability or loss suffered
by the TRUSTEES, ADVISORS or AFFILIATES, nor shall it provide that
the TRUSTEES, ADVISORS or AFFILIATES be held harmless for any loss
or liability suffered by IRET, unless all of the following
condition are met:

a. The TRUSTEES, ADVISORS or AFFILIATES have determined, in good
faith, that the course of conduct which caused the loss or
liability was in the best interests of IRET.

b. The TRUSTEES, ADVISORS or AFFILIATES were acting on behalf of
or performing services for IRET.

c. Such liability or loss was not the result of:

i. negligence or misconduct by the TRUSTEES, excluding the
INDEPENDENT TRUSTEES, ADVISORS or AFFILIATES; or

ii. gross negligence or willful misconduct by the INDEPENDENT
TRUSTEES.

d. Such indemnification or agreement to hold harmless is
recoverable only out of IRET NET ASSETS and not from
SHAREHOLDERS.

2. Notwithstanding anything to the contrary contained in this document
or elsewhere, the TRUSTEES, ADVISORS or AFFILIATES and any PERSONS
acting as a broker-dealer shall not be indemnified by IRET for any
losses, liabilities or expenses arising from or out of an alleged
violation of federal or state securities laws by such party unless
one or more of the following conditions are met:

a. There has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the
particular indemnitee.

b. Such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction as to the particular indemnitee.

c. A court of competent jurisdiction approves a settlement of the
claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should be
made, and the court considering the request for indemnification has
been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities
regulatory authority in which securities of IRET were offered or
sold as to indemnification for violations of securities laws.

<PAGE>

3. The advancement of IRET funds to the TRUSTEES, ADVISORS or
AFFILIATES for legal expenses and other costs incurred for which
indemnification is being sought is permissible only if all of the
following conditions are satisfied:

a. The legal action relates to acts or omissions with respect to
the performance of duties or services on behalf of IRET.

b. The legal action is initiated by a third party who is not a
SHAREHOLDER or the legal action is initiated by a SHAREHOLDER
acting in his or her capacity as such and a court of competent
jurisdiction specifically approves such advancement.

SECTION 13. PERSONS DEALING WITH TRUSTEES.

Any act of the TRUSTEES purporting to be done in their capacity as such,
or by agents or representatives of the TRUSTEES under authority from the
TRUSTEES shall, as to other PERSONS dealing with such TRUSTEES, agents,
or representatives be conclusively deemed to be within the purposes of
IRET and within the powers of the TRUSTEES. No PERSON dealing with the
TRUSTEES or any of them, or with their authorized agents or
representatives, shall be bound to see to the application of any funds
or property passing into their hands or control.

The receipt of the TRUSTEES or any of them, or of their authorized
agents or representatives, for monies or other consideration paid or
delivered to any of them shall be effectual discharges to PERSONS paying
or delivering the same.

SECTION 14. ADMINISTRATIVE POWERS OF TRUSTEES.

The TRUSTEES shall have power to pay the expenses of organization and
administration of IRET, including all legal and other expenses in
connection with the preparation and carrying out of the plan for the
formation of IRET, the acquisition of properties thereunder and the
issuance of SHARES thereunder; and to employ such officers, experts,
counsel, managers, salesmen, agents, workmen, clerks and other PERSONS
as they think best, and fix their compensation and define their duties.
Any TRUSTEE so employed may receive special or additional compensation
therefore.

ARTICLE 5 - DURATION AND TERMINATION OF IRET

SECTION 1. TERMINATION OF IRET.

IRET shall, unless sooner terminated as provided hereinafter, continue
in existence until such time as all of its assets have been liquidated
and distributed to the SHAREHOLDERS. IRET may be terminated at any time
by the TRUSTEES or, if the TRUSTEES have not so terminated IRET, by the
affirmative vote of the holders of a majority of the issued and
outstanding SHARES.

In any event, unless this Trust shall be earlier terminated as provided
in this declaration, it shall continue only until the expiration of 20
years after the death of the last survivor of the following named
PERSONS: C. Morris Anderson, Ralph A. Christensen, John D. Decker, J.
Norman Ellison, Jr., Magner J. Muus, Roger R. Odell and Thomas A. Wentz.

<PAGE>

In connection with any termination of IRET, the TRUSTEES, upon receipt
of such releases or indemnity as they deem necessary for their
protection, may

1. sell and convert into cash the property of IRET and distribute
the net proceeds among the SHAREHOLDERS ratably; or

2. convey the property of IRET to one or more PERSONS, entities,
trusts, or corporations for consideration consisting in whole
or in part of cash, SHARES of stock, or other property of any
kind, and distribute the net proceeds among the SHAREHOLDERS
ratably, at valuations fixed by the TRUSTEES, in cash or in
kind, or partly in cash and partly in kind; provided that the
proposal to proceed as described in this clause (2) shall have
been set forth in the written approval of the SHAREHOLDERS
holding a majority of the SHARES issued and outstanding.

Upon termination of IRET and distribution to the SHAREHOLDERS as herein
provided, a majority of the TRUSTEES shall execute and lodge among the
records of IRET an instrument in writing setting forth the fact of such
termination, and the TRUSTEES shall thereupon be discharged from all
further liabilities and duties hereunder, and the right, title, and
interest of all SHAREHOLDERS shall cease and be canceled and discharged.

SECTION 2. ORGANIZATION AS A CORPORATION.

Whenever the TRUSTEES deem it for the best interests of the SHAREHOLDERS
that IRET be organized as a corporation, the TRUSTEES shall have full
power to organize such corporation, under the laws of such state as they
may consider appropriate, in the place and stead of IRET without
procuring the further consent of any of the SHAREHOLDERS, in which event
the capital stock of such corporation shall be and remain the same as
fixed under this Agreement and Declaration and the SHAREHOLDERS shall
receive and accept stock in such corporation on the same basis as they
hold SHARES in IRET.

ARTICLE 6 - AMENDMENTS

SECTION 1. WHEN NO SHARES ARE OUTSTANDING.

At any time when no SHARES in IRET are outstanding, the TRUSTEES may
amend any provision of the Declaration. A certificate signed by a
majority of the TRUSTEES, setting forth such amendment and reciting that
it was duly adopted by the TRUSTEES, shall be lodged among the records
of IRET and shall be conclusive evidence of such amendment.
SECTION 2. WHEN SHARES ARE OUTSTANDING.

At any time when SHARES in IRET are outstanding, except as provided in
Article 1, Section 6, the Declaration may be amended by the TRUSTEES
then in office only with the consent of SHAREHOLDERS owning a majority
of the issued and outstanding SHARES. A certificate signed by a majority
of the TRUSTEES setting forth an amendment and reciting that it was duly
adopted shall be lodged among the records of IRET and recorded or filed
in each public office or registry in which the Declaration shall be
recorded or filed and shall be conclusive evidence of such amendment,
and any restatement of any provision of the Declaration purported to be
contained therein.

<PAGE>

ARTICLE 7 - MISCELLANEOUS

SECTION 1. APPLICABLE LAW.

The Declaration is executed and delivered in Minot, North Dakota, and
the laws of the State of North Dakota shall govern the construction,
validity, and effect of the Declaration and the administration of the entity
hereby created.

SECTION 2. HEADINGS FOR REFERENCE ONLY.

Headings preceding the text, articles, and sections hereof have been
inserted solely for convenience and reference, and shall not be construed to
affect the meaning, construction, or effect of the Declaration.

In approval of the foregoing RESTATED DECLARATION OF TRUST for Investors
Real Estate Trust, the undersigned TRUSTEES constituting a majority hereby
approve this document.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Ralph A. Christensen Trustee and Chairman October 24, 1996
- ------------------------
Ralph A. Christensen

/s/ Mike F. Dolan Trustee and Vice Chairman October 24, 1996
- ------------------------
Mike F. Dolan

/s/ Patrick G. Jones Trustee October 24, 1996
- ------------------------
Patrick G. Jones

/s/ Roger Odell Trustee and President October 24, 1996
- ------------------------
Roger Odell

/s/ J. Norman Ellison Trustee October 24, 1996
- ------------------------
J. Norman Ellison

/s/ Daniel L. Feist Trustee October 24, 1996
- ------------------------
Daniel L. Feist

/s/ C. Morris Anderson Trustee October 24, 1996
- ------------------------
C. Morris Anderson

/s/ Jeff Miller Trustee and Vice Chairman October 24, 1996
- ------------------------
Jeff Miller

/s/ Thomas A. Wentz, Jr. Trustee October 24, 1996
- ------------------------
Thomas A. Wentz, Jr.

/s/ John D. Decker Trustee October 24, 1996
- ------------------------
John D. Decker

<PAGE>

EX-3(ii)

AGREEMENT OF LIMITED PARTNERSHIP

IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

12 SOUTH MAIN

MINOT, ND 58701

JANUARY 31, 1997

<PAGE>

TABLE OF CONTENTS

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PARTNERSHIP CONTINUATION AND IDENTIFICATION . . . . . . . . . . . . . . . . . 7

Name, Office and Registered Agent . . . . . . . . . . . . . . . . . . . 7
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Term and Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Filing of Certificate and Perfection of Limited Partnership . . . . . . 9
Certificates Describing Partnership Units . . . . . . . . . . . . . . . 9

BUSINESS OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . 9

CAPITAL CONTRIBUTIONS AND ACCOUNTS . . . . . . . . . . . . . . . . . . . . . 10

Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 10
Additional Capital Contributions and Issuances of Additional
Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . 10
Issuance of Additional Partnership Interests . . . . . . . . . . . 10
Certain Deemed Contributions of Proceeds of Issuance
IRET Shares . . . . . . . . . . . . . . . . . . . . . . . . . 11
Minimum Limited Partnership Interest . . . . . . . . . . . . . . . 11
Additional Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 12
No Interest on Contributions . . . . . . . . . . . . . . . . . . . . . . 12
Return of Capital Contributions . . . . . . . . . . . . . . . . . . . . 12
No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 12

PROFITS AND LOSSES; DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 13

Allocation of Profit and Loss . . . . . . . . . . . . . . . . . . . . . 13
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Minimum Gain Chargeback . . . . . . . . . . . . . . . . . . . . . . 13
Qualified Income Offset . . . . . . . . . . . . . . . . . . . . . . 13
Capital Account Deficits . . . . . . . . . . . . . . . . . . . . . 14
Allocations Between Transferor and Transferee . . . . . . . . . . . 14
Definition of Profit and Loss . . . . . . . . . . . . . . . . . . . 14
Distribution of Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 15
IRET Distribution Requirements . . . . . . . . . . . . . . . . . . . . . 15
No Right to Distributions in Kind . . . . . . . . . . . . . . . . . . . 16
Limitations on Return of Capital Contributions . . . . . . . . . . . . . 16
Distributions upon Liquidation . . . . . . . . . . . . . . . . . . . . . 16
Substantial Economic Effect . . . . . . . . . . . . . . . . . . . . . . 16

RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER . . . . . . . . . . . . 17

Management of the Partnership . . . . . . . . . . . . . . . . . . . . . 17
Delegation of Authority . . . . . . . . . . . . . . . . . . . . . . . . 20
Indemnification and Exculpation of Indemnitees . . . . . . . . . . . . . 20
Liability of the General Partner . . . . . . . . . . . . . . . . . . . . 21

<PAGE>

Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Conflicts of Interest and Investment Restrictions . . . . . . . . . . . 23
General Partner Participation . . . . . . . . . . . . . . . . . . . . . 23
Title to Partnership Assets . . . . . . . . . . . . . . . . . . . . . . 24
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

CHANGES IN GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . 24

Transfer of the General Partner's Partnership Interest . . . . . . . . . 24
Admission of a Substitute or Additional General Partner . . . . . . . . 25
Effect of Bankruptcy, Withdrawal, Death or Dissolution
of a General Partner . . . . . . . . . . . . . . . . . . . . . . . 26
Removal of a General Partner . . . . . . . . . . . . . . . . . . . . . . 27

RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS . . . . . . . . . . . . . . . 28

Management of the Partnership . . . . . . . . . . . . . . . . . . . . . 28
Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Limitation on Liability of Limited Partners . . . . . . . . . . . . . . 29
Ownership by Limited Partner of Corporate General
Partner or Affiliate . . . . . . . . . . . . . . . . . . . . . . . 29
Exchange Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . 32

Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . 32
Restrictions on Transfer of Limited Partnership Interests . . . . . . . 33
Admission of Substitute Limited Partner . . . . . . . . . . . . . . . . 34
Rights of Assignees of Partnership Interests . . . . . . . . . . . . . . 35
Effect of Bankruptcy, Death, Incompetence or Termination
of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . 35
Joint Ownership of Interests . . . . . . . . . . . . . . . . . . . . . . 36

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS . . . . . . . . . . . . . . . . . 36

Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Custody of Partnership Funds; Bank Accounts . . . . . . . . . . . . . . 36
Fiscal and Taxable Year . . . . . . . . . . . . . . . . . . . . . . . . 37
Annual Tax Information and Report . . . . . . . . . . . . . . . . . . . 37
Tax Matters Partner; Tax Elections; Special Basis Adjustments . . . . . 37
Reports to Limited Partners . . . . . . . . . . . . . . . . . . . . . . 38

AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Survival of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

<PAGE>

Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Pronouns and Plurals . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

<PAGE>

AGREEMENT OF LIMITED PARTNERSHIP
OF

IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

This limited partnership agreement is made between IRET, Inc., a North
Dakota corporation, of 12 South Main, Minot, North Dakota, as the general
partner, and by the initial limited partner whose name is appended to this
agreement, to be effective on January 31, 1997, for the purpose of forming of
IRET PROPERTIES, a North Dakota Limited Partnership, under the provisions of
Chapter 45-10.1 of the North Dakota Century Code.

