INVESTORS REAL ESTATE TRUST, S-11, 1997-11-26

INVESTORS REAL ESTATE TRUST
S-11, 1997-11-26
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. X

CALCULATION OF REGISTRATION FEE

<TABLE>
Proposed Maximum Proposed Maximum
Title of securities Amount to be Proposed Maximum aggregate offering Amount of
to be registered registered per unit price registration fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Real 2,500,000 shares $7.45 per share $18,625,000.00 $6,422.46
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 1 of 233
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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 & 3
2 Inside Cover Page of Prospectus....................................3, 4 & 5
3 Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges....................................................10 to 21
4 Determination of Offering Price..........................................32
5 Dilution.................................................................33
6 Selling Security Holders................................................N/A
7 Plan of Distribution...............................................33 to 34
8 Use of Proceeds....................................................34 to 36
9 Selected Financial Data.............................................36 & 37
10 Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................38 to 45
11 General Information as to Investors Real Estate Trust..............45 to 48
12 Policy with Respect to Certain Activities..........................48 to 51
13 Investment Policies of Investors Real Estate Trust.................51 to 52
14 Description of Real Estate.........................................52 to 56
15 Tax Treatment of the Trust and Its Security Holders................62 to 74
16 Market Price Of and Dividends on the Trust's Shares of Beneficial
Interest.........................................................74 to 77
17 Description of the Trust's Securities....................................77
18 Legal Proceedings.......................................................N/A
19 Security Ownership of Certain Beneficial Owners
and Management...................................................77 to 80
20 Directors and Executive Officers...................................78 to 80
21 Executive Compensation..............................................80 & 81
22 Certain Relationships and Related Transactions.....................80 to 84
23 Selection, Management and Custody of Trust's Investments.................84
24 Policies with Respect to Certain Transactions.......................84 & 85
25 Limitations of Liability...........................................85 to 87
26 Financial Statements and Information..............................93 to 137
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.............................138
31 Sales to Special Parties................................................138
32 Recent Sales of Unregistered Securities...........................138 & 139
33 Indemnification of Directors and Officers...............................139
34 Treatment of Proceeds from Stock Being Registered.......................139
35 Financial Statements and Exhibits................................139 to 141
36 Undertakings.....................................................141 to 143

Page 2 of 233

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Effective Date: ______________, 1997 ___________CST
Prospectus

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

FOR 2,000,000 SHARES OF BENEFICIAL INTEREST
OF INVESTORS REAL ESTATE TRUST WITHOUT PAR VALUE
MINIMUM PURCHASE: 100 SHARES ($745.00)(1)
OFFERING PRICE: $7.45 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.2 The Trust is a North Dakota Real Estate Investment
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."
Since October 17, 1997, the shares have been listed and traded on the NASDAQ
small cap market. See "Market Price Of and Dividends On the Trust's Shares
Of Beneficial Interest."

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 INTENDS TO BORROW 70% OF THE COST OF REAL ESTATE PURCHASED
OR CONSTRUCTED.

- THE PUBLIC TRADING MARKET FOR THE SHARES HAS ONLY RECENTLY
DEVELOPED, AND THERE IS NO ASSURANCE THAT IT WILL CONTINUE.

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

1 Page 3 of 233
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- THE ESTIMATED BOOK VALUE OF TRUST SHARES AFTER THIS OFFERING WILL
BE $4.39. A PURCHASER PAYING $7.45 PER SHARE WILL INCUR AN
IMMEDIATE BOOK VALUE DILUTION OF $3.06 PER SHARE.

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

- THE SHARE PRICE IS ARBITRARILY DETERMINED.

- THE ADVISOR AND ITS AFFILIATES ARE OR MAY 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(3) SELLING COMMISSION(4) PROCEEDS TO TRUST(5)
- ------------------------------------------------------------------------------
PER SHARE $7.45 $.60 $6.85
- ------------------------------------------------------------------------------
TOTAL $14,900,000 $1,200,000 $13,700,000
- ------------------------------------------------------------------------------

The Trust has registered 2,500,000 of its shares of Beneficial Interest no
par value per share, of which 500,000 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) Except in Minnesota where the minimum purchase shall be 335.57 shares
or $2,500 or 268.45 shares or $2,000 for retirement plan purchases. In
addition, a purchaser who is a Minnesota resident must meet the following
suitability requirements:

1) Either individually or with a spouse has an annual gross income of at
least $60,000 during the previous calendar year, have a net worth of
at least $60,000 (exclusive of principal residence and its furnishings
and automobile), and are purchasing shares for only the investors own
account or retirement plan.

2) Either individually or with a spouse have a net worth of at least
$225,000 (exclusive of the principal residence and its furnishings and
automobiles), and are purchasing shares for only the investors own
account or retirement plan.

(2) 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.

(3) 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."

2 Page 4 of 233
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(4) The Trust will pay the securities broker-dealers a commission of 8%
(approximately $.60 per share) for the shares of Beneficial Interest sold by
them. In no event shall the commissions payable exceed this amount.

(5) 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 a
minimum of $51,000 and a maximum of $349,000 for legal fees, advertising,
printing, promotion, registration fees and accounting fees. See Risk Factors -
Front-End Fees.

3 Page 5 of 233
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TABLE OF CONTENTS

PROSPECTUS PAGE
---------------
SUMMARY OF THE OFFERING...................................................8-19

THE TRUST...................................................................20

BUSINESS OBJECTIVES.........................................................22
Portfolio Mix..........................................................22
Leverage...............................................................22

AVAILABLE INFORMATION CONCERNING THE TRUST..................................22
Securities and Exchange Commission.....................................22
Reports to Security Holders............................................23
Incorporation by Reference.............................................23

RISK FACTORS................................................................23
Price of Shares Arbitrarily Determined.................................23
High Leverage..........................................................23
Failure to Qualify as a Real Estate Investment Trust...................23
Best Efforts Sale......................................................24
Business Environment...................................................24
Risks Related to Mortgage Lending......................................24
Relationship with Advisor..............................................25
Conflict of Interest...................................................25
Environmental Liability................................................26
Competition............................................................26
Liquidity..............................................................26
Affiliated Limited Partnerships........................................26
Front-End Fees.........................................................27

COMPENSATION TABLE..........................................................27

CONFLICTS OF INTEREST.......................................................28
Transactions with Affiliates and Related Parties.......................29
Compensation to the Advisor and Conflicts of Interest..................29
Competition by the Trust with Affiliates...............................29
Non-Arm's Length Agreements............................................30
Lack of Separate Representation........................................30

DETERMINATION OF OFFERING PRICE.............................................30

DILUTION....................................................................31

PLAN OF DISTRIBUTION........................................................31

USE OF PROCEEDS.............................................................32

SELECTED FINANCIAL DATA - ANNUAL............................................34

4 Page 6 of 233
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TWO YEAR SELECTED FINANCIAL DATA - QUARTERLY RESULTS........................34

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..............................................34
General................................................................34
Results of Operations..................................................34
Six Months Ended October 31, 1997...................................34
Fiscal Year 1997 Compared to Fiscal Year 1996.......................38
Fiscal Year 1996 Compared to Fiscal Year 1995.......................41

GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST.......................43
Organization of Trust..................................................43
Governing Instruments of Trust.........................................43
Independent Trustees...................................................43
Shareholder Meetings...................................................45

STRUCTURE OF THE TRUST......................................................45

POLICY WITH RESPECT TO CERTAIN ACTIVITIES...................................46
To Issue Senior Securities.............................................46
To Borrow Money........................................................46
To Make Loans To Other Persons.........................................47
Mortgage Loans Receivable - Unrelated..................................47
To Invest in the Securities of Other Issuers for the Purpose of
Exercising Control...............................................47
Consolidated Partnerships .............................................48
To Underwrite Securities of Other Issuers..............................48
To Engage in the Purchase and Sale (or Turnover) of Investments........48
To Offer Securities in Exchange for Property...........................48
To Repurchase or Otherwise Reacquire Its Shares or Other Securities....49
To Make Annual and Other Reports to Shareholders.......................49

INVESTMENT POLICIES OF THE TRUST............................................49
Investments in Real Estate or Interests in Real Estate.................49
Investments in Real Estate Mortgages...................................50
Investments in Other Securities........................................50
Investments in Securities Of or Interests In Persons Primarily
Engaged in Real Estate Activities................................50

DESCRIPTION OF REAL ESTATE..................................................50
INVESTMENT PORTFOLIO - INVESTORS REAL ESTATE TRUST
AS OF SEPTEMBER 30, 1997.........................................50
Real Estate Owned......................................................50
Title..................................................................54
Insurance..............................................................54
Planned Improvements...................................................54
Contracts or Options to Sell...........................................54
Occupancy and Leases...................................................54

SHARES AVAILABLE FOR FUTURE SALE............................................54

5 Page 7 of 233
<PAGE>

OPERATING PARTNERSHIP AGREEMENT.............................................55
Management.............................................................56
Transferability of Interests...........................................56
Capital Contribution...................................................57
Exchange Rights........................................................58
Registration Rights....................................................58
Operations.............................................................58
Distributions..........................................................59
Allocations............................................................59
Term...................................................................59
Fiduciary Duty.........................................................59
Tax Matters............................................................59

TAX TREATMENT OF THE TRUST AND ITS SECURITY HOLDERS.........................60
Federal Income Tax.....................................................60
North Dakota Income Tax................................................61
Taxation of the Trust's Shareholders...................................62
Taxation of Tax-Exempt Shareholders....................................62
Tax Considerations for Foreign Investors...............................63
Backup Withholding.....................................................63
State and Local Taxes..................................................64
Other Tax Considerations...............................................64
Tax Aspects of the Operating Partnership...............................64
Classification as a Partnership........................................65
Income Taxation of the Operating Partnership and Its Partners..........66

ERISA CONSIDERATIONS........................................................69

MARKET PRICE OF AND DIVIDENDS ON THE TRUST'S SHARES OF BENEFICIAL
INTERESTS..............................................................72
Market for the Registrant's Common Stock and Related Security
Holder Matters...................................................72
Dividend History.......................................................73

DIVIDEND REINVESTMENT PLAN..................................................74

DESCRIPTION OF THE TRUST'S SECURITIES.......................................75
Description of Shares of Beneficial Interest...........................75
Restrictions on Transfer...............................................75