ARTICLE I

DEFINITIONS

The following terms used in this Agreement shall have the meanings
specified below:

"Act" means the North Dakota Uniform Limited Partnership Act (Chapter
45-10.1 of the North Dakota Century Code), as it may be amended from time to
time.

"Additional Funds" has the meaning set forth in Section 4.03 hereof.

"Additional Limited Partner" means a Person admitted to this Partnership
as a Limited Partner pursuant to Section 4.02 hereof.

"Additional Securities" means any additional IRET Shares (other than
IRET Shares issued in connection with an exchange pursuant to Section 8.05
hereof) or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase IRET Shares, as
set forth in Section 4.02.

"Administrative Expenses" means (i) all administrative and operating
costs and expenses incurred by the Partnership, (ii) those administrative
costs and expenses of the General Partner and IRET, including advisory fees
and trustee fees of the General Partner and IRET, and any accounting and
legal expenses of the General Partner and IRET, which expenses, the Partners
have agreed, are expenses of the Partnership and not the General Partner or
IRET, and (iii) to the extent not included in clause (ii) above, all other
IRET Expenses.

"Affiliate" means, (i) any Person that, directly or indirectly, controls
or is controlled by or is under common control with such Person, (ii) any
other Person that owns, beneficially, directly or indirectly, 1O% or more of
the outstanding capital stock, shares or equity interests of such Person, or
(iii) any officer, director, employee, partner or trustee of such Person or
any Person controlling, controlled by or under common control with such
Person (excluding trustees and persons serving in similar capacities who are
not otherwise an Affiliate of such Person). For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities or partnership interests or
otherwise.

"Agreed Value" means the fair market value of a Partner's non-cash
Capital Contribution as of the date of contribution as agreed to by the
Partners. For purposes of this Partnership Agreement, the Agreed Value of a
Partner's non-cash Capital Contribution shall be equal to the number of
Partnership Units received by such Partner in exchange for Property or an
interest therein or in connection with the merger of a partnership of which
such person is a partner with and into the Partnership, or for any other
non-cash asset so contributed,

<PAGE>

multiplied by the "Market Price, calculated in accordance with the second and
third sentences of the definition of "Cash Amount." The names and addresses
of the Partners, number of Partnership Units issued to each Partner, and the
Agreed Value of non-cash Capital Contributions as of the date of contribution
is set forth on Exhibit A.

Agreement means this Agreement of Limited Partnership.

"Articles of Incorporation" means the Articles of Incorporation of the
General Partner filed with the Secretary of State of North Dakota, as amended
or restated from time to time.

"Capital Account" has the meaning provided in Section 4.04 hereof.

"Capital Contribution" means the total amount of cash, cash equivalents,
and the Agreed Value of any Property or other asset contributed or agreed to
be contributed, as the context requires, to the Partnership by each Partner
pursuant to the terms of the Agreement. Any reference to the Capital
Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Partnership Interest of such Partner.

"Capital Transaction" means the refinancing, sale, exchange,
condemnation, recovery of a damage award or insurance proceeds (other than
business or rental interruption insurance proceeds not reinvested in the
repair or reconstruction of Properties), or other disposition of any Property
(or the Partnership's interest therein).

"Cash Amount" means an amount of cash per Partnership Unit equal to the
value of the IRET Shares Amount on the date of receipt by IRET of a Notice of
Exchange. The value of the IRET Shares Amount shall be based on the average
of the daily market price of IRET Shares for the ten consecutive trading days
immediately preceding the date of such valuation. The market price for each
such trading day shall be: (i) if the IRET Shares are listed or admitted to
trading on any securities exchange, the sale price, regular way, on such day,
or if no such sale takes place on such day the average of the closing bid and
asked prices regular way, on such day, (ii) if the IRET Shares are not listed
or admitted to trading on any securities exchange, the last reported sale
price on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable quotation
source designated by IRET, or (iii) if the IRET Shares are not listed or
admitted to trading on any securities exchange and no such last reported sale
price or closing bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reliable
quotation source designated by IRET, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than ten days prior to the date in
question) for which prices have been so reported; provided that if there are
no bid and asked prices reported during the ten days prior to the date in
question, the value of the IRET Shares shall be determined by IRET acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the IRET
Shares Amount includes rights that a holder of IRET Shares would be entitled
to receive, then the value of such rights shall be determined by IRET acting
in good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.

"Certificate" means any instrument or document that is required under
the laws of the State of North Dakota, or any other jurisdiction in which the
Partnership conducts business, to be signed and sworn to by the Partners of
the Partnership (either by themselves or pursuant to the power-of-attorney,
granted to the General Partner in Section 8.02 hereof) and filed for
recording in the appropriate public offices within the State of North Dakota
or such other jurisdiction to perfect or maintain the Partnership as a
limited partnership, to effect the admission, withdrawal, or substitution of
any Partner of the Partnership, or to protect the limited liability of the
Limited Partners as limited partners under the laws of the State of North
Dakota or such other jurisdiction.

<PAGE>

"Code" means the Internal Revenue Code of 1986, as amended, and as
hereafter amended from time to time. Reference to any particular provision of
the Code shall mean that provision in the Code at the date hereof and any
successor provision of the Code.

"Commission" means the U.S. Securities and Exchange Commission.

"Conversion Factor" means 1.0, provided that in the event that IRET (i)
declares or pays a dividend on its outstanding IRET Shares in IRET Shares or
makes a distribution to all holders of its outstanding IRET Shares in IRET
Shares, (ii) subdivides its outstanding IRET Shares, or (iii) combines its
outstanding IRET Shares into a smaller number of IRET Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction,
the numerator of which-shall be the number of IRET Shares issued and
outstanding on the record date for such dividend, distribution, subdivision
or combination (assuming for such purposes that such dividend, distribution,
subdivision or combination has occurred as of such time), and the denominator
of which shall be the actual number of IRET Shares (determined without the
above assumption) issued and outstanding on such date. Any adjustment to the
Conversion Factor shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event;
provided, however, that if IRET receives a Notice of Exchange after the
record date, but prior to the effective date of such dividend, distribution,
subdivision or combination, the Conversion Factor shall be determined as if
IRET had received the Notice of Exchange immediately prior to the record date
for such dividend, distribution, subdivision or combination.

"Declaration of Trust" means the Declaration of Trust of IRET, as
amended or restated from time to time.

"Event of Bankruptcy" as to any Person means the filing of a petition
for relief as to such Person under Federal Bankruptcy statutes or appointment
of a receiver under the law of any jurisdiction (except if such petition is
has been dismissed within 90 days); insolvency as finally determined by a
court proceeding; commencement of any proceedings relating to such Person as
a debtor under any other reorganization, arrangement, insolvency, adjustment
of debt or law of any jurisdiction, whether now in existence or hereinafter
in effect, either by such Person or by another, provided that if such
proceeding is commenced by another, such Person indicates his approval of
such proceeding, consents thereto or acquiesces therein, or such proceeding
is contested by such Person and has not been finally dismissed within 90 days.

"Exchange Amount" means either the Cash Amount or the IRET Shares
Amount, as selected by the General Partner or IRET in its sole discretion
pursuant to Section 8.05(b) hereof.

"Exchange Right" has the meaning provided in Section 8.05(a) hereof.

"Exchanging Partner" has the meaning provided in Section 8.05(a) hereof.

"General Partner" means IRET, Inc., a North Dakota corporation, and any
Person who becomes a substitute or additional General Partner as provided
herein, and any of their successors as General Partner.

"General Partnership Interest" means a Partnership Interest held by the
General Partner that is a general partnership interest.

"Indemnitee" means (i) any Person made a party to a proceeding by reason
of its status as IRET, the General Partner or a trustee, director, officer or
employee of IRET, the Partnership or the General Partner, and (ii) such other
Persons (including Affiliates of IRET, General Partner or the Partnership) as
the General Partner may designate from time to time, in its sole and absolute
discretion.

<PAGE>

"Independent Trustee" means a trustee of IRET who is not an officer,
member, affiliate or employee of Odell-Wentz & Associates, L.L.C., the
advisor to IRET.

"Initial Properties" means those properties listed on Exhibit B hereto.

"IRET" means Investors Real Estate Trust, a North Dakota business trust
whose address is 12 South Main, Minot, North Dakota.

"IRET Expenses" means (i) costs and expenses relating to the formation
and continuity of existence and operation of IRET and any Subsidiaries
thereof, including Pine-Cone IRET, Inc., West-Stonehill IRET, Inc., and
Miramount IRET, Inc. , (which Subsidiaries shall, for purposes hereof, be
included within the definition of IRET), including taxes, fees and
assessments associated therewith, any and all costs, expenses or fees payable
to any trustee, officer, or employee of IRET, (ii) costs and expenses
relating to the public offering and registration of securities by IRET and
all statements, reports, fees and expenses incidental thereto, including
underwriting discounts and selling commissions applicable to any such
offering of securities, (iii) costs and expenses associated with the
preparation and filing of any periodic reports by IRET under federal, state
or local laws or regulations, including filings with the Commission, (iv)
costs and expenses associated with compliance by IRET with laws, rules and
regulations promulgated by any regulatory body, including the Commission, and
(v) all other operating or administrative costs of IRET incurred in the
ordinary course of its business on behalf of or in connection with the
Partnership.

"IRET Share" means a share of beneficial interest of IRET.

"IRET Shares Amount" shall mean a number of IRET Shares equal to the
product of the number of Partnership Units offered for exchange by an
Exchanging Partner, multiplied by the Conversion Factor as adjusted to and
including the Specified Exchange Date; provided that in the event IRET issues
to all holders of IRET Shares rights, options, warrants or convertible or
exchangeable securities entitling the shareholders to subscribe for or
purchase IRET Shares, or any other securities or property (collectively, the
"rights"), and the rights have not expired at the Specified Exchange Date,
then the IRET Shares Amount shall also include the rights issuable to a
holder of the IRET Shares Amount of IRET Shares on the record date fixed for
purposes of determining the holders of IRET Shares entitled to rights.

"Limited Partner" means any Person named as a Limited Partner on Exhibit
A attached hereto, and any Person who becomes a Substitute or Additional
Limited Partner, in such Person's capacity as a Limited Partner in the
Partnership.

"Limited Partnership Interest" means the ownership interest of a Limited
Partner in the Partnership at any particular time, including the right of
such Limited Partner to any and all benefits to which such Limited Partner
may be entitled as provided in this Agreement and in the Act, together with
the obligations of such Limited Partner to comply with all the provisions of
this Agreement and of such Act.

"Loss" has the meaning provided in Section 5.01(f) hereof.

"Notice of Exchange" means the Notice of Exercise of Exchange Right
substantially in the form attached as Exhibit C hereto.

"Offer" has the meaning set forth in Section 7.01(c) hereof.

"Partner" means any General Partner or Limited Partner.

<PAGE>

"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).

"Partnership Interest" means an ownership interest in the Partnership
held by either a Limited Partner or the General Partner and includes any and
all benefits to which the holder of such a Partnership Interest may be
entitled as provided in this Agreement, together with all obligations of such
Person to comply with the terms and provisions of this Agreement.

"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the
amount of Partnership Minimum Gain is determined by first computing, for each
Partnership nonrecourse liability, any gain the Partnership would realize if
it disposed of the property subject to the liability for no consideration
other than full satisfaction of the liability, and then aggregating the
separately computed gains. A Partner's share of Partnership Minimum Gain
shall be determined in accordance with Regulations Section 1.704-2(g)(1).

"Partnership Record Date" means the record date established by the
General Partner for the distribution of cash pursuant to Section 5.02 hereof,
which record date shall be the same as the record date established by the
IRET for a distribution to its shareholders of some or all of its portion of
such distribution.

"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued hereunder. The allocation of
Partnership Units among the Partners shall be as set forth on Exhibit A, as
may be amended from time to time.

"Percentage Interest" means the percentage ownership interest in the
Partnership of each Partner, as determined by dividing the Partnership Units
owned by a Partner by the total number of Partnership units then outstanding.
The Percentage Interest of each Partner shall be as set forth on Exhibit A,
as may be amended from time to time.

"Person" means any individual, partnership, corporation, joint venture,
trust or other entity.

"Profit" has the meaning provided in Section 5.01(f) hereof.

"Property" means any residential, office or industrial property or other
investment in which the Partnership holds an ownership interest.

"Regulations" means the Federal Income Tax Regulations issued under the
Code, as amended and as hereafter amended from time to time. Reference to any
particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any successor provision of the Regulations.

"REIT" means a real estate investment trust under Sections 856 through 860
of the Code.

"Service" means the Internal Revenue Service.

"Specified Exchange Date" means the first business day of the month that
is at least 60 business days after the receipt by IRET of the Notice of
Exchange.

"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.

<PAGE>

"Subsidiary Partnership" means any partnership of which the majority of
the limited or general partnership interests therein are owned, directly or
indirectly, by the Partnership.

"Substitute Limited Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to Section 9.03 hereof.

"Surviving General Partner" has the meaning set forth in Section 7.01(d)
hereof.

"Transaction" has the meaning set forth in Section 7.01(c) hereof.

"Transfer" has the meaning set forth in Section 9.02(a) hereof.

ARTICLE II

PARTNERSHIP CONTINUATION AND IDENTIFICATION

2.01 NAME, OFFICE AND REGISTERED AGENT. The name of the Partnership is
IRET PROPERTIES, a North Dakota Limited Partnership. The specified office
and place of business of the Partnership shall be 12 South Main Street,
Minot, North Dakota 58701. The General Partner may at any time change the
location of such office, provided the General Partner gives notice to the
Partners of any such change. The name and address of the Partnership's
registered agent is Odell-Wentz & Associates, L.L.C., a North Dakota Limited
Liability Company, 12 South Main Street, Minot, ND 58701.