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............75

EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...78

ADVISORY AGREEMENT..........................................................79
Basic Compensation.....................................................80
Additional Compensation................................................81
Limitation.............................................................81
Roger R. Odell.........................................................81
Thomas A. Wentz, Sr....................................................82

6 Page 8 of 233
<PAGE>

SELECTION, MANAGEMENT AND CUSTODY OF TRUST'S INVESTMENTS....................82
Management of Trust's Investments......................................82

POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS...............................82

LIMITATIONS OF LIABILITY....................................................83

LEGAL MATTERS...............................................................85

EXPERTS.....................................................................85

GLOSSARY OF TERMS...........................................................86

CONSOLIDATED FINANCIAL STATEMENTS - AS OF APRIL 30, 1997 AND 1996
AND INDEPENDENT AUDITOR'S REPORT......................................F-1
- SIX MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED)......................F-40

7 Page 9 of 233

<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 2,000,000 shares of Beneficial
Interest. The shares are being sold on a best efforts basis with no minimum or
maximum amount required to be sold. The share price is $7.45 per share of which
8% (approximately $.60) shall be paid to the selling agent and the balance
(approximately $6.85) 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, Minnesota, Colorado,
Illinois, Florida and such other states as may be added by a supplement to this
Prospectus. In the following states, the stated disclaimers apply and the
purchaser must satisfy the following investor qualifications imposed by that
state:

Illinois -
These securities have not been approved or disapproved by the Secretary of
State of Illinois or the State of Illinois, nor has the Secretary of State
of Illinois or the State of Illinois passed upon the accuracy or adequacy
of this Prospectus. Any representation to the contrary is a criminal
offense.

Minnesota -
1) Either individually or with a spouse has an annual gross income of at
least $60,000 during the previous calendar year, have a net worth of
at least $60,000 (exclusive of principal residence and its furnishings
and automobile), and are purchasing shares for only the investors own
account or retirement plan.

THE TRUST

8 Page 10 of 233

<PAGE>

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, Michigan, Idaho and Arizona.

IRET principal source of operating revenue is: rental income from real estate
properties. A minor amount of revenue is derived from interest on real estate
mortgages and 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."

OPERATING PARTNERSHIP

Since February 1, 1997, the Trust carries on its activities through IRET
Properties, a North Dakota Limited Partnership. This structure is often
referred to as an "Umbrella Real Estate Investment Trust" or UPREIT. By
operating as an UPREIT, the Trust is able to acquire real estate in exchange for
limited partnership units of IRET Properties. The Limited Partnership Units are
exchangeable on a one for one basis for Trust shares of Beneficial Interest
subject to certain restrictions. See "Operating Partnership Agreement." The
Trustees may offer IRET Properties Limited Partnership Units in exchange for
real estate in accordance with certain established policies. See "Policy with
Respect to Certain Activities - To Offer Securities in Exchange for Property."

9 Page 11 of 233

<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 Real Estate Investment 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 October 31, 1997, the Trust owned 98.95% of the
Operating Partnership

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

- Colton Heights
Properties

- Hill Park Properties

10 Page 12 of 233

<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. Since October
17, 1997, IRET shares have been listed for trading on the National Association
of

11 Page 13 of 233

<PAGE>

Securities Dealers Automated Quotation System Small Capitalization Index
(NASDAQ), but no assurance can be given that such listing will continue.

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.

Type Minimum Cap
---- ------- ---
Selling agent commission
8% of the amount sold -0- $1,192,000

Legal Fees $25,000 $ 25,000

Advertising, Printing and
Promotion Expenses $15,000 $ 313,000

Registration Fees $10,000 $ 10,000

Accounting Fees $ 1,000 $ 1,000
----------
$51,000 $1,541,000

PROJECTED USE OF PROCEEDS

The net proceeds from the sale of the 2,000,000 shares offered to the public
will be added to the Trust's operating capital to be used to construct apartment
properties 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 2,000,000
shares is sold. The figures listed cannot be precisely calculated at the
present time and may vary materially from the amounts shown.

Assuming all the offered shares are sold after deduction from the offering
proceeds of all the front-end fees and expenses associated with the offering,
approximately 89 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 14,900,000.00 100.00%
SELLING COMMISSIONS - 1,192,000.00 8.00%
LEGAL FEES - 25,000.00 Less than 1% (.00168)
ADVERTISING, PRINTING AND
PROMOTION EXPENSES - 313,000.00 Less than 3% (.02101)

12 Page 14 of 233

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REGISTRATION FEES - 10,000.00 Less than 1% (.00067)
ACCOUNTING FEES - 1,000.00 Less than 1% (.00007)
--------------
CASH AVAILABLE FOR CONSTRUCTION
OF PROPERTIES $13,359,000.00 89.66%

As of the date of this Prospectus, the Trust is engaged in constructing 67-unit
apartment buildings in Billings, MT, Bismarck, ND, and Grand Forks, ND, 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 $ 4,000,000
Bismarck, ND 67 4,000,000
Grand Forks, ND 67 4,000,000

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

City Units Estimated Cost
---- ----- --------------
Grand Forks, ND 201 $12,000,000
Bismarck, ND 201 12,000,000
Billings, MT 67 4,000,000
-----------
Total - Planned Apartment Construction $40,000,000

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
--------------------------------
<TABLE>
Year Ended April 30
------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Restated)
Consolidated Income Statement Data

13 Page 15 of 233

<PAGE>

Minority interest portion
of operating partnership
income (18) --- --- --- ---
Net income 3,897,879 4,611,970 3,967,830 3,200,388 2,363,702
Balance Sheet Data
Total real estate
investments 177,891,168 122,377,909 84,005,635 64,427,776 50,041,059
Total assets 186,993,943 131,355,638 94,616,744 72,391,548 54,658,569
Shareholders' equity 59,997,619 50,711,920 37,835,654 29,997,189 23,745,443

Consolidated Per Share Data
Net income $ .28 $ .38 $ .38 $ .36 $ .29
Gain of repossession/
sale of investments .03 .08 .04 .01 .01
Dividends .39 .36 .35 .33 .32
Tax status of dividend
Capital gain 21.0% 1.6% 11.0% 7.37% 4.08%
Ordinary income 79.0% 98.4% 89.0% 92.63% 74.04%
Return of capital 0.0% 0.0% 0.0% 0.00% 21.88%
</TABLE>

CAPITALIZATION
--------------

The Trust's capitalization after the issuance and sale of the 2,000,000 shares
will be as follows:

<TABLE>
As of October 31, 1997 After sale of 2,000,000 shares
<S> <C> <C>
Total Assets $204,001,703 $217,360,703(1)
Less Debt 138,025,109 138,025,109
Less Minority Interest
in Operating
Partnership 1,240,368 1,240,368
------------ ------------
Shareholders' Equity $ 64,736,226 $ 78,095,226(1)
</TABLE>

(1) Reflects costs of issue of $1,541,000 deducted from total sale proceeds
of $14,900,000,resulting in the addition of $13,359,000 to total assets.

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
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.

14 Page 16 of 233

<PAGE>

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:

<TABLE>
Fiscal Years Ending April 30
----------------------------
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Advisor's and Trustees'
Compensation $252,013 $304,898 $336,142 $458,019 $559,149
Advisory Investigation
Fee 56,140 89,514 49,836 117,506 177,834
Other Administrative
Expenses 58,253 46,557 79,974 162,588 158,627
-------- -------- -------- -------- --------
TOTAL FEES $308,358 $366,406 $440,969 $465,952 $895,610
</TABLE>

15 Page 17 of 233
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Fees as Percent of Net
Invested Assets of the
Trust .73% .68% 0.55% 0.6% 0.5%
Fees as Percent of Net
Taxable Income of Trust 15.50% 13.77% 11.74% 16.00% 22.98%
</TABLE>

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 the following
Broker-Dealers or such other Broker-Dealers who are members of the National
Association of Securities Dealers and shall enter into a Security Sales
Agreement with IRET.

American Investment Services, Inc. Berthel Fisher & Co.
17 South Main 100 2nd Street SE
P.O. Box 1934 Cedar Rapids, IA 52401
Minot, ND 58702 319-365-2506
701-852-3090

Garry Pierce Financial Services, LLP Huntingdon Securities Corporation
2910 East Broadway Avenue 216 South Broadway
Suite #33 P.O. Box 656
Bismarck, ND 58501 Minot, ND 58702-0656
701-222-3017 701-837-9440

Inland National Securities, Inc. Primevest Financial Services, Inc.
21 South Main 400 First Street South, Suite 300
P.O. Box 2011 St. Cloud, MN 56301
Minot, ND 58702 320-656-4300
701-852-1640

ND Holdings, Inc.
1 Main St. North
Minot, ND 58701
701-852-5292

All shares shall be sold on a "best efforts" basis with no guarantee or
requirement that any shares be sold. All sales to purchasers are subject to
certain requirements as follows:

WHO MAY INVEST

16 Page 18 of 233
<PAGE>

Prospectus. In the following states, the stated disclaimers apply and the
purchaser must satisfy the following investor qualifications imposed by that
state:

Illinois -
These securities have not been approved or disapproved by the
Secretary of State of Illinois or the State of Illinois, nor has
the Secretary of State of Illinois or the State of Illinois
passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.

Minnesota -
1) Either individually or with a spouse has an annual gross
income of at least $60,000 during the previous calendar
year, have a net worth of at least $60,000 (exclusive of
principal residence and its furnishings and automobile), and
are purchasing shares for only the investors own account or
retirement plan.

2) Either individually or with a spouse have a net worth of at
least $225,000 (exclusive of the principal residence and its
furnishings and automobiles), and are purchasing shares for
only the investors own account or retirement plan.

For each share sold, the selling Broker-Dealer shall receive a commission of
eight percent (approximately $.60 per share). No other compensation or fees
other than the percentage commission shall be paid by the Trust to said
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
property management company as it pertains to the day-to-day management of
each individual property. All major operating decisions concerning the
Trust's operation of its real estate shall be made by the Board of Trustees.

17 Page 19 of 233
<PAGE>

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,
1997, the ratio of total liabilities ($138,025,109) to total assets
($204,001,703) was 67.7%.

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 10 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

18 Page 20 of 233
<PAGE>

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.

19 Page 21 of 233
<PAGE>

THE TRUST

Investors Real Estate Trust (hereinafter "IRET"), a registered real estate
investment 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, 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:

20 Page 22 of 233
<PAGE>

Fiscal Year Ending 4/30
1997 1996 1994 Restated
---- ---- -------------
REVENUE FROM OPERATIONS
Real Estate Rentals $22,972,369 $17,635,297 $12,280,738
Interest, Discount &
Fees 861,613 1,024,368 1,520,385
----------- ----------- -----------
$23,833,982 $18,659,665 $13,801,123

EXPENSE $20,334,539 $15,041.858 $10,240,805
----------- ----------- -----------

NET REAL ESTATE INVESTMENT
INCOME $ 3,499,443 $ 3,617,807 $ 3,560,318
GAIN ON SALE OF INVESTMENTS
(CAPITAL GAIN) 398,424 994,163 407,512
MINORITY INTEREST PORTION
OF OPERATING PARTNERSHIP
INCOME (18) -0- -0-
----------- ----------- -----------

NET INCOME $ 3,897,849 $ 4,611,970 $ 3,967,830
----------- ----------- -----------
----------- ----------- -----------

PER SHARE
Net Income $ .28 $ .38 $ .38
Dividends Paid $ .39 $ .36 $ .35

As indicated above, IRET's principal source of operating revenue is rental
income from real estate properties owned by the trust. 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.

21 Page 23 of 233
<PAGE>

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 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

22 Page 24 of 233
<PAGE>

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 of IRET shares of beneficial interest is substantially less than the
purchase price to new shareholders under this Offering. As of October 31,
1997, the book value of the 15,806,231 shares then outstanding was $4.10.
Assuming all of the shares registered under this Offering are sold, the
estimated resulting book value will be $4.39 per share. Thus, a purchasing
shareholder paying $7.45 per share under this Offering will incur an
immediate book value dilution of $3.06 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

23 Page 25 of 233
<PAGE>

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 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,

24 Page 26 of 233
<PAGE>

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. 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

25 Page 27 of 233
<PAGE>

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. Effective
October 17, 1997, IRET shares of Beneficial Interest have been traded on the
National Association of Securities Dealers Automated Quotation System Small
Capitalization Index (NASDAQ). No assurance can be given that IRET shares
will continue to be traded on such market.

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
been consolidated for financial reporting purposes to more properly depict
the financial status of IRET. (It is emphasized that the

26 Page 28 of 233
<PAGE>

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 and 1997, 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.

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 12%, which is below the capped amount.
The fees are capped in that under no situation shall they exceed the capped
amount:

Type Minimum Cap
---- ------- ---
Selling agent commission
8% of the amount sold -0- $1,192,000

Legal Fees $25,000 $ 25,000

Advertising, Printing and
Promotion Expenses $15,000 $ 313,000

Registration Fees $10,000 $ 10,000

Accounting Fees $ 1,000 $ 1,000
------- ----------

$51,000 $1,541,000

COMPENSATION TABLE

The following table sets forth the fees and other compensation which the
Trust is to pay in association with this offering. The total operating
expenses of the Trust shall not exceed the greater of 2% of its average
invested assets or 25% of its net income for any fiscal year. From the
inception of the Trust in 1970, this requirement has been met.

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

Advisory Fee Odell-Wentz & Associates The advisor will earn
annually an additional
base fee of $79,280 once
the sale proceeds of
$13,257,000 are invested.
(.7% of net invested
assets).

27 Page 29 of 233
<PAGE>

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
$66,285.

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.

Broker-Dealer Fees Selling Brokerage Firms (Eight percent or $.60
of each share sold) for
a total possible
commission of
$1,192,000.

Advertising and Up to an additional two
Promotional Expenses percent of gross proceeds
of $14,900,000 ($298,000)
may be paid as
compensation for
advertising and
promotional expenses.

Experts' Fees Pringle & Herigstad, P.C. $25,000 for legal fees,
plus filing fees,
accounting fees and
printing costs estimated
to be $26,000.

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

28 Page 30 of 233
<PAGE>

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
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.

29 Page 31 of 233
<PAGE>

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.

DETERMINATION OF OFFERING PRICE

The offering price of $7.45 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 sold, 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 Sold Low High Low High Dividend
---- ------ ----------- --- ---- --- ---- --------
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 451,383 5.89 6.30 6.40 6.85 .09
1996 April-June 551,418 6.30 6.30 6.85 6.85 .09125
1996 July-September 254,046 6.30 6.44 6.85 7.00 .0975
1996 October-December 259,672 6.44 6.44 7.00 7.00 .095
1997 January-March 353,479 6.44 6.62 7.00 7.20 .0975
1997 April-June 244,520 6.62 6.62 7.20 7.20 .10
1997 July-September 306,716 6.62 6.62 7.20 7.20 .10125
*Includes $.005 special dividend.

30 Page 32 of 233
<PAGE>

Since October 17, 1997, IRET shares of Beneficial Interest have been listed on
The National Association of Securities Dealers Automated Quotation System - The
NASDAQ Small Cap Market - under the symbol "IRETS." During the month of
October, 1997, 40,954 shares were traded in 52 trades with a high price of $7
3/8, a low of $6 9/16 and a closing price of $6 11/16.

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,
1997, the book value of the 15,806,234 shares then outstanding was $4.10.
Assuming all of the shares registered under this Offering are sold, the
estimated resulting book value will be $4.39 per share. Thus, a purchasing
shareholder paying $7.45 per share under this Offering will incur an immediate
book value dilution of $3.06 per share.

PLAN OF DISTRIBUTION

The shares offered by this Prospectus shall be sold by the following Broker-
Dealers or such other Broker-Dealers who are members of the National Association
of Securities Dealers and have entered into a Sales Agreement with IRET.

American Investment Services, Inc. Berthel Fisher & Co.
17 South Main 100 2nd Street SE
P.O. Box 1934 Cedar Rapids, IA 52401
Minot, ND 58702 319-365-2506
701-852-3090

Inland National Securities, Inc. Primevest Financial Services, Inc.
21 South Main 400 First Street South, Suite 300
P.O. Box 2011 St. Cloud, MN 56301
Minot, ND 58702 320-656-4300
701-852-1640

ND Holdings, Inc.
1 Main St. North
Minot, ND 58701
701-852-5292

All shares shall be sold on a "best efforts" basis with no guarantee or
requirement that any shares be sold. All sales to purchasers are subject to
certain requirements as follows:

31 Page 33 of 233
<PAGE>

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.

WHO MAY INVEST

Illinois -
These securities have not been approved or disapproved by the
Secretary of State of Illinois or the State of Illinois, nor has
the Secretary of State of Illinois or the State of Illinois
passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.

Minnesota -
1) Either individually or with a spouse has an annual gross
income of at least $60,000 during the previous calendar
year, have a net worth of at least $60,000 (exclusive of
principal residence and its furnishings and automobile), and
are purchasing shares for only the investors own account or
retirement plan.

2) Either individually or with a spouse have a net worth of at
least $225,000 (exclusive of the principal residence and its
furnishings and automobiles), and are purchasing shares for
only the investors own account or retirement plan.

USE OF PROCEEDS

32 Page 34 of 233
<PAGE>

DOLLARS PERCENT
-------------- ---------------------
GROSS OFFERING PROCEEDS 14,900,000.00 100.00%
SELLING COMMISSIONS - 1,192,000.00 8.00%
LEGAL FEES - 25,000.00 Less than 1% (.00168)
ADVERTISING, PRINTING AND
PROMOTION EXPENSES - 313,000.00 Less than 3% (.02101)
REGISTRATION FEES - 10,000.00 Less than 1% (.00067)
ACCOUNTING FEES - 1,000.00 Less than 1% (.00007)
--------------
CASH AVAILABLE FOR CONSTRUCTION
OF PROPERTIES $13,359,000.00 89.66%

Apartments Under Construction
-----------------------------
City Units Estimated Cost
---- ----- --------------
Billings, MT 67 $ 4,000,000
Bismarck, ND 67 4,000,000
Grand Forks, ND 67 4,000,000

Planned Apartment Construction
------------------------------
City Units Estimated Cost
---- ----- --------------
Grand Forks, ND 201 $12,000,000
Bismarck, ND 201 12,000,000
Billings, MT 67 4,000,000
Total - Planned Apartment Construction $40,000,000

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.

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 - Three Months Ended July 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:

33 Page 35 of 233
<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, 1997, this
depreciation deduction was $3,584,591. 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, 1997, the ratio of mortgage
liabilities to total Trust real estate assets was $122,303,008 of
mortgage liabilities to $191,965,635 of net real estate owned or
63.7%. Thus, as much as $40,245,122 could be borrowed on the
existing portfolio before reaching the desired debt ratio of 70%
(present equity in real estate of $191,965,635, minus mortgages
of $122,303,008 equals $69,662,627 divided by 30% = $232,208,757,
minus present real estate owned of $191,963,635 equals
$40,245,122) (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
($3,924,643 as of October 31, 1997) which securities are held in
brokerage accounts with Smith Barney. The current policy of said
broker 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. (As of the date of this Prospectus,
the Trust has credit lines of $9,500,000.) No assurance can be
given that either of these borrowing arrangements would be
available to the Trust.