2.02 PARTNERS.

(a) The General Partner of the Partnership is IRET, Inc., a North
Dakota corporation. Its principal place of business shall be the
same as that of the Partnership.

(b) Attached as Exhibit A is the name and addresses of the Limited
Partners as of the date hereof. The Limited Partners shall be those
Persons identified as Limited Partners on Exhibit A hereto, as
amended from time to time.

2.03 TERM AND DISSOLUTION.

(a) The term of the Partnership shall continue in full force and effect
until April 30, 2050, except that the Partnership shall be dissolved
upon the first to occur of any of the following events:

(i) dissolution, death, removal or withdrawal of a General Partner
unless the business of the Partnership is continued pursuant to
Section 7.03(b) hereof; provided that if a General Partner is
on the date of such occurrence a partnership, the dissolution
of such General Partner as a result of the dissolution, death,
withdrawal, removal or Event of Bankruptcy of a partner in such
partnership shall not be an event of dissolution of the
Partnership if the business of such General Partner is continued
by the remaining partner or partners, either alone or with
additional partners, and such General Partner an such partners
comply with any other applicable requirements of this Agreement;

(ii) The passage of 90 days after the sale or other disposition of
all or substantially all of the assets of the Partnership
(provided that if the Partnership receives an installment
obligation as consideration for such sale or other disposition,
the Partnership shall

<PAGE>

continue, unless sooner dissolved under the provisions of this
Agreement, until such time as such note or notes are paid in
full);

(iii) The exchange of all Limited Partnership Interests; or

(iv) The election by the General Partner that the Partnership should
be dissolved.

(b) Upon dissolution of the Partnership (unless the business of the
Partnership is continued pursuant to Section 7.03(b) hereof), the
General Partner (or its trustee, receiver, successor or legal
representative) shall amend or cancel the Certificate and liquidate
the Partnership's assets and apply and distribute the proceeds
thereof in accordance with Section 5.06 hereof. Notwithstanding the
foregoing, the liquidating General Partner may either (i) defer
liquidation of, or withhold from distribution for a reasonable time,
any assets of the Partnership (including those necessary to satisfy
the Partnership's debts and obligations), or (ii) distribute the
assets to the Partners in kind.

2.04 FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP. The
General Partner shall execute, acknowledge, record and file at the expense of
the Partnership, the Certificate and any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each
state or other jurisdiction in which the Partnership conducts business.

2.05 CERTIFICATES DESCRIBING PARTNERSHIP UNITS. At the request of a
Limited Partner, the General Partner, at its option, may issue a certificate
summarizing the terms of such Limited Partner's interest in the Partnership,
including the number of Partnership Units owned and the Percentage Interest
represented by such Partnership Units as of the date of such certificate. Any
such certificate (i) shall be in form and substance as approved by the
General Partner, (ii) shall not be negotiable and (iii) shall bear a legend
to the following effect:

"This certificate is not negotiable. The Partnership Units represented
by this certificate are governed by and transferable only in accordance with
the provisions of the Partnership Agreement of IRET Properties, a North
Dakota Limited Partnership, as from time to time amended and restated."

ARTICLE III

BUSINESS OF THE PARTNERSHIP

The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by
a limited partnership organized pursuant to the Act, provided, however, that
such business shall be limited to and conducted in such a manner as to permit
IRET at all times to qualify as a REIT, unless IRET otherwise ceases to
qualify as a REIT, (ii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing or the ownership of
interests in any entity engaged in any of the foregoing and (iii) to do
anything necessary or incidental to the foregoing: In connection with the
foregoing, and without limiting IRET's right in its sole discretion to cease
qualifying as a REIT, the Partners acknowledge that IRET's current status as
a REIT inures to the benefit of all the Partners and not solely to IRET. The
General Partner shall also be empowered to do any and all acts and things
necessary or prudent to ensure that the Partnership will not be classified as
a "publicly traded partnership" for purposes of Section 7704 of the Code.

<PAGE>

ARTICLE IV

CAPITAL CONTRIBUTIONS AND ACCOUNTS

4.01 CAPITAL CONTRIBUTIONS. IRET shall, through the General Partner,
its wholly owned subsidiary, contribute to the capital of the Partnership all
of its assets subject to all of its liabilities as specified on Exhibit A
hereof. The Limited Partners shall contribute to the capital of the
Partnership interests in one or more of the Properties or the partnerships
owning such Properties, each with values as set forth opposite their names on
Exhibit A. The Agreed Values of such Limited Partners' ownership interests in
the Properties that are contributed to the Partnership are as set forth
opposite their names on Exhibit A.

4.02 ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL
PARTNERSHIP INTERESTS. Except as provided in this Section 4.02 or in Section
4.03, the Partners shall have no right or obligation to make any additional
Capital Contributions or loans to the Partnership. The General Partner may
contribute additional capital to the Partnership, from time to time, and
receive additional Partnership Interests in respect thereof, in the manner
contemplated in this Section 4.02.

(a) Issuance of Additional Partnership Interests.

General. The General Partner is hereby authorized to cause the
Partnership to issue such additional Partnership Interests in the
form of Partnership Units for any Partnership purpose at any time or
from time to time, to the Partners (including the General Partner and
IRET) or to other Persons for such consideration and on such terms
and conditions as shall be established by the General Partner in its
sole and absolute discretion, all without the approval of any
Limited Partners. Any additional Partnership Interests issued thereby
may be issued in one or more classes, or one or more series of any of
such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties,
including rights, powers and duties senior to Limited Partnership
Interests, all as shall be determined by the General Partner in its
sole and absolute discretion and without the approval of any Limited
Partner, subject to North Dakota law, including, without limitation,
(i) the allocations of items of Partnership income, gain, loss,
deduction and credit to each such class or series of Partnership
Interests; (ii) the right of each such class or series of Partnership
Interests to share in Partnership distributions; and (iii) the rights
of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership; provided, however,
that no additional Partnership Interests shall be issued to the
General Partner or IRET unless either:

(1) the additional Partnership Interests are issued in connection
with an issuance of IRET Shares of or other interests in IRET,
which shares or interests have designations, preferences and
other rights, all such that the economic interests are
substantially similar to the designations, preferences and other
rights of the additional Partnership Interests issued to the
General Partner or IRET by the Partnership in accordance with
this Section 4.02 and the General Partner or IRET shall make a
Capital Contribution to the Partnership in an amount equal to
the proceeds raised in connection with the issuance of such
shares of stock of or other interests in IRET, or

(2) the additional Partnership Interests are issued to all Partners
in proportion to their respective Percentage Interests. Without
limiting the foregoing, the General Partner is expressly
authorized to cause the Partnership to issue Partnership Units
for less than fair market value, so long as the General Partner
concludes in good faith that such issuance is in the best
interests of the General Partner and the Partnership.

<PAGE>

(b) In connection with any and all issuances of IRET Shares, IRET and the
General Partner, as IRET determines, shall make Capital Contributions
to the Partnership of the proceeds therefrom, provided that if the
proceeds actually received and contributed by IRET, directly or
through the General Partner, are less than the gross proceeds of such
issuance as a result of any underwriter's discount or other expenses
paid or incurred in connection with such issuance, then the General
Partner and IRET shall be deemed to have made Capital Contributions
to the Partnership in the aggregate amount of the gross proceeds of
such issuance and the Partnership shall be deemed simultaneously to
have paid such offering expenses in accordance with Section 6.05
hereof and in connection with the required issuance of additional
Partnership Units to the General Partner and IRET for such Capital
Contributions pursuant to Section 4.02(a) hereof.

4.03 ADDITIONAL FUNDING. If the General Partner determines that it is
in the best interests of the Partnership to provide for additional
Partnership funds ("Additional Funds") for any Partnership purpose, the
General Partner may (i) cause the Partnership to obtain such funds from
outside borrowings, or (ii) elect to have the General Partner or IRET provide
such Additional Funds to the Partnership through loans or otherwise.

4.04 CAPITAL ACCOUNTS. A separate capital account (a "Capital
Account") shall be established and maintained for each Partner in accordance
with Regulation Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner
acquires an additional Partnership Interest in exchange for more than a de
minimis Capital Contribution, (ii) the Partnership distributes to a Partner
more than a de minimis amount of Partnership property as consideration for a
Partnership Interest, or (iii) the Partnership is liquidated within the
meaning of Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall
revalue the property of the Partnership to its fair market value (as
determined by the General Partner, in its sole discretion, taking into
account Section 7701(g) of the Code) in accordance with Regulation Section
1.704-1(b)(2)(iv)(f). When the Partnership's property is revalued by the
General Partner, the Capital Accounts of the Partners shall be adjusted in
accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which
generally require such Capital Accounts to be adjusted to reflect the manner
in which the unrealized gain or loss inherent in such property (that has not
been reflected in the Capital Accounts previously) would be allocated among
the Partners pursuant to Section 5.01 if there were a taxable disposition of
such property for its fair market value (as determined by the General
Partner, in its sole discretion, and taking into account Section 7701(g) of
the Code) on the date of the revaluation.

4.05 PERCENTAGE INTERESTS. If the number of outstanding Partnership
Units increases or decreases during a taxable year, each Partner's Percentage
Interest shall be adjusted by the General Partner effective as of the
effective date of each such increase or decrease to a percentage equal to the
number of Partnership Units held by such Partner divided by the aggregate
number of Partnership Units outstanding after giving effect to such increase
or decrease. If the Partners' Percentage Interests are adjusted pursuant to
this Section 4.O5, the Profits and Losses for the taxable year in which the
adjustment occurs shall be allocated between the part of the year ending on
the day when the Partnership's property is revalued by the General Partner
and the part of the year beginning on the following day either (i) as if the
taxable year had ended on the date of the adjustment or (ii) based on the
number of days in each part. The General Partner, in its sole discretion,
shall determine which method shall be used to allocate Profits and Losses for
the taxable year in which the adjustment occurs. The allocation of Profits
and Losses for the earlier part of the year shall be based on the Percentage
Interests before adjustment, and the allocation of Profits and Losses for the
later part shall be based on the adjusted Percentage Interests.

4.06 NO INTEREST ON CONTRIBUTIONS. No Partner shall be entitled to
interest on its Capital Contribution.

4.07 RETURN OF CAPITAL CONTRIBUTIONS. No Partner shall be entitled to
withdraw any part of its Capital Contribution or its Capital Account or to
receive any distribution from the Partnership, except as specifically
provided in this Agreement. Except as otherwise provided herein, there shall
be no obligation to return to any

<PAGE>

Partner or withdrawn Partner any part of such Partner's Capital Contribution
for so long as the Partnership continues in existence.

4.08 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the
right or obligation of any Partner to make Capital Contributions or loans or
to pursue any other right or remedy hereunder or at law or in eity, it being
understood and agreed that the provisions of this Agreement shall be solely
for the benefit of, and may be enforced solely by, the parties hereto and
their respective successors and assigns. None of the rights or obligations of
the Partners herein set forth to make Capital Contributions or loans to the
Partnership shall be deemed an asset of the Partnership for any purpose by
any creditor or other third party, nor may such rights or obligations be
sold, transferred or assigned by the Partnership or pledged or encumbered by
the Partnership to secure any debt or other obligation of the Partnership or
of any of the Partners. In addition, it is the intent of the parties hereto
that no distribution to an-v Limited Partner shall be deemed a return of
money or other property in violation of the Act. However, if any court of
competent Jurisdiction holds that, notwithstanding the provisions of this
Agreement, any Limited Partner is obligated to return such money or property,
such obligation shall be the obligation of such Limited Partner and not of
the General Partner. without limiting the generality of the foregoing, a
deficit Capital Account of a Partner shall not be deemed to be a liability of
such Partner nor an asset or property of the Partnership.

ARTICLE V

PROFITS AND LOSSES; DISTRIBUTIONS

5.01 ALLOCATION OF PROFIT AND LOSS.

(a) General. Profit and Loss of the Partnership for each fiscal year of
the Partnership shall be allocated among the Partners in accordance
with their respective Percentage Interests.

(b) Minimum Gain Chargeback. Notwithstanding any provision to the
contrary, (i) any expense of the Partnership that is a "nonrecourse
deduction" within the meaning of Regulations Section 1.704-2(b)(1)
shall be allocated in accordance with the Partners' respective
Percentage Interests, (ii) any expense of the Partnership that is a
"partner nonrecourse deduction" within the meaning of Regulations
Section 1.704-2(i)(2) shall be allocated to the Partner that bears
the "economic risk of loss" of such deduction in accordance with
Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease
in Partnership Minimum Gain within the meaning of Regulations
Section 1.704-2(f)(1) for any Partnership taxable year, then, subject
to the exceptions set forth in Regulations Section 1.704-2(f)(2),
(3), (4) and (5), items of gain and income shall be allocated among
the Partners in accordance with Regulations Section 1.704-2(f) and
the ordering rules contained in Regulations Section 1.704-2(j), and
(iv) if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain within the meaning of Regulations Section 1.704-2(i)(4) for any
Partnership taxable year, then, subject to the exceptions set forth
in Regulations Section 1.704(2)(g), items of gain and income shall
be allocated among the Partners in accordance with Regulations
Section 1.704-2(i)(4) and the ordering rules contained in Regulations
Section 1.704-2(j). A Partner's "interest in partnership profits" for
purposes of determining its share of the nonrecourse liabilities the
Partnership within the meaning of Regulations Section 1.752-3(a)(3)
shall be such Partner's Percentage Interest.