SELECTED FINANCIAL DATA - ANNUAL

<TABLE>
Year Ended April 30
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data (Restated)

Revenue $ 23,833,982 $ 18,659,665 $13,801,123 $11,583,008 $ 8,316,643
Operating income 3,499,443 3,617,807 3,560,318 3,135,426 2,231,092
Gain on repossession/
sale of investments 398,424 994,163 407,512 64,962 132,610
Minority interest portion
of operating partnership
income (18) --- --- --- ---
Net income 3,897,849 4,611,970 3,967,830 3,200,388 2,363,702

34 Page 36 of 233
<PAGE>

Balance Sheet Data
Total real estate
investments $177,891,168 122,377,909 84,005,635 64,427,776 50,041,059
Total assets 186,993,943 131,355,638 94,616,744 72,391,548 54,658,569
Shareholders' equity 59,997,619 50,711,920 37,835,654 29,997,189 23,745,443

Consolidated Per Share Data
Net income $ .28 $ .38 $ .38 $ .36 $ .29
Gain of repossession/
sale of investments .03 .08 .04 .01 .01
Dividends .39 .36 .35 .33 .32
Tax status of dividend
Capital gain 21% 1.6% 11.0% 7.37% 4.08%
Ordinary income 79% 98.4% 89.0% 92.63% 74.04%
Return of capital 0% 0.0% 0.0% 0.00% 21.88%
</TABLE>

TWO YEAR SELECTED FINANCIAL DATA - QUARTERLY RESULTS
(FISCAL YEAR 1995 RESULTS RESTATED - SEE NOTE 11 TO FINANCIAL STATEMENTS)

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

Revenues $4,966,475 $5,474,027 $6,383,030 $7,010,450
Income before gains on
sale of investments 978,107 1,048,154 1,027,117 446,065
Net gain on sale of investments 252,062 - 138,629 7,733
Minority interest of unitholders
in operating partnership - - - (18)
Net income 1,230,169 1,048,154 1,165,746 453,780

Per share
Income before gains on
sale of investments .07 .08 .07 .03
Net gain on sale of
investments .02 - .01 -

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

35 Page 37 of 233
<PAGE>

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. On February 1,
1997, IRET restructured itself as an Umbrella Partnership Real Estate Investment
Trust (UPREIT). No other 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.

This discussion and analysis should be read in conjunction with the audited
financial statements prepared by Brady Martz and Associates who have served as
the auditor for IRET since its inception.

RESULTS OF OPERATIONS:

SIX MONTHS ENDED OCTOBER 31, 1997:

GENERAL. We are pleased to report to you on several very positive
accomplishments by your Company during the second quarter of its
current Fiscal year:

- A 23% increase in per share Funds from Operations ($.16 per
share versus $.13);

- Listing of IRET shares of Beneficial Interest for trading on
the National Association of Securities Dealers Automated
Quotation System Small Capitalization Index (NASDAQ) under the
symbol "IRETS";

- Selection by Great Plains Software to build and lease to them
their office campus in Fargo, North Dakota. This project will
be built over the next 18 months at an estimated cost of
$15,000,000.

RESULTS OF OPERATIONS. Funds from Operations for the second
quarter of Fiscal 1998 increased to $2,433,924 from the year
earlier figure of $1,780,956. On a per share basis, Funds from
Operations for the second quarter were $.16 per share, compared to
$.13 per share for the same period of Fiscal 1997 (an increase of
23%). For the first six months of Fiscal 1998, Funds from
Operations increased to $4,427,165 from the year earlier figure of
$3,449,423 or $.28 per share versus $.25 per share (an increase of
12%). This strong increase in Funds from Operations resulted from
increased rental income ($7,827.686 compared to $5,235,244 for the
second quarter of Fiscal 1997). Six month rental income figures
are $14,834,983 for Fiscal 1998 versus $9,985,638 for Fiscal 1997.

Taxable income for the second quarter was $1,303,765 versus
$1,045,287 in the prior year. For the first six months of Fiscal
1998, net taxable income was $2,236,871 versus $2,278,323 for the
same period of Fiscal 1997.

36 Page 38 of 233
<PAGE>

During the second quarter of Fiscal 1998, IRET experienced a strong
demand for its apartment properties, with the vacancy rate falling
to below 5%. The ongoing program of instituting modest rental rate
increases continues to produce satisfactory results.

We are very pleased with the performance of the investment
portfolio.

FINANCIAL CONDITION. IRET continues to enjoy a very strong balance
sheet. During the past year, real estate owned has increased to
$211,087,102 from the $147,288,224 owned on October 31, 1996. Real
estate mortgages owed have increased to $122,303,008 from the
$79,214,615 owed one year earlier. Shareholder equity has
increased to $64,736,226 from the year earlier figure of
$55,028,986. Comparative balance sheet figures are:

10/31/97 10/31/96
-------- --------
Cash and Marketable Securities $ 6,898,420 $ 6,098,851
Net Real Estate Owned 191,965,635 132,514,883
Net Real Estate Mortgages 1,819,591 2,414,610
Total Assets 204,001,703 143,769,442
Total Liabilities 138,025,109 88,740,456
Shareholder Equity 64,736,226 55,028,986

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.

SALE OF PROPERTIES. During the second quarter IRET sold the
Superpumper convenience store in Bismarck, North Dakota, realizing
a gain of $83,579. Also, during the second quarter, a sales
agreement was signed providing for the sale of a 48-unit
Scottsbluff, Nebraska apartment complex which will close during the
third quarter with an approximate gain to IRET of $326,138.

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

Cost
----
- 108 Unit Kirkwood Apartment Complex,
Bismarck, ND $3,175,000

- Edgewood Vista Assisted Living Center,
Minot, ND $4,900,000

- 67 Unit Circle 50 Apartment Complex,
Billings, MT $4,100,000

- 125 Unit Jenner Properties Apartment
Complexes, Grand Forks, Devils Lake
and Dickinson, ND $2,297,500

37 Page 39 of 233
<PAGE>

- Sweetwater Springs Retirement Home,
Phase II, Douglasville, GA $ 1,161,878

The following properties are under construction:

- 67 Unit Legacy Apartment Complex, Grand
Forks, ND $ 4,000,000

- 2 - 67 Unit Apartment Buildings
(Cottonwood Apartments, Bismarck, ND) $ 8,000,000

- Alzheimer's Addition and Expansion of
Edgewood Vista Complex, Minot, ND $ 1,300,000

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

- 122 Unit Park East Apartment Complex,
Fargo, ND $ 4,900,000

- 248 Apartment Units Magic City Realty,
Minot, ND $ 5,270,000

- Office Campus for Great Plains Software,
Fargo, ND $15,000,000

DIVIDENDS. IRET paid a regular dividend of 10.3 cents per share on
October 1, 1997, to shareholders of record at the close of business
on September 17, 1997. This was an increase from the 10.125 cents
per share regular dividend paid on July 1, 1997, and was the 106th
consecutive quarterly dividend paid by IRET.

FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996. IRET s Fiscal Year 1997,
which ended on April 30, 1997, saw a continuation of IRET s rapid growth
with assets owned increasing by more than 40%. IRET s 27th year ended
with total assets, revenues, funds from operations and shareholder
equity all reaching record levels.

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 1997 increased to $7,144,622 ($.51 per share),
compared to $5,977,431 ($.49 per share) generated by IRET in Fiscal
1996 and the $5,434,244 ($.52 per share) recognized in Fiscal 1995.

EARNINGS. IRET s net taxable earnings for Fiscal Year 1997
decreased to $3,897,849 from the $4,611,970 earned in Fiscal 1996
and the $3,967,830 earned in Fiscal 1995. Approximately one-half
of the decrease in earnings from the Fiscal 1996 level resulted
from a decrease in capital gain income. In Fiscal 1997, $398,424 of
capital gain income was recorded, as compared to $994,163 in the
prior year.

38 Page 40 of 233
<PAGE>

The other principle reason for the decline in taxable income is the
continuing acquisition by IRET of new real estate investments which
result in an increase in depreciation allowance. In Fiscal 1997,
$3,584,591 of depreciation was recorded as compared to $2,261,724
in the prior year. This will result in a significant portion of
IRET s dividends being sheltered from income tax by the increased
depreciation allowance.

On a per share basis, net taxable income was $.28 per share for
Fiscal 1997, compared to $.38 per share recorded in both Fiscal
1996 and 1995.

REVENUES. Total revenues for Fiscal 1997 were $23,833,982, compared
to $18,659,665 in Fiscal 1996 (an increase of 28%) and $13,801,123
in Fiscal 1995. The increase in revenues received during Fiscal
1997 in excess of the prior year revenues was $5,174,317. This
increase resulted from:

Rent from 11 properties acquired in
Fiscal 1997 $4,451,266
Rent from 7 properties acquired in
Fiscal 1996 in excess of that
received in Fiscal 1996 1,526,453
A decrease in rental income on
existing properties (-5.4%) (625,949)
An increase in rent on Smith Home
Furnishing Building (bankruptcy of
tenant) 61,892
A decrease in rent - properties sold
during 1996 (76,590)
A decrease in interest income (162,755)
----------
$5,174,317

This increase in revenue resulted primarily from the addition of
new real estate properties to the portfolio. Rents received on
properties owned prior to the beginning of Fiscal Year 1996 saw an
increase in scheduled rents of 2.25%, but the occupancy level for
those properties decreased from approximately 95% to slightly over
90% resulting in a decrease in rental income from those properties
of $625,949. However, the new properties acquired during Fiscal
Years 1996 and 1997 generated nearly $6,000,000 of new revenues.

Interest income continued to decline as IRET completes the
repositioning of its investment portfolio from a mix of real estate
equities and mortgage loans to one consisting entirely of real
estate equities. Management is of the opinion that the long term
yields from real estate equity investments will exceed that
available from interest income on mortgage loans but, in the short
run, the switch does result in lower immediate revenues and
taxable income.

Capital gain income for Fiscal 1997 was $398,424 resulting from the
sale of two older and smaller investment properties. This compares
to $994,163 of capital gain income recognized in Fiscal 1996 and
the $407,512 recognized in

39 Page 41 of 233
<PAGE>

Fiscal 1995. IRET will continue to seek to market several of its
older and smaller apartment properties.

NET TAXABLE INCOME. The $714,121 decrease in net taxable income for
Fiscal 1997 over the net income earned in the prior fiscal year
resulted from:

A decrease in gain from sale of
investments $ (595,739)
An increase in net rental income
(rents, less utilities, maintenance,
taxes, insurance and management) 3,518,152
A decrease in interest income (162,755)
An increase in interest expense (2,091,037)
An increase in depreciation expense (1,322,867)
An increase in operating expenses
and advisory trustee services (97,169)
A decrease in amortization expense 37,312
An increase in Minority interest of
Operating Partnership Income (18)
$ (714,121)

PROPERTY ACQUISITIONS. IRET added nearly $60,000,000 of real estate
to its portfolio during Fiscal 1997, including:

COMMERCIAL:
Computer City, Kentwood, MI $ 2,113,574
Edgewood Vista, Missoula, MT 962,428
Wedgwood Retirement Inns, Sweetwater, GA 2,810,000

UNITS APARTMENTS
67 Circle 50, Billings, MT* $ 1,519,855
98 South Pointe II, Minot, ND** 1,024,234
60 Rosewood Court, Sioux Falls, SD 1,938,245
116 Legacy Apts., Grand Forks, ND** 3,573,057
98 Rocky Meadows, Billings, MT** 2,654,554
210 Miramont Apts., Fort Collins, CO 14,235,461
192 Neighborhood Apts., Colorado Springs, CO 10,849,561
108 Woodridge Apts., Rochester, MN 6,398,096
67 Cottonwood Lake, Bismarck, ND* 1,055,862
360 Park Meadows Apts., St. Cloud, MN 10,242,747
-----------
Total $59,377,674

*Property not placed in service at April 30, 1997. Additional
costs are still to be incurred.

**Represents costs to complete a project started in year ending
April 30, 1996.

40 Page 42 of 233
<PAGE>

PROPERTY DISPOSITIONS. During Fiscal 1997, IRET sold a 24 plex
apartment building in Hutchinson, MN, realizing a gain of $252,000.
It also recognized a gain of $138,600 from the previous sale of an
18 plex apartment building in Mandan, ND. It is management s
intention to continue to market IRET s older and smaller apartment
projects.

FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995. This comparative report
is reproduced as it was submitted for Fiscal Year 1996. 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)

41 Page 43 of 233
<PAGE>

A decrease in interest income (240,344)
----------
$4,858,542
----------
----------

The increase in revenue during Fiscal Year 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
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 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**

42 Page 44 of 233
<PAGE>

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.

GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST

ORGANIZATION OF TRUST. Investors Real Estate Trust is a registered real estate
investment 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 during all years of its existence.

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 62 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:

43 Page 45 of 233

<PAGE>

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

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 experience 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 former Director of First Bank -
Minot, N.A. Mr. Miller has over 25 years experience 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 experience 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

44 Page 46 of 233

<PAGE>

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

The Trust's 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. IRET owns in excess of 98.9336% of the Operating Partnership. 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 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

45 Page 47 of 233

<PAGE>

"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 October 31, 1997, the Investment Certificates
outstanding totaled $9,579,002. 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
1997 1996 1995
----------- ----------- -----------
Cost of Property
Acquired $59,377,674 $40,660,975 $27,033,369
Net Increase in
Mortgages Payable $44,035,887 $21,702,852 $13,006,654

Percent of Acquisition
Price Represented by
Net Increase in
Mortgages Payable 74% 53% 48%

46 Page 48 of 233

<PAGE>

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:
Real Estate 4/30/97
Location Security Balance Rate
- -------- ----------- ----------- ----
Billings, MT
- ------------
Colton Heights Apts.-144 Units $ 137,162 9%

Denver, CO
- ------------
Writer Corp. Residential Lots 1,251 14%
Centrebrooke Homes Residential Lots 53,314 12%

Gilbert, AZ
- ------------
NE1/4-27-2-6 Commercial Land 670,153 8%

Douglasville GA
- ---------------
Sweetwater Springs Retirement Center $1,150,017 9%

Other Mortgages
- ---------------
Over $100,000 $ 850,577 8-10 1/4%
$50,000 to $99,999 0
$20,000 to $49,999 130,545 8-12%
Less than $20,000 30,764 9%
----------
TOTAL $3,023,783
Unearned Discounts ( 8,146)
Allowance for Losses (124,881)
Deferred Gain (18,713)
----------
$2,872,043
----------
----------

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.

47 Page 49 of 233

<PAGE>

The Trust currently holds an interest in the following partnerships:

<TABLE>
Year Partner-
Name, Location, Size ship Formed Fiscal
& Type of Real and % Owned 1997 Year
Estate Owned by IRET Occupancy Purchased Cost
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHATEAU PROPERTIES, LTD. 1979 97% 1972 $2,663,654
Apartment Complex 26.7%
- - Minot, ND, 64 Units

CONSOLIDATED PARTNERSHIPS:

SWEETWATER PROPERTIES 1981 85% 1972 $1,623,477
- - Devils Lake & Grafton, ND 0%
- - 114 Units

BISON PROPERTIES 1982 88% 1972 $1,607,288
- - Jamestown, Carrington & 20%
Cooperstown, ND
- - 125 Units

1ST AVENUE BUILDING 1981 66% 1981 $796,192
- - Minot, ND 20%
- - 16,500 sq. ft. Office Building

EASTGATE PROPERTIES 1983 69% 1970 $1,768,233
- - Moorhead, MN 18%
- - 116 Units

COLTON HEIGHTS PROPERTIES, 1984 84% 1984 $820,155
- - Minot, ND 18.69%
- - 18 Units

HILL PARK PROPERTIES 1985 90% 1985 $2,835,106
- - Bismarck, ND 7.14%
- - 92 Units
</TABLE>

It is possible that the Trust 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. Commencing on February 1, 1997,
the Trust operates principally through IRET Properties, a North Dakota Limited
Partnership, of which the Trust is the sole general partner. Such a structure
allows the Trust to offer Limited Partnership Units in exchange for real estate.
The Trust currently has plans to offer Limited Partnership Units in exchange for
real estate on a continuous and ongoing basis. All exchanges shall be subject
to approval by the Board of Trustees on such terms and conditions which are
deemed reasonable by the Trustees.

48 Page 50 of 233

<PAGE>

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.

INVESTMENT POLICIES OF REGISTRANT

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 July 31, 1997, the ratio of
total liabilities ($127,729,630) to total assets ($189,544,095) was 67%.

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.

49 Page 51 of 233

<PAGE>

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.

DESCRIPTION OF REAL ESTATE

IRET owned the following properties as of September 30, 1997:

REAL ESTATE OWNED:

<TABLE>
FISCAL MORTGAGE
1998 YEAR PAYABLE
SIZE/TYPE OCCUPANCY PURCHASED COST INTEREST RATE
APARTMENTS
<S> <C> <C> <C> <C> <C>
Dakota Arms 18 Unit 98% 1996 $595,339 $387,987
Minot, ND Apt. Bldg. 8.50%

Fairfield 24 Unit 89% 1988 $406,069 $108,578
Marshall, MN Apt Bldg 9.00%

41 East Apts 41 Unit 80% 1989 $375,952 $228,664
Dickinson, ND Apt. Bldg 8.50

Pleasant View 18 Unit 95% 1989 $262,883 $26,732
Mandan, ND Apt. Bldg. 8.75

Lone Tree Manor Apts 12 Unit 82% 1991 $222,336 -
Harvey, ND Apt Bldg

Sunchase Apts. 2 18-unit 97 1988 $1,009,906 $488,748
Fargo, ND Apt Bldgs. 8.67%

BEULAH CONDOS ND 22 Condo 62% 1983 $431,945 -
Beaulah, ND Units

50 Page 52 of 233

<PAGE>

CANDLELIGHT APTS 44 Units 99% 1993 $854,220 $510,086
Fargo, ND Apt. Bldg 8.50%

CENTURY APTS 120 Unit 94% 1986 $1,832,262 $1,544,644
Dickinson, ND Apt Complex 7.69%

CENTURY APTS 192 Unit 77% 1986 $3,754,252 $2,614,883
Williston, ND Apt Complex 7.69%

CIRCLE FIFTY 49 Unit N/A Not Completed $4,284,441 -
Billings, MT Apt Complex

COLUMBIA PARK PHASE II 201 Unit N/A Not Completed $1,076,327 -
Grand Forks, ND Apt Complex

COTTONWOOD LAKE 268 Unit N/A Not Completed $2,387,863 -
Bismarck, ND Apt Complex

CRESTVIEW APTS 152 Unit 94% 1994 $4,699,501 $2,690,079
Bismarck, ND Apt Bldg 8.55%

FOREST PARK ESTATES 270 Unit 92% 1993 $6,872,932 $4,071,789
Grand Forks, ND Apt Complex 7.625%

JENNER PROP. - UPREIT 125 Units 98% 1997 $2,305,207 $1,383,809
Grand Forks, ND Apt Bldgs 9.25%
Dickinson, ND
Devils Lake, ND

KIRKWOOD MANOR 108 Units 100% 1997 $3,203,821 $2,330,000
Bismarck, ND Apt Bldgs 7.75%

LEGACY APTS 116 Unit 94% 1996 $6,965,758 $3,962,686
Grand Forks, ND Apt Complex 7.773%

MIRAMONT APT 210 Unit 96% 1996 $14,254,905 $11,549,936
Ft. Collins, CO Apt Complex 8.25%

NEIGHBORHOOD APT 192 Unit 93% 1996 $10,926,869 $7,459,996
Colorado Springs, CO Apt Complex 7.98%

NORTH POINTE 49 49 Unit 99% 1995 $2,399,778 $1,331,589
Bismarck, ND Apt Bldg 8.07%

OAK MANOR APTS 27 Unit 99% 1989 $294,348 $233,079
Dickinson, ND Apt Bldg 8.75%

OAKWOOD ESTATES 160 Unit 80% 1993 $5,392,645 $3,473,140
Sioux Falls, SD Apt Complex 7.88125%

OXBOW 120 UNITS 120 Unit 100% 1994 $4,957,085 $3,452,615
Sioux Falls, SD Apt Complex 7.88125%

PARK MEADOWS APT 360 Unit 87% 1997 $10,495,461 $7,985,571
St. Cloud, MN Apt Complex 8.07%

PARK PLACE 48 Unit 88% 1988 $838,129 -
Waseca, MN Apt Bldg

PARKWAY APTS 36 Unit 70% 1988 $102,687 -
Beulah, ND Apt Bldg

PINE CONE APTS 195 Unit 87% 1994 $13,139,082 $10,568,341
Ft. Collins, CO Apt Complex 7.125%

51 Page 53 of 233

<PAGE>

POINTE WEST APTS 90 Unit 91% 1994 $3,830,817 $2,237,026
City, SD Apt Complex 8.55%

PRAIRIE WINDS APTS 48 Unit 97% 1993 $1,971,650 $1,352,552
Sioux Falls, SD Apt Bldg 7.67%

ROCKY MEADOWS 98 Unit 95% 1996 $6,615,957 $2,921,496
Billings, MT Apt Complex 7.75%

SCOTTSBLUFF ESTATES 48 Unit 95% 1988 $718,800 -
Scottsbluff, NE Apt Bldg

SOUTH POINTE 196 Unit 87% 1995 $10,213,505 $5,595,543
Minot, ND Apt Complex 8.245%