(c) Qualified Income Offset. If a Limited Partner receives in any
taxable year an adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Regulations
Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit
balance in such Partner's Capital Account that exceeds the sum of
such Partner's shares of Partnership Minimum Gain and

<PAGE>

Partner Nonrecourse Debt Minimum Gain, as determined in accordance
with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner
shall be allocated specially for such taxable year (and, if
necessary, later taxable years) items of income and gain in an amount
and manner sufficient to eliminate such deficit Capital Account
balance as quickly as possible as provided in Regulations
Section 1.704-l(b)(2)(ii)(d). After the occurrence of an allocation
of income or gain to a Limited Partner in accordance with this
Section 5.01(c), to the extent permitted by Regulations
Section 1.704-1(b), items of expense or loss shall be allocated to
such Partner in an amount necessary to offset the income or gain
previously allocated to such Partner under this Section 5.01(c).

(d) Capital Account Deficits. Loss shall not be allocated to a Limited
Partner to the extent that such allocation would cause a deficit in
such Partner's Capital Account (after reduction to reflect the items
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6)) to exceed the sum of such Partner's shares of Partnership
Minimum Gain and Partner Nonrecourse Debt Minimum Gain. Any Loss in
excess of that limitation shall be allocated to the General Partner.
After the occurrence of an allocation of Loss to the General
Partner in accordance with this Section 5.01(d), to the extent
permitted by Regulations Section 1.704-1(b), Profit shall be
allocated to such Partner in an amount necessary to offset the Loss
previously allocated to such Partner under this Section 5.01(d).

(e) Allocations Between Transferor and Transferee. If a Partner
transfers any part or all of its Partnership Interest, the
distributive shares of the various items of Profit and Loss allocable
among the Partners during such fiscal year of the Partnership shall
be allocated between the transferor and the transferee Partner either
(i) as if the Partnership's fiscal year had ended on the date of the
transfer, or (ii) based on the number of days of such fiscal year
that each was a Partner without regard to the results of Partnership
activities in the respective portions of such fiscal year in which
the transferor and the transferee were Partners. The General Partner,
in its sole discretion, shall determine which method shall be used to
allocate the distributive shares of the various items of Profit and
Loss between the transferor and the transferee Partner.

(f) Definition of Profit and Loss. "Profit" and "Loss" and any items of
income, gain, expense, or loss referred to in this Agreement shall be
determined in accordance with federal income tax accounting
principles, as modified by Regulations Section 1.704-1(b)(2)(iv),
except that Profit and Loss shall not include items of income, gain
and expense that are specially allocated pursuant to Section 5.01(b),
5.01(c), or 5.01(a). All allocations of income, Profit, gain, Loss,
and expense (and all items contained therein) for federal income tax
purposes shall be identical to all allocations of such items set
forth in this Section 5.01, except as otherwise required by
Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). The
General Partner shall have the authority to elect the method to be
used by the Partnership for allocating items of income, gain, and
expense as required by Section 704(c) of the Code and such election
shall be binding on all Partners.

5.02 DISTRIBUTION OF CASH.

(a) The Partnership shall distribute cash on a quarterly (or, at the
election of the General Partner, more frequent) basis, in an amount
determined by the General Partner in its sole discretion, to the
Partners who are Partners on the Partnership Record Date with respect
to such quarter (or other distribution period) in accordance with
their respective Percentage Interests on the Partnership Record Date;
provided, however, that if a new or existing Partner acquires an
additional Partnership Interest in exchange for a Capital
Contribution on any date other than a Partnership Record Date, the
cash distribution attributable to such additional Partnership

<PAGE>

Interest relating to the Partnership Record Date next following the
issuance of such additional Partnership Interest shall be reduced in
the proportion that the number of days that such additional
Partnership Interest is held by such Partner bears to the number of
days between such Partnership Record Date and the immediately
preceding Partnership Record Date.

(b) Notwithstanding any other provision of this AGREEMENT, the General
Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any
withholding requirements established under the Code or any other
federal, state or local law including, without limitation, pursuant
to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent
that the Partnership is required to withhold and pay over to any
taxing authority any amount resulting from the allocation or
distribution of income to the Partner or assignee (including by
reason of Section 1446 of the Code), the amount withheld shall be
treated as a distribution of cash in the amount of such withholding
to such Partner.

(c) In no event may a Partner receive a distribution of cash with respect
to a Partnership Unit if such Partner is entitled to receive a cash
dividend as the holder of record of a IRET Share for which all or
part of such Partnership Unit has been or will be exchanged.

5.03 IRET DISTRIBUTION REQUIREMENTS. The General Partner shall use its
reasonable efforts to cause the Partnership to distribute amounts sufficient
to enable IRET to pay shareholder dividends that will allow IRET to (i) meet
its distribution requirement for Qualification as a REIT as set forth in
Section 857(a)(1) of the Code and (ii) avoid any federal income or excise tax
liability imposed by the Code.

5.04 NO RIGHT TO DISTRIBUTIONS IN KIND. No Partner shall be entitled
to demand property other than cash in connection with any distributions by the
Partnership.

5.05 LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS. Notwithstanding
any of the provisions of this Article V, no Partner shall have the right to
receive and the General Partner shall not have the right to make, a
distribution that includes a return of all or part of a Partner's Capital
Contributions, unless after giving effect to the return of a Capital
Contribution, the sum of all Partnership liabilities, other than the
liabilities to a Partner for the return of his Capital Contribution, does not
exceed the fair market value of the Partnership's assets.

5.06 DISTRIBUTIONS UPON LIQUIDATION.

(a) Upon liquidation of the Partnership, after payment of, or adequate
provision for, debts and obligations of the Partnership, including
any Partner loans, any remaining assets of the Partnership shall he
distributed to all Partners with positive Capital Accounts in
accordance with their respective positive Capital Account balances.
For purposes of the preceding sentence, the Capital Account of each
Partner shall be determined after all adjustments made in accordance
with Sections 5.01 and 5.02 resulting from Partnership operations
and from all sales and dispositions of all or any part of the
Partnership's assets. To the extent deemed advisable by the General
Partner, appropriate arrangements (including the use of a liquidating
trust) may be made to assure that adequate funds are available to pay
any contingent debts or obligations.

(b) If the General Partner has a negative balance in its Capital Account
following a liquidation of the Partnership, as determined after
taking into account all Capital Account adjustments in accordance
with Sections 5.01 and 5.02 resulting from Partnership operations and
from all sales and dispositions of all or any part of the
Partnership's assets, the General Partner shall contribute to the
Partnership an amount of cash equal to the negative balance in its
Capital Account and such cash shall be paid or distributed by the
Partnership to creditors, if any, and

<PAGE>

then to the Limited Partners in accordance with Section 5.06(a). Such
contribution by the General Partner shall be made by the end of the
Partnership's taxable year in which the liquidation occurs (or, if
later, within 90 days after the date of the liquidation).

5.07 SUBSTANTIAL ECONOMIC EFFECT. It is the intent of the Partners
that the allocations of Profit and Loss under the Agreement have substantial
economic effect (or be consistent with the Partners' interests in the
Partnership in the case of the allocation of losses attributable to
nonrecourse debt) within the meaning of Section 704(b) of the Code as
interpreted by the Regulations promulgated pursuant thereto. Article V and
other relevant provisions of this Agreement shall be interpreted in a manner
consistent with such intent.

ARTICLE VI

RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER

6.01 MANAGEMENT OF THE PARTNERSHIP.

(a) Except as otherwise expressly provided in this Agreement, the General
Partner shall have full, complete and exclusive discretion to manage
and control the business of the Partnership for the purposes herein
stated, and shall make all decisions affecting the business and
assets of the Partnership. Subject to the restrictions specifically
contained in this Agreement, the powers of the General Partner shall
include, without limitation, the authority to take the following
actions on behalf of the Partnership:

(i) to acquire, purchase, own, operate, lease and dispose of any
real property and any other property or assets that the General
Partner determines are necessary or appropriate or in the best
interests of the business of the Partnership;

(ii) to construct buildings and make other improvements on the
properties owned or leased by the Partnership;

(iii) to authorize, issue, sell, redeem or otherwise purchase any
Partnership Interests or any securities (including secured and
unsecured debt obligations of the Partnership, debt obligations
of the Partnership convertible into any class or series of
Partnership Interests, or options, rights, warrants or
appreciation rights relating to any Partnership Interests) of
the Partnership;

(iv) to borrow or lend money for the Partnership, issue or receive
evidences of indebtedness in connection therewith, refinance,
increase the amount of, modify, amend or change the terms of,
or extend the time for the payment of, any such indebtedness,
and secure such indebtedness by mortgage, deed of trust, pledge
or other lien on the Partnership's assets;

(v) to guarantee or become a comaker of indebtedness of IRET or any
Subsidiary thereof, refinance, increase the amount, modify or
change the terms of, or extend the time for the payment of, any
such guarantee or indebtedness, and secure such guarantee or
indebtedness by mortgage, deed of trust, pledge or other lien on
the Partnership's assets;

(vi) to use assets of the Partnership (including, without limitation,
cash on hand) for any purpose consistent with this Agreement,
including, without limitation, payment, either directly or by
reimbursement, of all operating costs and general administrative

<PAGE>

expenses of IRET, the General Partner, the Partnership or any
Subsidiary of either, to third parties or to the General Partner
as set forth in this Agreement;

(vii) to lease all or any portion of any of the Partnership's assets,
whether or not the terms of such leases extend beyond the
termination date of the Partnership and whether or not any
portion of the Partnership's assets so leased are to be
occupied by the lessee, or, in turn, subleased in whole or
in part to others, for such consideration and on such terms
as the General Partner may determine;

(viii) to prosecute, defend, arbitrate, or compromise any and all
claims or liabilities in favor of or against the Partnership,
on such terms and in such manner as the General Partner may
reasonably determine, and similarly to prosecute, settle or
defend litigation with respect to the Partners, the Partnership,
or the Partnership's assets; provided, however, that the
General Partner may not, without the consent of all of the
Partners, confess a judgment against the Partnership;

(ix) to file applications, communicate, and otherwise deal with any
and all governmental agencies having jurisdiction over, or in
any way affecting, the Partnership's assets or any other aspect
of the Partnership business;

(x) to make or revoke any election permitted or required of the
Partnership by any taxing authority;

(xi) to maintain such insurance coverage for public liability, fire
and casualty, and any and all other insurance for the
protection of the Partnership, for the conservation of
Partnership assets, or for any other purpose convenient or
beneficial to the Partnership, in such amounts and such
types, as it shall determine from time to time;

(xii) to determine whether or not to apply any insurance proceeds for
any property to the restoration of such property or to
distribute the same;

(xiii) to establish one or more divisions of the Partnership, to hire
and dismiss employees of the Partnership or any division of the
Partnership, and to retain legal counsel, accountants,
consultants, real estate brokers, and such other persons, as
the General Partner may deem necessary or appropriate in
connection with the Partnership business and to pay therefor
such reasonable remuneration as the General Partner may deem
reasonable and proper;

(xiv) to retain other services of any kind or nature in connection
with the Partnership business, and to pay therefor such
remuneration as the General Partner may deem reasonable and
proper;

(xv) to negotiate and conclude agreements on behalf of the
Partnership with respect to any of the rights, powers and
authority conferred upon the General Partner;

(xvi) to maintain accurate accounting records and to file promptly all
federal, state and local income tax returns on behalf of the
Partnership;

(xvii) to distribute Partnership cash or other Partnership assets in
accordance with this Agreement;

<PAGE>

(xviii) to form or acquire an interest in, and contribute property to,
any further limited or general partnerships, joint ventures or
other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the
contributions of property to IRET, its Subsidiaries and any
other Person in which it has an equity interest from time to
time);

(xix) to establish Partnership reserves for working capital, capital
expenditures, contingent liabilities, or any other valid
Partnership purpose; and

(xx) to take such other action, execute, acknowledge, swear to or
deliver such other documents and instruments, and perform any
and all other acts that the General Partner deems necessary or
appropriate for the formation, continuation and conduct of the
business and affairs of the Partnership (including, without
limitation, all actions consistent with allowing IRET at all
times to qualify as a IRET unless IRET voluntarily terminates
its REIT status) and to possess and enjoy all of the rights and
powers of a general partner as provided by the Act.

(b) Except as otherwise provided herein, to the extent the duties of
the General Partner require expenditures of funds to be paid to
third parties, the General Partner shall not have any obligations
hereunder except to the extent that partnership funds are
reasonably available to it for the performance of such duties, and
nothing herein contained shall be deemed to authorize or require
the General Partner, in its capacity as such, to expend its
individual funds for payment to third parties or to undertake any
individual liability or obligation on behalf of the Partnership.

6.02 DELEGATION OF AUTHORITY. The General Partner may delegate any or
all of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the
business of the Partnership, which Person may, under supervision of the
General Partner, perform any acts or services for the Partnership as the
General Partner may approve.

6.03 INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.

(a) The Partnership shall indemnify an Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several,
expenses (including reasonable legal fees and expenses),
judgments, fines, settlements, and other amounts arising from any
and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, that relate to the
operations of the Partnership as set forth in this Agreement in
which any Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that:
(i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in
bad faith or was the result of active and deliberate dishonesty;
(ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. The termination of
any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 6.03(a). The
termination of any proceeding by conviction or upon a plea of nolo
contenders or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the
Indemnitee acted in a manner contrary to that specified in this
Section 6.03(a). Any indemnification pursuant to this Section 6.03
shall be made only out of the assets of the Partnership.

<PAGE>

(b) The Partnership shall reimburse an Indemnitee for reasonable
expenses incurred by an Indemnitee who is a party to a proceeding
in advance of the final disposition of the proceeding upon receipt
by the Partnership of (i) a written affirmation by the Indemnitee
of the Indemnitee's good faith belief that the standard of conduct
necessary for indemnification by the Partnership as authorized in
this Section 6.03 has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall
ultimately be determined that the standard of conduct has not been
met.

(c) The indemnification provided by this Section 6.03 shall be in
addition to any other rights to which an Indemnitee or any other
Person may be entitled under any agreement, pursuant to any vote of
the Partners, as a matter of law or otherwise, and shall continue
as to an Indemnitee who has ceased to serve in such capacity.

(d) The Partnership may purchase and maintain insurance, on behalf of
the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership
would have the power to indemnify such Person against such
liability under the provisions of this Agreement.

(e) For purposes of this Section 6.03, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by it of its duties
to the Partnership also imposes duties on, or otherwise involves
services by, it to the plan or participants or beneficiaries of the
plan; excise taxes assessed on an Indemnitee with respect to an
employee benefit plan pursuant to applicable law shall constitute
fines within the meaning of this Section 6.03; and actions taken or
omitted by the Indemnitee with respect to an employee benefit plan
in the performance of its duties for a purpose reasonably believed
by it to be in the interest of the participants and beneficiaries
of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Partnership.

(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set
forth in this Agreement.

(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 6.03 because the Indemnitee had an interest
in the transaction with respect to which the indemnification
applies if the transaction was otherwise permitted by the terms of
this Agreement.

(h) The provisions of this Section 6.03 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators
and shall not be deemed to create any rights for the benefit of
any other Persons.

6.04 LIABILITY OF THE GENERAL PARTNER.

(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary
damages to the Partnership or any Partners for losses sustained or
liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner acted in good faith. The
General Partner shall not be in breach of any duty that the General
Partner may owe to the Limited Partners or the Partnership or any
other Persons under this Agreement or if any duty stated or implied
by law or equity provided the General Partner, acting in good
faith, abides by the terms of this Agreement.

<PAGE>

(b) The Limited Partners expressly acknowledge that the General Partner
is acting on behalf of the Partnership, IRET and the Company's
shareholders collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited
Partners (including, without limitation, the tax consequences to
Limited Partners or the tax consequences of same, but not all, of
the Limited Partners) in deciding whether to cause the Partnership
to take (or decline to take) any actions. In the event of a
conflict between the interests of the shareholders of IRET on one
hand and the Limited Partners on the other, the General Partner
shall endeavor in good faith to resolve the conflict in a manner
not adverse to either the shareholders of IRET or the Limited
Partners; provided, however, that for so long as IRET, directly or
the General Partner owns a controlling interest in the Partnership,
any such conflict that cannot be resolved in a manner not adverse
to either the shareholders of IRET or the Limited Partners shall be
resolved in favor of the shareholders. The General Partner shall
not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners
in connection with such decisions, provided that the General
Partner has acted in good faith.

(c) Subject to its obligations and duties as General Partner set forth
in Section 6.01 hereof, the General Partner may exercise any of the
powers granted to it under this Agreement and perform any of the
duties imposed upon it hereunder either directly or by or through
its agents. The General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by
it in good faith.

(d) Notwithstanding any other provisions of this Agreement or the Act,
any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on
behalf of the Partnership, undertaken in the good faith belief that
such action or omission is necessary or advisable in order (i) to
protect the ability of IRET to continue to qualify as a REIT or
(ii) to prevent IRET from incurring any taxes under Section 857,
Section 4981, or any other provision of the Code, is expressly
authorized under this Agreement and is deemed approved by all of
the Limited Partners.

(e) Any amendment, modification or repeal of this Section 6.04 or any
provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the
Partnership and the Limited Partners under this Section 6.04 as in
effect immediately prior to such amendment, modification or repeal
with respect to matters occurring, in whole or in part, prior to
such amendment, modification or repeal, regardless of when claims
relating to such matters may arise or be asserted.

6.05 REIMBURSEMENT. The General Partner is hereby authorized to pay
compensation for accounting, administrative, legal, technical, management and
other services rendered to the Partnership. All of the aforesaid expenditures
(including Administrative Expenses) shall be obligations of the Partnership, and
the General Partner shall be entitled to reimbursement by the Partnership for
any expenditure (including Administrative Expenses) incurred by it on behalf of
the Partnership which shall be made other than out of the funds of the
Partnership.

6.06 OUTSIDE ACTIVITIES. Subject to Section 6.08 hereof, the Articles of
Incorporation and any agreements entered into by the General Partner or its
Affiliates with the Partnership or a Subsidiary, any officer, director,
employee, agent, trustee, Affiliate or shareholder of the General Partner, the
General Partner shall be entitled to and may have business interests and engage
in business activities in addition to those relating to the Partnership,
including business interests and activities substantially similar or identical
to those of the Partnership. Neither the Partnership nor any of the Limited
Partners shall have any rights by virtue of this Agreement in any such business
ventures, interest or activities. None of the Limited Partners nor any other
Person shall have any rights by virtue of this Agreement or the partnership
relationship established hereby in any such business ventures, interests or
activities, and the General Partner shall have no obligation pursuant to

<PAGE>

this Agreement to offer any interest in any such business ventures, interests
and activities to the Partnership or any Limited Partner, even if such
opportunity is of a character which, if presented to the Partnership or any
Limited Partner, could be taken by such Person.

6.07 CONFLICTS OF INTEREST AND INVESTMENT RESTRICTIONS. The Partnership
shall not purchase any property, sell or lease any property, borrow or loan any
money nor invest in any joint ventures with any Trustee, Director, employee or
any affiliate (including the Advisor) of IRET, except in connection with a
transaction approved by a majority of the Independent Trustees of IRET who are
not themselves in any way involved in the transaction as being a fair,
competitive and commercially reasonable transaction which is no less favorable
to the Partnership than a similar transaction between unaffiliated parties under
the same circumstances.

6.08 GENERAL PARTNER PARTICIPATION. The General Partner agrees that all
business activities of the General Partner, including activities pertaining to
the acquisition, development or ownership of office or industrial property or
other property, shall be conducted through the Partnership or one or more
Subsidiary Partnerships; provided, however, that IRET is allowed to make a
direct acquisition, but if and only if, such acquisition is made in connection
with the issuance of Additional Securities, which direct acquisition and
issuance have been approved and determined to be in the best interests of IRET
and the Partnership by a majority of the Independent Trustees.

6.09 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner, IRET or one or more
nominees, as the General Partner may determine, including Affiliates of the
General Partner. The General Partner hereby declares and warrants that any
Partnership assets for which legal title is held in the name of the General
Partner or any nominee or Affiliate of the General Partner shall be held by the
General Partner for the use and benefit of the Partnership in accordance with
the provisions of this Agreement; provided, however, that the General Partner
shall use its best efforts to cause beneficial and record title to such assets
to be vested in the Partnership as soon as reasonably practicable. All
Partnership assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which legal title to such
Partnership assets is held.

6.10 MISCELLANEOUS. In the event IRET redeems any IRET Shares, then the
General Partner shall cause the Partnership to purchase from the General Partner
and IRET a number of Partnership Units as determined based on the application of
the Conversion Factor on the same terms that IRET exchanged such IRET Shares.
Moreover, if IRET makes a cash tender offer or other offer to acquire IRET
Shares, then the General Partner shall cause the Partnership to make a
corresponding offer to the General Partner and IRET to acquire an equal number
of Partnership Units held by the General Partner and IRET. In the event any IRET
Shares are exchanged by IRET pursuant to such offer, the Partnership shall
redeem an equivalent number of the General Partner's and IRET Partnership Units
for an equivalent purchase price based on the application of the Conversion
Factor.

ARTICLE VII

CHANGES IN GENERAL PARTNER

7.01 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST.

(a) The General Partner shall not transfer all or any portion of its
General Partnership Interest or withdraw as General Partner except as provided
in Section 7.01(c) or in connection with a transaction described in
Section 7.01(d).

<PAGE>

(b) The General Partner agrees that it and IRET will at all times own
in the aggregate at least 20% of the Partnership.

(c) Except as otherwise provided in Section 6.06(b) or Section 7.01(d)
hereof, IRET shall not engage in any merger, consolidation or other combination
with or into another Person or sale of all or substantially all of its assets,
or any reclassification, or any recapitalization or change of outstanding IRET
Shares (a "Transaction"), unless (i) the Transaction also includes a merger of
the Partnership or sale of substantially all of the assets of the Partnership as
a result of which all Limited Partners will receive for each Partnership Unit an
amount of cash, securities, or other property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or other property
paid in the Transaction to a holder of one IRET Share in consideration of one
IRET Share, provided that if, in connection with the Transaction, a purchase,
tender or exchange offer ("Offer") shall have been made to and accepted by the
holders of more than 50% of the outstanding IRET Shares, each holder of
Partnership Units shall be given the option to exchange its Partnership Units
for the greatest amount of cash, securities, or other property which a Limited
Partner would have received had it (A) exercised its Exchange Right and
(B) sold, tendered or exchanged pursuant to the Offer the IRET Shares received
upon exercise of the Exchange Right immediately prior to the expiration of the
Offer; and (ii) no more than 75% of the equity securities of the acquiring
Person in such Transaction is owned, after consummation of such Transaction, by
IRET, the General Partner or Persons who were Affiliates of the Company, the
Partnership or the General Partner immediately prior to the date on which the
Transaction is consummated.

(d) Notwithstanding Section 7.01(c), IRET or the General Partner may
merge with or into or consolidate with another entity if immediately after such
merger or consolidation (i) substantially all of the assets of the successor or
surviving entity (the "Survivor"), other than Partnership Units held by IRET or
the General Partner, are contributed, directly or indirectly, to the Partnership
as a Capital Contribution in exchange for Partnership Units with a fair market
value equal to the value of the assets so contributed as determined by the
Survivor in good faith and (ii) the Survivor expressly agrees to assume all
obligations of the General Partner or IRET, as appropriate, hereunder. Upon such
contribution and assumption, the Survivor shall have the right and duty to amend
this Agreement as set forth in this Section 7.01(d). The Survivor shall in good
faith arrive at a new method for the calculation of the Cash Amount, the IRET
Shares Amount and Conversion Factor for a Partnership Unit after any such merger
or consolidation so as to approximate the existing method for such calculation
as closely as reasonably possible. Such calculation shall take into account,
among other things, the kind and amount of securities, cash and other property
that was receivable upon such merger or consolidation by a holder of IRET Shares
or options, warrants or other rights relating thereto, and to which a holder of
Partnership Units could have acquired had such Partnership Units been exchanged
immediately prior to such merger or consolidation. Such amendment to this
Agreement shall provide for adjustment to such method of calculation, which
shall be as nearly equivalent as may be practicable to the adjustments provided
for with respect to the Conversion Factor. The Survivor also shall in good faith
modify the definition of IRET Shares and make such amendments to Section 8.05
hereof so as to approximate the existing rights and obligations set forth in
Section 8.05 as closely as reasonably possible. The above provisions of this
Section 7.01(d) shall similarly apply to successive mergers or consolidations
permitted hereunder.

7.02 ADMISSION OF A SUBSTITUTE OR ADDITIONAL GENERAL PARTNER. A Person
shall be admitted as a substitute or additional General Partner of the
Partnership only if the following terms and conditions are satisfied:

(a) a majority in interest of the Limited Partners (other than IRET)
shall have consented in writing to the admission of the substitute
or additional General Partner, which consent may be withheld in the
sole discretion of such Limited Partners;

(b) the Person to be admitted as a substitute or additional General
Partner shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement by executing a

<PAGE>

counterpart thereof and such other documents or instruments as may
be required or appropriate in order to effect the admission of such
Person as a General Partner, and a certificate evidencing the
admission of such Person as a General Partner shall have been filed
for recordation and all other actions required by Section 2.05
hereof in connection with such admission shall have been performed;

(c) if the Person to be admitted as a substitute or additional General
Partner is a corporation or a partnership it shall have provided
the Partnership with evidence satisfactory to counsel for the
Partnership of such Person's authority to become a General Partner
and to be bound by the terms and provisions of this Agreement; and

(d) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel and the state or any
other jurisdiction as may be necessary) that the admission of the
person to be admitted as a substitute or additional General Partner
is in conformity with the Act, that none of the actions taken in
connection with the admission of such Person as a substitute or
additional General Partner will cause (i) the Partnership to be
classified other than as a partnership for federal income tax
purposes, or (ii) the loss of any Limited Partner's limited
liability.

7.03 EFFECT OF BANKRUPTCY, WITHDRAWAL, DEATH OR DISSOLUTION OF A GENERAL
PARTNER.

(a) Upon the occurrence of an Event of Bankruptcy as to a General
Partner (and its removal pursuant to Section 7.04(a) hereof or the
death, withdrawal, removal or dissolution of a General Partner
(except that, if a General Partner is on the date of such
occurrence a partnership, the withdrawal, death, dissolution, Event
of Bankruptcy as to, or removal of a partner in, such partnership
shall be deemed not to be a dissolution of such General Partner if
the business of such General Partner is continued by the remaining
partner or partners), the Partnership shall be dissolved and
terminated unless the Partnership is continued pursuant to
Section 7.03(b) hereof.

(b) Following the occurrence of an Event of Bankruptcy as to a General
Partner (and its removal pursuant to Section 7.04(a) hereof or the
death, withdrawal, removal or dissolution of a General Partner
(except that, if a General Partner is on the date of such
occurrence a partnership, the withdrawal, death, dissolution, Event
of Bankruptcy as to, or removal of a partner in, such partnership
shall be deemed not to be a dissolution of such General Partner if
the business of such General Partner is continued by the remaining
partner or partners), the Limited Partners, within 90 days after
such occurrence, may elect to reconstitute the Partnership and
continue the business of the Partnership for the balance of the
term specified in Section 2.04 hereof by selecting, subject to
Section 7.02 hereof and any other provisions of this Agreement, a
substitute General Partner by unanimous consent of the Limited
Partners. If the Limited Partners elect to reconstitute the
Partnership and admit a substitute General Partner, the
relationship with the Partners and of any Person who has acquired
an interest of a Partner in the Partnership shall be governed by
this Agreement.