SOUTHVIEW APTS 24 Unit 77% 1994 $679,360 -
Minot, ND Apt Bldg

SOUTHWIND APTS 164 Unit 87% 1996 $5,540,069 $3,536,254
Grand Forks, ND Apt Complex 8.34%

VIRGINIA APARTMENTS 15 Unit 88% 1987 $219,826 -
Minot, ND Apt Bldg

WEST STONEHILL 313 Unit 92% 1995 $11,316,566 $7,974,307
St Cloud, MN Apt Complex 7.93%

WOODRIDGE APTS 108 Unit 99% 1996 $6,469,745 $4,339,736
Rochester, MN Apt Complex 7.85%

Total Residential $151,918,298

COMMERCIAL
401 SOUTH MAIN 9,200 sq. ft. 84 1987 $487,826 -
Minot, ND Commercial Bldg

408 1ST STREET SE Rental House 100% 1986 $46,907 -
Minot, ND

CREEKSIDE OFFICE
BUILDING Office Bldgs 98% 1992 $1,633,344 $897,602
Billings, MT 8.35%

LESTER CHIROPRACTIC
CLINIC 5,000 sq. ft. 100% 1988 $268,917 -
Bismarck, ND Clinic Bldg

WALTERS 214 SO MAIN 3,500 sq. ft. 100% 1978 $111,696 $6,354
Minot, ND Retail Bldg 9.00%

ARROWHEAD SHOPPING
CNTR 80,000 sq. ft. 95% 1973 $2,552,317 -
Minot, ND Shopping Center

BARNES & NOBLE 30,000 sq. ft. 100% 1994 $3,292,012 $2,191,640
Fargo, ND Retail/Whse. 7.98

BARNES & NOBLE 30,000 sq. ft. 100% 1995 $3,699,101 $2,373,493
Omaha, NB Retail/Whse. 7.98%

CARMIKE THEATRE 28,528 sq. ft. 100% 1994 $2,545,737 $1,665,633
Grand Forks, ND 10 screen theatre 8.90%

COMPUTER CITY 16,080 sq. ft. 100% 1996 $2,113,574 $1,519,437
Kentwood, MI Strip Shopping 7.75%
Cntr

52 Page 54 of 233

<PAGE>

EDGEWOOD VISTA 10,314 sq. ft. 100% 1997 $962,428 $641,025
Missoula, MT Assisted Living 9.75%

EDGEWOOD VISTA 10,314 sq. ft. 100% 1997 899,821 $643,896
East Grand Forks, MN Assisted Living 8.35%

EDGEWOOD VISTA 77,211 sq. ft. 100% 1997 4,906,555 $3,710,000
Minot, ND Assisted Living 8.27%

HUTCHINSON TECHNOLOGY Manufacturing 100% 1993 $4,429,026 $2,296,432
Sioux Falls, SD Plant 8.75%

LINDBERG BUILDING Office/Whse 100% 1992 $1,455,789 $797,051
Eden Prairie, MN 8.75%

MINOT PLAZA 11,200 sq. ft. 100% 1993 $506,246 -
Minot, ND Strip Shopping
Cntr

PETCO WAREHOUSE 18,000 sq. ft 100% 1994 $1,278,934 $789,231
Fargo, ND Retail/Whse 8.65%

PIONEER SEED Office/Whse. 100% 1992 $653,876 $317,382
Moorhead, MN 8.38%

RETAIL WAREHOUSE 70,000 sq. ft. 12% 1994 $5,639,665 $3,553,918
Boise, ID Retail/Whse. 9.75%

STONE CONTAINER Manufacturing 100% 1995 $4,998,485 $3,100,756
Fargo, ND Plant 8.25%

SUPERPUMPER Gas Station/ 100% 1988 $428,777 -
Crookston, MN Conven. Store

SUPERPUMPER Gas Station/ 100% 1986 $297,064 -
Emerado, ND Conven. Store

SUPERPUMPER Gas Station/ 100% 1991 $485,007 -
Grand Forks, ND Conven. Store

SUPERPUMPER Gas Station/ 100% 1987 $239,212 -
Langdon, ND Conven. Store

SUPERPUMPER Gas Station/ 100% 1993 $120,600 -
Sidney, MT Conven. Store

WEDGEWOOD RETIREMENT Assisted Living 100% 1996 $2,810,000 $1,555,986
Cntr
Sweetwater, GA 8.0375%

Total Commercial $46,630,189

CONSOLIDATED PARTNERSHIPS:

SWEETWATER PROPERTIES 114 Unit 88% 1972 $1,623,477 $212,352
Devils Lake & Apt Bldgs 9.75%
Grafton, ND

BISON PROPERTIES 125 Apt Units 91% 1972 $1,607,288 $96,843
Jamestown, Carrington & 10.00%
Cooperstown, ND

1ST AVENUE BUILDING 16,500 sq. ft. 67% 1981 $796,192 -
Minot, ND Office Bldg.

53 Page 55 of 233

<PAGE>

EASTGATE PROPERTIES 116 Unit 71% 1970 $1,768,233 -
Moorhead, MN Apt Complex

COLTON HEIGHTS 18 Unit 80% 1984 $820,155 $352,016
PROPERTIES, Apt Bldg 9.00%
Minot, ND

HILL PARK PROPERTIES 92 Unit 93% 1985 $2,835,106 $1,423,928
Bismarck, ND Apt Complex 7.69%

Total Partnerships $9,450,451

Total Real Estate Owned $208,231,668 $122,504,843
Less: Accumulated Depreciation (18,722,741)

Net Carrying $189,508,927
Value
</TABLE>

TITLE. The title to all of the above properties is in the name of IRET
Properties, IRET or a wholly owned subsidiary, 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
September 30, 1997. In the case of apartment properties, lease arrangements
with individual tenants vary from month-to-month to one year leases, with the
normal term 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
two prior registrations of 3,600,000 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

54 Page 56 of 233

<PAGE>

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 registrations which were effective
July 9, 1996, and March 14, 1997, respectively, 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.

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 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

55 Page 57 of 233

<PAGE>

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.

56 Page 58 of 233

<PAGE>

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 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

57 Page 59 of 233

<PAGE>

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 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

58 Page 60 of 233

<PAGE>

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 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.

59 Page 61 of 233

<PAGE>

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 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.

(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.

60 Page 62 of 233

<PAGE>

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

61 Page 63 of 233

<PAGE>

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.

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-term
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

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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 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

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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 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.

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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 treated as a publicly traded partnership and, thus, will be

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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 PROPERTY. 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

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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.

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

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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 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

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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 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

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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-ERISA 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

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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
"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

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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 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. Since October 17, 1997, the shares have been listed on the
NASDAQ Small Capitalization Index. On each business day, a "bid" and "ask"
price shall be posted with all transactions subject to certain conditions and
restrictions. No assurance can be given as to the price or ability to sell
shares on the NASDAQ System or of the continued listing of IRET shares on that
system. Prior to the NASDAQ listing, the Trust itself acted 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 were sold by the Trust, such
sales replenished the repurchasing fund on a share for share basis. THIS
REPURCHASE POLICY WAS SUBJECT TO CHANGE AT ANY TIME BY THE BOARD OF TRUSTEES AND
NO ASSURANCE WAS GIVEN OF ITS CONTINUATION.

72 Page 74 of 233

<PAGE>

The following is a summary of the total number of shares sold and repurchased
pursuant to this prior policy 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 1,516,519 5.89 6.44 6.70 7.00
1997 to date 904,715 6.44 6.62 7.00 7.20

As of July 31, 1997, IRET had 3,268 shareholders. No shareholder held more
than 5% of the 15,297,234 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.

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:

73 Page 75 of 233
<PAGE>

<TABLE>
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
4/1/97 $.10 $6.62
7/1/97 $.10125 $6.62
10/1/97 $.103 $6.62
</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 500,000 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.

74 Page 76 of 233
<PAGE>

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 ($7.45 X 92% = $6.85
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 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, subject to certain
restrictions. See "Shares Available for Future Sale" at page 55.

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 October 31, 1997, 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 8.76% of such shares on May 31, 1997.

75 Page 77 of 233
<PAGE>

Name and Position Principal Occupations Trustee Shares Beneficially
With Trust During Past 5 Years Since Owned As Of 5-31-97
- ----------------- --------------------- ------- -------------------

C. Morris Anderson President of North Hill
Trustee, Age 68 Bowl, Inc.; Director of
Dakota Boys Ranch (25
years); Director of
International Inn, Inc.,
and Norwest Bank - Minot,
N.A. and a Partner in
Magic City Realty, Ltd. 1970 8,929(1)

Ralph A. Christensen Retired Rancher; Former
Trustee and Chairman Director of First Bank
Age 68 - Minot, N.A.; Chairman
of IRET 1970 42,238(2)

John D. Decker
Trustee, Age 80 Investor 1970 47,416(3)

Mike F. Dolan
Trustee and Vice Investor;
Chairman, Age 86 Vice-Chairman of IRET 1978 228,921(4)

J. Norman Ellison, Jr. Businessman; Managing
Trustee, Age 74 Partner of Ellison Realty
Co.; Former Director of
First Bank - Minot, N.A. 1970 18,340(5)

Daniel L. Feist Realtor, Broker, Real Estate
Trustee, Age 65 Developer, Builder, General
Contractor; President-Owner
of Feist Construction &
Realty, Inc.; Investor;
Businessman; Former Director
of First Bank System -
Minot, N.A.; Director N.D.
Holdings, Inc., Minot, ND 1985 442,872(6)

Patrick G. Jones Investor 1986 79,624(7)
Trustee, Age 49

Jeff L. Miller Investor; Businessman;
Trustee and Vice President of M & S
Chairman, Age 53 Concessions, Inc., and
former president of
Coca-Cola Bottling Co.
of Minot; Former Director
of First Bank - Minot 1985 137,406(8)

76 Page 78 of 233
<PAGE>

Roger R. Odell Realtor; President of IRET;
Trustee and Partner in Odell-Wentz &
President, Age 71 Associates (Advisor of IRET);
Director of Investors Manage-
ment & Marketing, Inc. and
Inland Securities, Inc.;
Partner in Magic City
Realty, Ltd. 1970 140,565(9)

Thomas A. Wentz, Jr. Attorney, Pringle & Herigstad,
Trustee, Age 31 P.C.; Sole General Partner
of WENCO, Ltd. 1996 166,832(10)

(1) 5,729 shares are owned by Mr. Anderson and his wife as Joint Tenants.
3,200 shares are owned by Mr. Anderson's wife; he disclaims beneficial
ownership of these shares.