7.04 REMOVAL OF A GENERAL PARTNER.

(a) Upon the occurrence of an Event of Bankruptcy as to, or the
dissolution of, a General Partner, such General Partner shall be
deemed to be removed automatically; provided, however, that if a
General Partner is on the date of such occurrence a partnership,
the withdrawal, death, dissolution, Event of Bankruptcy as to or
removal of a partner in such partnership shall be deemed not to
be a dissolution of the General Partner if the business of such
General Partner is continued by the remaining partner or partners.

<PAGE>

(b) If a General Partner has been removed pursuant to this Section 7.04
and the Partnership is continued pursuant to Section 7.03 hereof,
such General Partner shall promptly transfer and assign its General
Partnership Interest in the Partnership to the substitute General
Partner approved by a majority in interest of the Limited Partners
in accordance with Section 7.03(b) hereof and otherwise admitted to
the Partnership in accordance with Section 7.02 hereof. At the
time of assignment, the removed General Partner shall be entitled
to receive from the substitute General Partner the fair market
value of the General Partnership Interest of such removed General
Partner as reduced by any damages caused to the Partnership by such
General Partner. Such fair market value shall be determined by an
appraiser mutually agreed upon by the General Partner and a
majority in interest of the Limited Partners within 10 days
following the removal of the General Partner. In the event that the
parties are unable to agree upon an appraiser, the removed General
Partner and a majority in interest of the Limited Partners each
shall select an appraiser. Each such appraiser shall complete an
appraisal of the fair market value of the removed General Partner's
General Partnership Interest within 30 days of the General
Partner's removal, and the fair market value of the removed General
Partner's General Partnership Interest shall be the average of the
two appraisals; provided, however, that if the higher appraisal
exceeds the lower appraisal by more than 20% of the amount of the
lower appraisal, the two appraisers, no later than 40 days after
the removal of the General Partner, shall select a third appraiser
who shall complete an appraisal of the fair market value of the
removed General Partner's General Partnership Interest no later
than 60 days after the removal of the General Partner. In such
case, the fair market value of the removed General Partner's
General Partnership Interest shall be the average of the two
appraisals closest in value.

(c) The General Partnership Interest of a removed General Partner,
during the time after default until transfer under Section 7.04(b),
shall be converted to that of a special Limited Partner; provided,
however, such removed General Partner shall not have any rights to
participate in the management and affairs of the Partnership, and
shall not be entitled to an portion of the income, expense, profit,
gain or loss allocations or cash distributions allocable or
payable, as the case may be, to the Limited Partners. Instead, such
removed General Partner shall receive and be entitled only to
retain distributions or allocations of such items that it would
have been entitled to receive in its capacity as General Partner,
until the transfer is effective pursuant to Section 7.04(b).

(d) All Partners shall have given and hereby do give such consents,
shall take such actions and shall execute such documents as shall
be legally necessary and sufficient to effect all the foregoing
provisions of this Section.

ARTICLE VIII

RIGHTS AND OBLIGATIONS
OF THE LIMITED PARTNERS

8.01 MANAGEMENT OF THE PARTNERSHIP. The Limited Partners shall not
participate in the management or control of Partnership business nor shall they
transact any business for the Partnership, nor shall they have the power to sign
for or bind the Partnership, such powers being vested solely and exclusively in
the General Partner.

8.02 POWER OF ATTORNEY. Each Limited Partner hereby irrevocably appoints
the General Partner its true and lawful attorney-in-fact, who may act for each
Limited Partner and in its name, place and stead, and for its use and benefit to
sign, acknowledge, swear to, deliver, file and record, at the appropriate public
offices, any and all documents, certificates, and instruments as may be deemed
necessary or desirable by the General

<PAGE>

Partner to carry out fully the provisions of this Agreement and the Act in
accordance with their terms, which power of attorney is coupled with an interest
and shall survive the death, dissolution or legal incapacity of the Limited
Partner, or the transfer by the Limited Partner of any part or all of its
Partnership Interest.

8.03 LIMITATION ON LIABILITY OF LIMITED PARTNERS. No Limited Partner
shall be liable for any debts, liabilities, contracts or obligations of the
Partnership. A Limited Partner shall be liable to the Partnership only to make
payments of its Capital Contribution, if any, as and when due hereunder. After
its Capital Contribution is fully paid, no Limited Partner shall, except as
otherwise required by the Act, be required to make any further Capital
Contributions or other payments or lend any funds to the Partnership.

8.04 OWNERSHIP BY LIMITED PARTNER OF CORPORATE GENERAL PARTNER OR
AFFILIATE. No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in the General Partner or in any Affiliate
thereof if such ownership by itself or in conjunction with other stock or other
interests owned by other Limited Partners would, in the opinion of counsel for
the Partnership, jeopardize the classification of the Partnership as a
partnership for federal income tax purposes. The General Partner shall be
entitled to make such reasonable inquiry of the Limited Partners as is required
to establish compliance by the Limited Partners with the provisions of this
Section.

8.05 EXCHANGE RIGHT.

(a) Subject to Sections 8.05(b), 8.05(c), 8.05(d) and 8.05(e), on or
after the date which is one year after the acquisition of such
units, each Limited Partner, other than IRET, shall have the right
(the "Exchange Right") to require the Partnership to redeem on a
Specified Exchange Date all or a portion of the Partnership Units
held by such Limited Partner at an exchange price equal to and in
the form of the Cash Amount to be paid by the Partnership. The
Exchange Right shall be exercised pursuant to a Notice of Exchange
delivered to the Partnership (with a copy to the General Partner)
by the Limited Partner who is exercising the Exchange Right (the
"Exchanging Partner"); provided, however, that the Partnership
shall not be obligated to satisfy such Exchange Right if IRET
and/or the General Partner elects to purchase the Partnership
Units subject to the Notice of Exchange pursuant to
Section 8.05(b); and provided, further, that no Limited Partner
may deliver more than two Notices of Exchange during each calendar
year. A Limited Partner may not exercise the Exchange Right for
less than 1,000 Partnership Units or, if such Limited Partner holds
less than 1,000 Partnership Units, all of the Partnership Units
held by such Partner. The Exchanging Partner shall have no right,
with respect to any Partnership Units so exchanged, to receive any
distribution paid with respect to Partnership Units if the record
date for such distribution is on or after the Specified Exchange
Date.

(b) Notwithstanding the provisions of Section 8.05(a), a Limited
Partner that exercises the Exchange Right shall be deemed to have
offered to sell the Partnership Units described in the Notice of
Exchange to the General Partner and IRET, and either of the General
Partner or IRET (or both) may, in its sole and absolute discretion,
elect to purchase directly and acquire such Partnership Units by
paying to the Exchanging Partner either the Cash Amount or the IRET
Shares Amount, as elected by the General Partner or IRET (in its
sole and absolute discretion), on the Specified Exchange Date,
whereupon the General Partner or IRET shall acquire the Partnership
Units offered for exchange by the exchanging Partner and shall be
treated for all purposes of this Agreement as the owner of such
Partnership Units. If the General Partner and/or IRET shall elect
to exercise its right to purchase Partnership Units under this
Section 8.05(b) with respect to a Notice of Exchange, they shall so
notify the Exchanging Partner within five Business Days after the
receipt b the General Partner of such Notice of Exchange. Unless
the General Partner and/or IRET (in its sole and absolute
discretion) shall exercise its right to purchase Partnership Units
from the Exchanging Partner

<PAGE>

pursuant to this Section 8.05(b), neither the General Partner nor
IRET shall have any obligation to the Exchanging Partner or the
Partnership with respect to the Exchanging Partner's exercise of
the Exchange Right. In the event the General Partner or IRET shall
exercise its right to purchase Partnership Units with respect to
the exercise of a Exchange Right in the manner described in the
first sentence of this Section 8.05(b), the Partnership shall have
no obligation to pay any amount to the Exchanging Partner with
respect to such Exchanging Partner's exercise of such Exchange
Right, and each of the Exchanging Partner, the Partnership, and the
General Partner or IRET, as the case may be, shall treat the
transaction between the General Partner or IRET, as the case may
be, and the Exchanging Partner for federal income tax purposes as
a sale of the Exchanging Partner's Partnership Units to the General
Partner or IRET, as the case may be. Each Exchanging Partner agrees
to execute such documents as the General Partner may reasonably
require in connection with the issuance of IRET Shares upon
exercise of the Exchange Right.

(c) Notwithstanding the provisions of Section 8.05(a) and 8.05(b), a
Limited Partner shall not be entitled to exercise the Exchange
Right if the delivery of IRET Shares to such Partner on the
Specified Exchange Date by the General Partner or IRET pursuant to
Section 8.05(b) (regardless of whether or not the General Partner
or IRET would in fact exercise its rights under Section 8.05(b))
would (i) result in such Partner or any other person owning,
directly or indirectly, IRET Shares in excess of the ownership
Limitation (as defined in IRET's Declaration of Trust) and
calculated in accordance therewith, except as provided in IRET's
Declaration of Trust, (ii) result in IRET Shares being owned by
fewer than 100 persons (determined without reference to any rules
of attribution), except as provided in IRET's Declaration of Trust,
(iii) result in IRET being "closely held" within the meaning of
Section 856(h) of the Code, (iv) cause IRET to own, directly or
constructively, 10% or more of the ownership interests in a tenant
of the General Partner's, the Partnership's, or a Subsidiary
Partnership's, real property, within the meaning of
Section 856(d)(2)(D) of the Code, or (v) cause the acquisition of
IRET Shares by such Partner to be "integrated" with any other
distribution of IRET Shares for purposes of complying with the
registration provisions of the Securities Act of 1933, as amended
(the "Securities Act"). The General Partner or IRET, in their
sole discretion, may waive the restriction on exchange set forth in
this Section 8.05(c); provided, however, that in the event such
restriction is waived, the Exchanging Partner shall be paid the
Cash Amount.

(d) Any Cash Amount to be paid to an Exchanging Partner pursuant to
this Section 8.05 shall be paid on the Specified Exchange Date;
provided, however, that IRET or the General Partner may elect to
cause the Specified Exchange Date to be delayed for up to an
additional 180 days to the extent required for IRET to cause
additional IRET Shares to be issued to provide financing to be used
to make such payment of the Cash Amount. Notwithstanding the
foregoing, IRET and the General Partner agree to use their best
efforts to cause the closing of the acquisition of exchanged
Partnership Units hereunder to occur as quickly as reasonably
possible.

(e) Notwithstanding any other provision of this Agreement, the General
Partner shall place appropriate restrictions on the ability of the
Limited Partners to exercise their Exchange Rights as and if deemed
necessary to ensure that the Partnership does not constitute a
"publicly traded partnership" under section 7704 of the Code. If
and when the General Partner determines that imposing such
restrictions is necessary, the General Partner shall give prompt
written notice thereof (a "Restriction Notice") to each of the
Limited Partners, which notice shall be accompanied by a copy of
an opinion of counsel to the Partnership which states that, in the
opinion of such counsel, restrictions are necessary in order to
avoid the Partnership being treated as a "publicly traded
partnership" under section 7704 of the Code.

<PAGE>

8.06 REGISTRATION.

(a) Shelf Registration of the IRET Shares. Prior to or on the first
date upon which the Partnership Units owned by any Limited Partner
may be exchanged (or such other date as may be required under
applicable provisions of the Securities Act), the Company agrees to
file with the Securities and Exchange Commission (the "Commission)
a shelf registration statement on Form S-3 under Rule 415 of the
Securities Act (a "Registration Statement"), or any similar rule
that may be adopted by the Commission, with respect to all of the
IRET Shares that may be issued upon exchange of such Partnership
Units pursuant to Section 8.05 hereof ("Exchange Shares"). IRET
will use its best efforts to have the Registration Statement
declared effective under the Securities Act. IRET need not file a
separate Registration Statement, but may file one Registration
Statement covering Exchange Shares issuable to more than one
Limited Partner. IRET further agrees to supplement or make
amendments to each Registration Statement, if required by the
rules, regulations or instructions applicable to the registration
form utilized by IRET or by the Securities Act or rules and
regulations thereunder for such Registration Statement.

(b) If a Registration Statement under subsection (a) above is not
available under the securities laws or the rules of the Commission,
or if required to permit the resale of Exchange Shares by
"Affiliates" (as defined in the Securities Act), IRET agrees to
file with the Commission a Registration Statement covering the
resale of Exchange Shares by Affiliates or others whose Exchange
Shares are not covered by a Registration Statement filed pursuant
to subsection (a) above. IRET will use its best efforts to have the
Registration Statement declared effective under the Securities Act.
IRET need not file a separate Registration Statement, but may file
one Registration Statement covering Exchange Shares issuable to
more than one Limited Partner. IRET further agrees to supplement or
make amendments to each Registration Statement, if required by the
rules, regulations or instructions applicable to the registration
form utilized by IRET or by the Securities Act or rules and
regulations thereunder for such Registration Statement.

(c) Listing on Securities Exchange. If IRET shall list or maintain
the listing of any of its shares of Beneficial Interest on any
securities exchange or national market system, it will, as
necessary to permit the registration and sale of the Exchange
Shares hereunder, list thereon, maintain and, when necessary,
increase such listing to include such Exchange Shares.

ARTICLE IX

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

9.01 PURCHASE FOR INVESTMENT.

(a) Each Limited Partner hereby represents and warrants to the
General Partner, to IRET and to the Partnership that the
acquisition of his Partnership Interests is made as a principal
for its account for investment purposes only and not with a view to
the resale or distribution of such Partnership Interest.

(b) Each Limited Partner agrees that he will not sell, assign or
otherwise transfer his Partnership Interest or any fraction
thereof, whether voluntarily or by operation of law or at judicial
sale or otherwise, to any Person who does not make the
representations and warranties to the General Partner set forth in
Section 9.01(a) above and similarly agree not to sell, assign or
transfer such

<PAGE>

Partnership Interest or fraction thereof to any Person who does
not similarly represent, warrant and agree.

9.02 RESTRICTIONS ON TRANSFER OF LIMITED PARTNERSHIP INTERESTS.

(a) Subject to the provisions of 9.02(b), (c) and (d), a Limited
Partner may offer, sell, assign, hypothecate, pledge or otherwise
transfer all or any portion of his Limited Partnership Interest, or
any of such Limited Partner's economic rights as a Limited Partner,
whether voluntarily or by operation of law or at judicial sale or
otherwise (collectively, a "Transfer") with or without the consent
of the General Partner. The General Partner may require, as a
condition of any Transfer, that the transferor assume all costs
incurred by the Partnership in connection therewith.

(b) No Limited Partner may effect a Transfer of its Limited
Partnership Interest, in whole or in part, if, in the opinion of
legal counsel for the Partnership, such proposed Transfer would
require the registration of the Limited Partnership Interest under
the Securities Act of 1933, as amended, or would otherwise violate
any applicable federal or state securities or blue sky law
(including investment suitability standards).

(c) No transfer by a Limited Partner of its Partnership Units, in whole
or in part, may be made to any Person if (i) in the opinion of
legal counsel for the Partnership, the transfer would result in the
Partnership's being treated as an association taxable as a
corporation (other than a qualified IRET subsidiary within the
meaning of Section 856(i) of the Code), (ii) in the opinion of
legal counsel for the Partnership, it would adversely affect the
ability of IRET to continue to qualify as a REIT or subject IRET
to any additional taxes under Section 857 or section 4981 of the
Code, or (iii) such transfer is effectuated through an "established
securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the
Code.

(d) No transfer of any Partnership Units may be made to a lender to
the Partnership or any Person who is related (within the meaning of
Regulations Section 1.752-4(b)) to any lender to the Partnership
whose loan constitutes a nonrecourse liability (within the meaning
of Regulations Section 1.752-1(a)(2)), without the consent of the
General Partner, which may be withheld in its sole and absolute
discretion, provided that as a condition to such consent the lender
will be required to enter into an arrangement with the Partnership
and the General Partner to exchange or redeem for the Cash Amount
any Partnership Units in which a security interest is held
simultaneously with the time at which such lender would be deemed
to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.

(e) Any Transfer in contravention of any of the provisions of this
Article IX shall be void and ineffectual and shall not be binding
upon, or recognized by, the Partnership.

9.03 ADMISSION OF SUBSTITUTE LIMITED PARTNER.

(a) Subject to the other provisions of this Article IX, an assignee of
the Limited Partnership Interest of a Limited Partner (which shall
be understood to include any purchaser, transferee,

<PAGE>

donee, or other recipient of any disposition of such Limited
Partnership Interest) shall be deemed admitted as a Limited Partner
of the Partnership only upon the satisfactory completion of the
following:

The assignee shall have accepted and agreed to be bound by the
terms and provisions of this Agreement by executing a counterpart
or an amendment thereof, including a revised Exhibit A, and such
other documents or instruments as the General Partner may require
in order to effect the admission of such Person as a Limited
Partner.

(ii) To the extent required, an amended Certificate evidencing
the admission of such Person as a Limited Partner shall
have been signed, acknowledged and filed for record in
accordance with the Act.

(iii) The assignee shall have delivered a letter containing the
representation set forth in Section 9.01(a) hereof and
the agreement set forth in Section 9.01(b) hereof.

(iv) If the assignee is a corporation, partnership or trust,
the assignee shall have provided the General Partner with
evidence satisfactory to counsel or the Partnership of
the assignee's authority to become a Limited Partner
under the terms and provisions of this Agreement.

(v) The assignee shall have executed a power of attorney
containing the terms and provisions set forth in
Section 8.02 hereof.

(vi) The assignee shall have paid all reasonable legal fees of
the Partnership and the General Partner and filing and
publication costs in connection with its substitution as
a Limited Partner.

(vii) The assignee has obtained the prior written consent of
the General Partner to its admission as a Substitute
Limited Partner, which consent may be given or denied
in the exercise of the General Partner's sole and
absolute discretion.

(b) For the purpose of allocating Profits and Losses and distributing
cash received by the Partnership, a Substitute Limited Partner
shall be treated as having become, and appearing in the records
of the Partnership as, a Partner upon the filing of the Certificate
described in Section 9.03(a)(ii) hereof or, if no such filing is
required, the later of the date specified in the transfer documents
or the date on which the General Partner has received all necessary
instruments of transfer and substitution.

(c) The General Partner shall cooperate with the Person seeking to
become a Substitute Limited Partner by preparing the documentation
required by this Section and making all official filings and
publications. The Partnership shall take all such action as
promptly as practicable after the satisfaction of the conditions
in this Article-IX to the admission of such Person as a Limited
Partner of the Partnership.

9.04 RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS.

(a) Subject to the provisions of Sections 9.01 and 9.02 hereof, except
as required by operation of law, the Partnership shall not be
obligated for any purposes whatsoever to recognize the assignment
by any Limited Partner of its Partnership Interest until the
Partnership has received notice thereof.

<PAGE>

(b) Any Person who is the assignee of all or any portion of a Limited
Partner's Limited Partnership Interest, but does not become a
Substitute Limited Partner and desires to make a further assignment
of such Limited Partnership Interest, shall be subject to all the
provisions of this Article IX to the same extent and in the same
manner as any Limited Partner desiring to make an assignment of
its Limited Partnership Interest.

9.05 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A LIMITED
PARTNER. The occurrence of an Event of Bankruptcy as to a Limited Partner, the
death of a Limited Partner or a final adjudication that a Limited Partner is
incompetent (which term shall include, but not be limited to, insanity) shall
not cause the termination or dissolution of the Partnership, and the business of
the Partnership shall continue if an order for relief in a bankruptcy proceeding
is entered against a Limited Partner, the trustee or receiver of his estate or,
if he dies, his executor, administrator or trustee, or, if he is finally
adjudicated incompetent, his committee, guardian or conservator, shall have the
rights of such Limited Partner for the purpose of settling or managing his
estate property and such power as the bankrupt, deceased or incompetent Limited
Partner possessed to assign all or any part of his Partnership Interest and to
join with the assignee in satisfying conditions precedent to the admission of
the assignee as a Substitute Limited Partner.

9.06 JOINT OWNERSHIP OF INTERESTS. A Partnership Interest may be acquired
by two individuals as joint tenants with right of survivorship, provided that
such individuals either are married or are related as spouse, child, grandchild,
parent or grandparent to one another. The written consent or vote of both
owners of an such jointly held Partnership Interest shall be required to
constitute the action of the owners of such Partnership Interest; provided,
however, that the written consent of only one joint owner will be required if
the Partnership has been provided with evidence satisfactory to the counsel for
the Partnership that the actions of a single joint owner can bind both owners
under the applicable laws of the state of residence of such joint owners. Upon
the death of one owner of a Partnership Interest held in a joint tenancy with a
right of survivorship, the Partnership Interest shall become owned solely by the
survivor as a Limited Partner and not as an assignee. The Partnership need not
recognize the death of one of the owners of a jointly-held Partnership Interest
until it shall have received notice of such death. Upon notice to the General
Partner from either owner, the General Partner shall cause the Partnership
Interest to be divided into two equal Partnership Interests, which shall
thereafter be owned separately by each of the former owners. Partnership
interests may also be owned as tenants in common.

ARTICLE X

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

10.01 BOOKS AND RECORDS. At all times during the continuance of the
Partnership, the Partners shall keep or cause to be kept at the Partnership's
specified office true and complete books of account in accordance with generally
accepted accounting principles, including: (a) a current list of the full name
and last known business address of each Partner, (b) a copy of the Certificate
of Limited Partnership and all certificates of amendment thereto, (c) copies of
the Partnership's federal, state and local income tax returns and reports,
(d) copies of the Agreement and an financial statements of the Partnership for
the three most recent years and all documents and information required under
the Act. Any Partner or its duly authorized representative, upon paying the
costs of collection, duplication and mailing, shall be entitled to inspect or
copy such records during ordinary business hours.

10.02 CUSTODY OF PARTNERSHIP FUNDS; BANK ACCOUNTS.

(a) All funds of the Partnership not otherwise invested shall be
deposited in one or more accounts maintained in such banking or
brokerage institutions as the General Partner shall determine,
and withdrawals shall be made only on such signature or signatures
as the General Partner may, from time to time, determine.

<PAGE>

(b) All deposits and other funds not needed in the operation of the
business of the Partnership may be invested by the General Partner
in investment grade instruments (or investment companies whose
portfolio consists primarily thereof), government obligations,
certificates of deposit, bankers' acceptances and municipal notes
and bonds. The funds of the Partnership shall not be commingled
with the funds of any other Person except for such commingling as
may necessarily result from an investment in those investment
companies permitted by this Section 10.02(b).

10.03 FISCAL AND TAXABLE YEAR. The fiscal and taxable year of the
Partnership shall be from May 1st to April 30th.

10.04 ANNUAL TAX INFORMATION AND REPORT. Within 75 days after the end of
each fiscal year of the Partnership, the General Partner shall furnish to each
person who was a Limited Partner at any time during such year the tax
information necessary to file such Limited Partner's individual tax returns as
shall be reasonably required by law.

10.05 TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS.

(a) The General Partner shall be the Tax Matters Partner of the
Partnership within the meaning of Section 6231(a)(7) of the Code.
As Tax Matters Partner, the General Partner shall have the right
and obligation to take all actions authorized and required,
respectively, by the Code for the Tax Matters Partner. The General
Partner shall have the Right to retain professional assistance in
respect of any audit of the Partnership by the Service and all
out-of-pocket expenses and fees incurred by the General Partner on
behalf of the Partnership as Tax Matters Partner shall constitute
Partnership expenses. In the event the General Partner receives
notice of a final Partnership adjustment under Section 6223(a)(2)
of the Code, the General Partner shall either (i) file a court
petition for judicial review of such final adjustment within the
period provided under Section 6226(a) of the Code, a copy of which
petition shall be mailed to all Limited Partners on the date such
petition is filed, or (ii) mail a written notice to all Limited
Partners, within such period, that describes the General Partner's
reasons for determining not to file such a petition.

(b) All elections required or permitted to be made by the Partnership
under the Code or any applicable state or local tax law shall be
made by the General Partner in its sole discretion.

(c) In the event of a transfer of all or any part of the Partnership
Interest of any Partner, the Partnership, at the option of the
General Partner, may elect pursuant to Section 754 of the Code to
adjust the basis of the Properties. Notwithstanding anything
contained in Article V of this Agreement, any adjustments made
pursuant to Section 754 shall affect only the successor in interest
to the transferring Partner and in no event shall be taken
into account in establishing, maintaining or computing Capital
Accounts for the other Partners for any purpose under this
Agreement. Each Partner will furnish the Partnership with all
information necessary to give effect to such election.

10.06 REPORTS TO LIMITED PARTNERS.

(a) As soon as practicable after the close of each fiscal quarter
(other than the last quarter of the fiscal year), the General
Partner shall cause to be mailed to each Limited Partner a
quarterly report containing financial statements of the Partnership
or of IRET if such statements are prepared solely on a consolidated
basis with IRET, for such fiscal quarter, presented in accordance
with generally accepted accounting principles. As soon as
practicable after the close of each fiscal year, the General
Partner shall cause to be mailed to each Limited Partner

<PAGE>

an annual report containing financial statements of the
Partnership, or of IRET if such statements are prepared solely on
a consolidated basis with IRET, for such fiscal year, presented in
accordance with generally accepted accounting principles. The
annual financial statements shall be audited by accountants
selected by the General Partner.

(b) Any Partner shall further have the right to a private audit of the
books and records of the Partnership, provided such audit is made
for Partnership purposes, at the expense of the Partner desiring it
and is made during normal business hours.

ARTICLE XI

AMENDMENT OF AGREEMENT

The General Partner's consent shall be required for any amendment to this
Agreement. The General Partner, without the consent of the Limited Partners, may
amend this Agreement in any respect; provided, however, that the following
amendments shall require the consent of Limited Partners (other than IRET)
holding more than 50% of the Percentage Interests of the Limited Partners (other
than IRET):

(a) any amendment affecting the operation of the Conversion Factor or
the Exchange Right (except as provided in Section 8.05(d) or
7.01(d) hereof) in a manner adverse to the Limited Partners;

(b) any amendment that would adversely affect the rights of the
Limited Partners to receive the distributions payable to them
hereunder, other than with respect to the issuance of additional
Partnership Units pursuant to Section 4.02 hereof;

(c) any amendment that would alter the Partnership's allocations of
Profit and Loss to the Limited Partners, other than with respect
to the issuance of additional Partnership Units pursuant to
Section 4.02 hereof; or

(d) any amendment that would impose on the Limited Partners any
obligation to make additional Capital Contributions to the
Partnership.

ARTICLE XII

GENERAL PROVISIONS

12.01 NOTICES. All communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or upon deposit in the United States mail, registered,
postage prepaid return receipt requested, to the Partners at the addresses set
forth in Exhibit A attached hereto; provided, however, that any Partner may
specify a different address by notifying the General Partner in writing of such
different address. Notices to the Partnership shall be delivered at or mailed to
its specified office.

12.02 SURVIVAL OF RIGHTS. Subject to the provisions hereof limiting
transfers, this Agreement shall be binding upon and inure to the benefit of the
Partners and the Partnership and their respective legal representatives,
successors, transferees and assigns.