(2) Includes shares held in Mr. Christensen's IRA, and also his wife's IRA,
which is comprised of 603 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 9,177 shares as to which Mr. Decker does not have beneficial
ownership or dispositive powers.

(4) Mr. Dolan's children own 41,354 shares, as to which Mr. Dolan disclaims
beneficial ownership or dispositive powers.

(5) Includes 4,689 shares held by Mr. Ellison's wife. Mr. Ellison disclaims
beneficial ownership of such shares.

(6) Includes 116,820 shares held in Mrs. Feist's name and in her IRA of
which Mr. Feist disclaims beneficial ownership. Also includes shares held in
Mr. Feist's IRA's. Mr. Feist's children own 88,878 shares as to which Mr.
Feist does not have beneficial ownership or dispositive powers.

(7) Includes 39,723 shares held by Mrs. Jones and in her IRA. Mr. Jones
disclaims beneficial ownership of such shares. Also includes shares held in
Mr. Jones' IRA. Mr. Jones' children own 11,601 hares as to which Mr. Jones
disclaims beneficial ownership.

(8) 45,409 of such shares are owned by Mr. Miller's wife. Mr. Miller
disclaims beneficial ownership of such shares. Also includes shares held in
Mr. Miller's IRA.

(9) Includes 9,848 shares owned by Magic City Realty and 20,757 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.

77 Page 79 of 233
<PAGE>

Mr. Odell's children own 72,081 shares as to which Mr. Odell does not have
beneficial ownership or dispositive powers.

(10) Includes 164,877 shares owned by WENCO, Ltd., of which Mr. Wentz, Jr.,
is Sole General Partner.

As of May 31, 1997, all of the above trustees as a group owned or held voting
control of 1,313,143 shares of Beneficial Interest of IRET, representing
8.76% of the 14,997,591 shares then outstanding.

During the fiscal year ending April 30, 1997, 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 19, 1997, at which meeting shareholders owning 60.6% 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

<TABLE>
Fiscal Years Ending April 30
----------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Advisor's and Trustees'
Compensation $252,013 $304,898 $336,142 $458,019 $559,149
Other Administrative
Expenses 58,253 46,557 79,974 162,588 $158,627
-------- -------- -------- -------- --------
TOTAL $310,266 $351,455 $416,116 $620,607 $717,776
</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 1993-1997, the amount of these acquisition fees were
$56,140, $89,514, $49,836, $117,506 and $177,834, respectively.

78 Page 80 of 233
<PAGE>

The following tabulation shows the cash compensation paid by IRET to its
trustees and officers during its fiscal year ending April 30, 1997. 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, 1997
- ---- ------------ -----------------
C. Morris Anderson Trustee $ 8,204.00
Ralph A. Christensen Trustee & Chairman 10,199.50
John D. Decker Trustee 8,304.00
Mike F. Dolan Trustee & Vice Chairman 9,352.75
J. Norman Ellison, Jr. Trustee 8,404.00
Daniel L. Feist Trustee 8,304.00
Jeff L. Miller Trustee & Vice Chairman 9,152.75
Patrick G. Jones Trustee 8,304.00
Thomas A. Wentz, Jr. Trustee (2)
Thomas A. Wentz, Sr. 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, 1997, Odell-Wentz & Associates received compensation and
reimbursement of disbursements under said Agreement of $667,366.70. 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, 1997, Investors Management & Marketing,
Inc., received $408,903.64 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 a broker-dealer for the
sale of Trust securities. During the fiscal year ending April 30, 1997, the
Trust paid Inland National Securities, Inc. $291,143.37 as security sales
fees.

(2) Mr. Wentz is the Vice-President and a member of Odell-Wentz &
Associates, L.L.C. He and his son, Thomas A. Wentz, Jr., are also members of
the law firm of Pringle & Herigstad, P.C., counsel for the Trust. During the
fiscal year ending April 30, 1997, the Trust paid Pringle & Herigstad, P.C.,
the sum of $36,045.27 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

79 Page 81 of 233
<PAGE>

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 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,

80 Page 82 of 233
<PAGE>

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.

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, 1997, Odell-Wentz & Associates, L.L.C., received compensation and
reimbursement of disbursements under said Agreement of $667,366.70. The
terms of said Advisory Agreement are explained above. Investors Management &

81 Page 83 of 233
<PAGE>

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, 1997, Investors Management & Marketing,
Inc., received $408,903.64 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, 1997, the
Trust paid Inland National Securities, Inc., $291.143.37 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, 1997, Odell-Wentz & Associates, L.L.C., received compensation and
reimbursement of disbursements under said Agreement of $667,366.70. 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, 1997, the Trust paid
Pringle & Herigstad, P.C., the sum of $36,045.27 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 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;

82 Page 84 of 233
<PAGE>

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

83 Page 85 of 233
<PAGE>

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.

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.

84 Page 86 of 233
<PAGE>

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:

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 shareholder, and Thomas
A. Wentz, Jr., is a shareholder of said law firm (they 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, 1996, and April 30, 1997, the
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended April 30, 1997, 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.

85 Page 87 of 233
<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.

86 Page 88 of 233

<PAGE>

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.

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.

87 Page 89 of 233

<PAGE>

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

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 Real Estate Investment 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.

88 Page 90 of 233

<PAGE>

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.

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.

89 Page 91 of 233

<PAGE>

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.

90 Page 92 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST

AND SUBSIDIARIES

MINOT, NORTH DAKOTA

CONSOLIDATED FINANCIAL STATEMENTS

AS OF

APRIL 30, 1997 AND 1996

AND

INDEPENDENT AUDITOR'S REPORT

F-1 Page 93 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
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 8-18

ADDITIONAL INFORMATION

Independent Auditor's Report on Additional Information 19

Marketable Securities 20

Noncurrent Indebtedness of Related Parties -
Mortgage Loans Receivable 21

Supplemental Income Statement Information 22

Real Estate and Accumulated Depreciation 23-27

Investments in Mortgage Loans on Real Estate 28-29

Selected Financial Data 30

Gain from Property Dispositions 31

Mortgage Loans 32-33

Significant Property Acquisitions 34

Schedules other than those listed above are omitted since
they are not required or are not applicable, or the
required information is shown in the financial statement
or notes thereon.

Quarterly Results of Consolidated Operations (Unaudited) 35

F-2 Page 94 of 233
<PAGE>

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying consolidated balance sheets of Investors
Real Estate Trust and Subsidiaries as of April 30, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended April 30, 1997, 1996 and 1995. 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 Subsidiaries as of April 30, 1997 and
1996, and the consolidated results of its operations and cash flows for the
years ended April 30, 1997, 1996 and 1995, in conformity with generally
accepted accounting principles.

BRADY, MARTZ & ASSOCIATES, P.C.

May 23, 1997

F-3 Page 95 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1997 AND 1996

ASSETS

1997 1996
------------ ------------
REAL ESTATE INVESTMENTS
Property owned $191,884,509 $131,447,734
Less accumulated depreciation (16,948,156) (13,551,571)
------------ ------------
$174,936,353 $117,896,163

Mortgage loans receivable 3,108,933 4,932,138
Less- unearned discounts and deferred interest (10,524) (18,222)
- deferred gain from property dispositions (18,713) (165,074)
- allowance for loan losses (124,881) (267,096)
------------ ------------
Total real estate investments $177,891,168 $122,377,909

OTHER ASSETS
Cash 1,718,257 2,715,274
Marketable securities - held-to-maturity 4,055,459 4,411,857
Marketable securities - available-for-sale 683,466 -
Accounts receivable 332,814 30,269
Real estate deposits 100,000 -
Investment in partnership 78,469 85,576
Prepaid insurance 248,377 128,541
Tax and insurance escrow 1,250,469 1,151,527
Deferred charges 635,464 454,685
------------ ------------
TOTAL ASSETS $186,993,943 $131,355,638
------------ ------------
------------ ------------

F-4 Page 96 of 233
<PAGE>

LIABILITIES AND SHAREHOLDERS' EQUITY

1997 1996
------------ ------------
LIABILITIES
Accounts payable and accrued expenses $ 3,073,071 $ 3,142,190
Mortgages payable 115,734,946 71,699,059
Investment certificates issued 8,187,305 5,802,469
------------ ------------
Total liabilities $126,995,322 $ 80,643,718
------------ ------------

MINORITY INTEREST OF UNITHOLDERS IN
OPERATING PARTNERSHIP $ 1,002 $ -
------------ ------------

SHAREHOLDERS' EQUITY
Shares of beneficial interest (unlimited
authorization, no par value, 14,940,513
shares outstanding in 1997 and 13,258,908
shares outstanding in 1996) $ 65,073,951 $ 54,263,917
Accumulated distributions in excess of net
income (5,162,837) (3,551,997)
Unrealized gain on securities available-
for-sale 86,505 -
------------ ------------
Total shareholders' equity $ 59,997,619 $ 50,711,920
------------ ------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $186,993,943 $131,355,638
------------ ------------
------------ ------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

F-5 Page 97 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995

1997 1996 1995
---- ---- ----
REVENUE
Real estate rentals $22,972,369 $17,635,297 $12,280,738
Interest, discounts and fees 861,613 1,024,368 1,520,385
----------- ----------- -----------
Total revenue $23,833,982 $18,659,665 $13,801,123
----------- ----------- -----------

EXPENSES
Interest $7,638,776 $5,547,739 $3,484,310
Depreciation 3,584,591 2,261,724 1,767,294
Utilities and maintenance 3,741,878 3,167,560 2,352,968
Taxes and insurance 2,720,495 2,065,017 1,220,434
Property management expenses 1,870,435 1,281,311 779,024
Advisory and trustee services 559,149 458,019 336,142
Operating expenses 158,627 162,588 79,974
Amortization 60,588 97,900 20,659
Provision for loan losses - - 200,000
Total expenses $20,334,539 $15,041,858 $10,240,805
----------- ----------- -----------