12.03 ADDITIONAL DOCUMENTS. Each Partner agrees to perform all further
acts and execute, swear to, acknowledge and deliver all further documents which
may be reasonable, necessary, appropriate or desirable to carry out the
provisions of this Agreement or the Act.

<PAGE>

12.04 SEVERABILITY. If any provision of this Agreement shall be declared
illegal, invalid, or unenforceable in any jurisdiction, then such provision
shall be deemed to be severable from this agreement (to the extent permitted by
law) and in any event such illegality, invalidity or unenforceability shall not
affect the remainder hereof.

12.05 ENTIRE AGREEMENT. This Agreement and exhibits attached hereto
constitute the entire Agreement of the Partners and supersede all prior written
agreements and prior and contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof.

12.06 PRONOUNS AND PLURALS. When the context in which words are used in
the Agreement indicates that such is the intent, words in the singular number
shall include the plural and the masculine gender shall include the neuter or
female gender as the context may require.

12.07 HEADINGS. The Article headings or sections in this Agreement are for
convenience only and shall not be used in construing the scope of this Agreement
or any particular Article.

12.08 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one and the same instrument binding on all
parties hereto, notwithstanding that all parties shall not have signed the same
counterpart.

12.09 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Dakota.

GENERAL PARTNER
IRET, INC.

BY__________________________________
Timothy P. Mihalick, Secretary

INITIAL LIMITED PARTNER

____________________________________
Thomas A. Wentz, Sr.

<PAGE>

IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

EXHIBIT A

INITIAL PARTNERS AND PERCENTAGE OWNERSHIP

Percentage
GENERAL PARTNER: Ownership
- --------------- ----------

IRET, Inc.
12 South Main
Minot, ND 58701
(As a "Qualified Real Estate Investment Trust
Subsidiary" of Investors Real Estate Trust, a
North Dakota Business Trust, whose tax
identification number is 45-0311232) *________%

INITIAL LIMITED PARTNER:
- -----------------------

Thomas A. Wentz, Sr.
505 8th Avenue SE
Minot, ND 58701
ID# ###-##-#### **________%

100%
----
----

*Representing a contribution of properties with an agreed fair market value of
$____________, subject to liabilities of $______________, for a net contribution
of $______________.

**Representing a contribution of $1,000 cash.

<PAGE>

IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

EXHIBIT B

INITIAL ASSETS AND LIABILITIES OF THE PARTNERSHIP

The sum of $1,000 cash contribued by the initial limited partner and all of
the assets, subject to all of the liabilities, of Investors Real Estate Trust, a
North Dakota Business Trust, as the same shall exist at the close of business on
January 31, 1997.

<PAGE>

IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

EXHIBIT C

EXCHANGE NOTICE

In accordance with Section 8.05 of the Agreement of Limited Partnership of
IRET PROPERTIES, a North Dakota Limited Partnership (the "Agreement"), the
undersigned hereby irrevocably (i) presents for exchange __________ Partnership
Units in IRET PROPERTIES, a North Dakota Limited Partnership, in accordance with
the terms of the Agreement and the Exchange Right referred to in Section 8.05
thereof, (ii) surrenders such Partnership Units and all right, title and
interest therein, and (iii) directs that the Cash Amount or IRET Shares Amount
(as defined in the Agreement) as determined by the General Partner deliverable
upon exercise of the Exchange Right be delivered to the address specified below,
and if IRET Shares (as defined in the Agreement) are to be delivered, such IRET
Shares be registered or placed in the name(s) and at the address(es) specified
below.

Dated: ___________________________

Names of Limited Partners:

____________________________________
(Signatures of Limited Partners)

If IRET Shares are to be issued,
issue to:

____________________________________
Name(s)

____________________________________
(Mailing Address)

____________________________________
(City) (State) (Zip Code)

Please insert Social Security or tax
identification number:

____________________________________

Signature Guaranteed by:

____________________________________

<PAGE>

February 12, 1997

EXHIBIT EX-5
OPINION RE LEGALITY

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11 DATED FEBRUARY 12, 1997

In connection with the filing of Form S-11 by Investors Real Estate Trust, we
advise you that we have examined and are familiar with the originals of all
documents, trust records and other instruments relating to the organization
of Investors Real Estate Trust, the authorization and issuance of the shares
of Beneficial Interest described in said application, including the following:

1. Restated Declaration of Trust of Investors Real Estate Trust dated
October 22, 1996.

2. Registration Statement (Form S-11).

From our examination of said documents and records, it is our opinion:

1. Investors Real Estate Trust has been duly organized and is a
validly existing business trust under the laws of the State of
North Dakota.

2. Investors Real Estate Trust has the power under North Dakota law to
conduct the business activities described in the Trust Agreement
and said Prospectus.

3. Investors Real Estate Trust is authorized to issue an unlimited
number of its shares of Beneficial Interest as set forth in its
Trust Agreement and such shares conform to the statements made
about them in said Form S-11 and Prospectus.

4. Said shares of Beneficial Interest have been duly and validly
authorized and issued.

5. We are not aware, and Investors Real Estate Trust has advised us
that it is not aware of any legal or governmental proceedings
pending or threatened to which Investors Real Estate Trust is a
party or which the property thereof is the subject; and it and we
do not know of any contracts of a character to be disclosed on said
application or prospectus which are not disclosed, filed and
properly summarized therein.

<PAGE>

6. Said Form S-11 and the Prospectus and other exhibits attached
thereto are in the form required and have been examined by us; we
have no reason to believe that any of said documents contain any
untrue statement of material fact or omits to state any material
fact the statements therein not misleading. We have reviewed said
documents and to the best of our knowledge, information and belief,
the statements contained therein are correct.

PRINGLE & HERIGSTAD, P.C.

By /s/ Thomas A. Wentz, Jr.
------------------------
Thomas A. Wentz, Jr.

kak

<PAGE>

February 12, 1997

EXHIBIT EX-8
OPINION RE TAX MATTERS

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11 DATED FEBRUARY 12, 1997 - TAX MATTERS

In connection with the filing of the above described Form S-11 by Investors
Real Estate Trust, we advise you that we have prepared the section of the
Prospectus entitled "Tax Treatments of the Trust and Its Security Holders",
including the following subcategories: Federal Income Tax, North Dakota
Income Tax, Taxation of the Trust's Shareholders, Taxation of Tex-Exempt
Shareholders, Tax Considerations for Foreign Investors, Backup Withholding,
State and Local Taxes, Other Tax Considerations, Tax Aspects of the Operating
Partnership, Classification as a Partnership and Income Taxation of the
operating Partnership and Its Partners.

In conncection with the preparation of said portion of the filing, we have
examined and are familiar with the originals of all documents, trust records
and other instruments relating to the organization and operation of Investors
Real Estate Trust, IRET Properties, a North Dakota Limited Partnership, and
all other related entities described in the filing.

In addition, we have reviewed all applicable provisions of the Internal
Revenue Code, the regulations issued thereunder and, where appropriate,
revenue rulings, federal and state court decisions and such other materials
as we deemed necessary and relevant to the matters being opined upon.

The conclusions and statements made in the above described portions of the
S-11 filing represent our opinions on such matters and have been set forth
with our knowledge and consent. The above portions of the Prospectus are
hereby incorporated by reference.

PRINGLE & HERIGSTAD, P.C.

By /S/ THOMAS A. WENTZ, JR.
------------------------------
Thomas A. Wentz, Jr.

kak

<PAGE>
EX-23(i)

February 12, 1997

UNITED STATES SECURITIES AND
EXCHANGE COMMISSIONER
WASHINGTON DC 20549

FORM S-11 REGISTRATION STATEMENT
INVESTORS REAL ESTATE TRUST CIK0000798359

TO WHOM IT MAY CONCERN:

We consent to the incorporation directly or by reference in this Registration
Statement of Investors Real Estate Trust, on Form S-11 of our opinion letter
dated February 12, 1997, concerning the opinion of legality. We also consent
to the reference to us under the heading "Experts" in the Prospectus, which
is also part of this Registration Statement.

PRINGLE & HERIGSTAD, P.C.

/s/ Thomas A. Wentz, Jr.
Thomas A. Wentz, Jr.

kak

<PAGE>
EX-23(ii)

BRADY
MARTZ
- ----------------------------
CERTIFIED PUBLIC ACCOUNTANTS

UNITED STATES SECURITIES AND
EXCHANGE COMMISSIONER
WASHINGTON DC 20549

RE: FORM S-11 REGISTRATION STATEMENT
INVESTORS REAL ESTATE TRUST CIK0000798359

TO WHOM IT MAY CONCERN:

We hereby consent to the incorporation directly or by reference in the
Registration Statement of Investors Real Estate Trust on Form S-11, of the
consolidated financial statements and additional information of Investors
Real Estate Trust and Affiliated Partnerships as of April 30, 1996, as well
as our Independent Auditor's Report dated May 20, 1996. We also consent to
the reference to us under the heading "Experts" in the Prospectus, which is
part of the Registration Statement.

We also acknowledge that we are aware that said Form S-11 Filing includes the
unaudited consolidated financial report of the Registrant for the six-month
period ended October 31, 1996.

BRADY MARTZ & ASSOCIATES, P.C.

February 12, 1997

BRADY, MARTZ & ASSOCIATES, P.C.
24 West Central P.O. Box 848
Minot, ND 58702-0848 (701) 852-0196 Fax (701) 839-5452

OTHER OFFICES: Grand Forks, ND Bismarck, ND
Devils Lake, ND Thief River Falls, MN

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENT ATTACHED HERETO AS EXHIBIT F FOR THE 6-MONTH PERIOD ENDED
OCTOBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH EXHIBIT
F.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,344,519
<SECURITIES> 4,754,332
<RECEIVABLES> 2,741,154
<ALLOWANCES> 197,096
<INVENTORY> 0
<CURRENT-ASSETS> 8,839,949
<PP&E> 147,288,224
<DEPRECIATION> 14,773,341
<TOTAL-ASSETS> 143,769,442
<CURRENT-LIABILITIES> 2,534,382
<BONDS> 79,214,615
6,991,458
0
<COMMON> 58,950,599
<OTHER-SE> (3,921,613)
<TOTAL-LIABILITY-AND-EQUITY> 143,769,442
<SALES> 0
<TOTAL-REVENUES> 10,440,502
<CGS> 0
<TOTAL-COSTS> 5,000,905
<OTHER-EXPENSES> 358,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,054,669
<INCOME-PRETAX> 2,026,261
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,026,261
<DISCONTINUED> 0
<EXTRAORDINARY> 250,062
<CHANGES> 0
<NET-INCOME> 2,278,323
<EPS-PRIMARY> .17
<EPS-DILUTED> .17

</TABLE>

<PAGE>

EX-99
Investors Real Estate Trust

SUBSCRIPTION AGREEMENT

AMOUNT $__________________ NUMBER OF COMMON SHARES ________________

OWNERSHIP Name(s) ______________________________________________________
REGISTRATION: (investor(s) names)
Address ______________________________________________________

City ___________________________ State _______ Zip ___________

Social Security Number ____-____-____ or Tax I.D.# ___-______
Date of Birth ____/____/____

Under penalties of perjury, the undersigned certified (1) that the number shown
as his taxpayer identification
number is his correct taxpayer identification number and (2) that he is not
subject to back up withholding
either because he has not been notified that he is subject to backup withholding
as a result of a failure to
report all interest and dividends or because the Internal Revenue Service has
notified him that he is no longer
subject to backup withholding.
- --------------------------------------------------------------------------------
MAILING ADDRESS Name(s)_____________________________________________________
FOR CORRES- _____________________________________________________
PONDENCE AND CASH Address_____________________________________________________
DISTRIBUTIONS City ____________________________ State _______ Zip ________
(If different
from above)
- --------------------------------------------------------------------------------
TITLE TO ___Individual ___Tenants in Common ___IRA ___Partnership
BE HELD: ___Joint Tenants/ ___Corporation ___Trust ___Pension Plan
Rights of Survivorship ___Marital Property ___Custodian
___Profit Sharing
- --------------------------------------------------------------------------------
SIGNATURES: I hereby certify as follows: That a copy of the Prospectus,
including the Subscription Agreement attached thereto, as amended
and/or supplemented to date, has been delivered to me, and I
acknowledge that such Prospectus was received.

Executed this ___ day of _________, 199___, at ___________(city)
____ (state).

Signature (investor's, otherwise Trustee of IRA, Pension Plan,
etc.) ____________________

Additional Signature (if joint tenant) __________________________
- --------------------------------------------------------------------------------
The undersigned hereby represents that it has reasonable grounds to believe on
the basis of information obtained from the above-named investor concerning
his-her investment objectives, other investments, financial situation and needs,
and any other information known by it that:

A. The above-named investor is or will be in a financial position appropriate
to enable him-her to realize, to a significant extent, the benefits
discussed in the Prospectus;
B. The above-named investor has a fair market net worth sufficient to sustain
the risks inherent in the Shares, including loss of investment and lack of
liquidity; and
C. The Shares are otherwise suitable for the above-named investor. I further
represent that prior to executing this purchase transaction, I informed the
above-named investor of all pertinent facts relating to the liquidity of
the Shares.
- --------------------------------------------------------------------------------
SOLICITING Firm ____________________________________________________________
DEALER
ENDORSEMENT: Registered Representative _______________________ Phone _________

Address _________________________________________________________

Dealer Authorized Signature _____________________________________

NOTE: Checks to be made payable to: INVESTORS REAL ESTATE TRUST, 12
SOUTH MAIN ST., MINOT, ND 58701
- --------------------------------------------------------------------------------
Accepted by: INVESTORS REAL ESTATE TRUST

By: ODELL-WENTZ & ASSOCIATES Date _________________
(Advisor)