OPERATING INCOME $3,499,443 $3,617,807 $3,560,318

GAIN ON SALE OF PROPERTIES 398,424 994,163 407,512

MINORITY INTEREST PORTION OF
OPERATING PARTNERSHIP INCOME (18) - -
----------- ----------- -----------

NET INCOME $3,897,849 $4,611,970 $3,967,830
----------- ----------- -----------
----------- ----------- -----------

Net income per share:
Operating income $.25 $.30 $.34
Gain on sale of investments .03 .08 .04
---- ---- ----
Net income $.28 $.38 $.38
---- ---- ----
---- ---- ----

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

F-6 Page 98 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995

<TABLE>
Accumulated Unrealized
Shares of Distributions Gain Total
Beneficial in excess of on Securities Shareholders'
Interest Net Income Available-for-Sale Equity
---------- ------------- ------------------ -------------
<S> <C> <C> <C> <C>
BALANCE, MAY 1, 1994 $34,096,966 $(4,099,777) $ - $29,997,187

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

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

Net income - 3,897,849 - 3,897,849
Dividends distributed - (5,508,689) - (5,508,689)
Dividends reinvested 3,579,744 - - 3,579,744
Sale of shares 9,025,706 - - 9,025,706
Shares repurchased (1,795,416) - - (1,795,416)
Increase in unrealized
gain on securities
available-for-sale - - 86,505 86,505
----------- ----------- ------- -----------

BALANCE, APRIL 30, 1997 $65,073,951 $(5,162,837) $86,505 $59,997,619
----------- ----------- ------- -----------
----------- ----------- ------- -----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

F-7 Page 99 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995

<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,897,849 $ 4,611,970 $ 3,967,830
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,645,179 2,359,624 1,787,953
Minority interest portion of operating
partnership income 18 - -
Accretion of discount on contracts (7,698) (16,570) (14,670)
Gain on sale of properties (398,424) (994,163) (407,512)
Interest reinvested in investment
certificates 288,517 161,813 205,491
Changes in other assets and liabilities:
Increase in real estate deposits (100,000) - -
Increase in other assets (596,053) (273,636) (119,685)
Increase in tax and insurance escrow (98,942) (834,007) (3,603)
Increase (decrease) in accounts payable
and accrued expenses (69,119) 1,219,771 (108,444)
------------ ------------ ------------
Net cash provided from operating activities $ 6,561,327 $ 6,234,802 $ 5,307,360
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held-to-maturity $ 356,398 $ 417,952 $ 441,644
Principal payments on mortgage loans
receivable 1,706,202 2,642,346 4,059,328
Proceeds from sale of property - 389,784 -
Payments for acquisition and
improvement of properties (38,046,177) (32,462,846) (10,584,694)
Purchase of marketable securities
available-for-sale (596,961) - -
Investment in mortgage loans receivable (2,835,212) (1,784,981) (653,952)
------------ ------------ ------------
Net cash used for investing activities $(39,415,750) $(30,797,745) $ (6,737,674)
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $ 9,025,706 $ 9,820,470 $ 5,288,343
Proceeds from investment certificates issued 4,225,004 1,695,924 947,093
Proceeds from mortgages payable 27,094,270 29,025,001 2,092,266
Proceeds from short-term lines of credit 8,450,000 - -
Proceeds from sale of minority interest 1,000 - -
Repurchase of shares (1,795,416) (218,128) -
Dividends paid (1,930,455) (1,338,046) (1,417,708)
Redemption of investment certificates (2,128,686) (917,732) (695,803)
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

F-8 Page 100 of 233
<PAGE>

<TABLE>
<S> <C> <C> <C>
Principal payments on mortgage loans (2,634,017) (15,554,717) (1,979,111)
Payments on short-term lines of credit (8,450,000) - -
------------ ------------ ------------
Net cash provided from financing activities $ 31,857,406 $ 22,512,772 $ 4,235,080
------------ ------------ ------------

NET INCREASE (DECREASE) IN CASH $ (997,017) $ (2,050,171) $ 2,804,766

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

CASH AT END OF YEAR $ 1,718,257 $ 2,715,274 $ 4,765,445
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-9 Page 101 of 233
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Dividends reinvested $ 3,579,744 $ 3,100,988 $ 2,175,278
Real estate investment and mortgage
loans receivable acquired through
assumption of mortgage loans payable
and accrual of costs 19,575,635 8,232,568 15,917,788
Mortgage loan receivable transferred to
property owned 2,810,000 - -
Proceeds from sale of properties
deposited directly with escrow agent 455,329 426,352 940,258
Mortgages paid directly by
owner of contract - - 543,598
Interest reinvested directly in
investment certificates 288,517 161,813 205,491

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the year for:
Interest paid on mortgages $ 6,773,978 $ 4,661,065 $ 3,109,727
Interest paid on investment certificates 508,686 292,660 157,233
------------ ------------ ------------
$ 7,282,664 $ 4,953,725 $ 3,266,960
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

F-10 Page 102 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997, 1996 AND 1995

NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS - Investors Real Estate Trust qualifies under
Section 856 of the Internal Revenue Code 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, real estate related governmental backed securities (GNMA),
and equity securities in other real estate investment trusts.

Effective February 1, 1997, the Trust reorganized its structure in
order to convert to Umbrella Partnership Real Estate Investment Trust
(UPREIT) status. The Trust established an operating partnership (IRET
Properties, a North Dakota Limited Partnership) with a wholly owned
corporate subsidiary acting as its sole general partner (IRET, Inc., a
North Dakota Corporation). At that date, the Trust transferred all of
its assets and liabilities to the operating partnership in exchange
for general partnership units.

The general partner has full and exclusive management responsibility
for the real estate investment portfolio owned by the operating
partnership. The partnership will be operated in a manner that will
allow IRET to continue its qualification as a real estate investment
trust under the Internal Revenue Code.

All limited partners of the operating partnership will have "exchange
rights" allowing them, at their option, to exchange their limited
partnership units for shares of the Trust on a one for one basis. The
exchange rights are subject to certain restrictions including no
exchanges for at least one year following the acquisition of the
limited partnership units. The operating partnership will distribute
cash on a quarterly basis in the amounts determined by the Trust which
will result in each limited partner receiving the same dividends as a
Trust shareholder.

BASIS OF PRESENTATION - The consolidated financial statements include
the accounts of Investors Real Estate Trust and all of its
subsidiaries in which it maintains a controlling interest. The Trust
is the sole shareholder of IRET, Inc. which is the general partner of
the operating partnership, IRET Properties. IRET Properties is a
general partner in six limited partnerships, and due to the immaterial
involvement of the limited partners, has substantial influence over
their operations. 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.

NOTE 1 - (CONTINUED)

F-11 Page 103 of 233

<PAGE>

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.

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 12 years for furniture and fixtures
to 20 - 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 "held-to-maturity" and securities
"available-for-sale". The securities classified as held-to-maturity
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.

The securities classified as "available-for-sale" consist of equity
shares in other real estate investment trusts and are stated at fair
value. Unrealized gains and losses on securities available-for-sale
are recognized as direct increases or decreases in shareholders
equity. Cost of securities sold are recognized on the basis of
specific identification.

INVESTMENT IN PARTNERSHIP - 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 Operating Partnership has a general partnership
interest in the limited partnership. Chateau Properties, Ltd. has
invested in real estate properties.

MINORITY INTEREST - Capital contributions, distributions and profits
and losses are allocated to minority interests in accordance with the
terms of the operating partnership agreement.

F-12 Page 104 of 233

<PAGE>

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.

UPREIT status allows non-recognition of gain by an owner of
appreciated real estate if that owner contributes the real estate to a
partnership in exchange for a partnership interest. The UPREIT
concept was born when the non-recognition provisions of Section 721 of
the Internal Revenue Code were combined with "Exchange Rights" which
allow the contributing partner to exchange the limited partnership
interest received in exchange for the appreciated real estate for the
Trust stock. Upon conversion of the partnership units to Trust
shares, a taxable event occurs for that limited partner. Income or
loss of the operating partnership shall be allocated among its
partners in compliance with the provisions of Internal Revenue Code
Sections 701(b) and 704(c).

REVENUE RECOGNITION - Residential rental properties are leased under
operating leases with terms generally of one year or less. Commercial
properties are leased to tenants for various terms exceeding one year.
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. Rental income
is recognized as it is earned, which is not materially different than
on a straight-line basis.

Profit on sales of real estate 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 was not reasonably assured as
required by generally accepted accounting principles. Consequently,
the Trust uses the installment method of accounting for profits on
several property sales as it more fairly reflects earned revenue.

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 as discussed in Note 4.

INTEREST CAPITALIZATION - Interest is capitalized on accumulated
expenditures relating to the acquisition and development of certain
qualifying properties.

F-13 Page 105 of 233

<PAGE>

RECLASSIFICATIONS - Certain previously reported amounts have been
reclassified to conform with the current financial statement
presentation.

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 $31,658 and $335,999, respectively, at April 30, 1997.

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, 1997 April 30, 1996
-------------- -------------

Residential $ 149,643,413 $ 96,029,855
Less accumulated depreciation (11,845,692) (9,620,990)
-------------- -------------
$ 137,797,721 $ 86,408,865
-------------- -------------

Commercial $ 42,241,096 $ 35,417,879
Less accumulated depreciation (5,102,464) (3,930,581)
-------------- -------------
$ 37,138,632 $ 31,487,298
-------------- -------------
Remaining cost $ 174,936,353 $ 117,896,163
-------------- -------------
-------------- -------------

There were no repossessions during the years ended April 30, 1997 and 1996.

The above cost of residential real estate owned included construction in
progress of $2,482,849 and $12,544,357 as of April 30, 1997 and 1996,
respectively.

Construction period interest of $269,513 has been capitalized for the year
ended April 30, 1997. Construction period interest of $690,665 was
capitalized for the year ended April 30, 1996.

Residential apartment units are rented to individual tenants with lease
terms up to one year. Gross revenues from residential rentals totaled
$18,935,111, $12,286,492 and $9,076,477 for the years ended April 30,
1997, 1996 and 1995, respectively.

Gross revenues from commercial property rentals totaled $4,037,258,
$5,348,805, and $3,204,261 for the years ended April 30, 1997, 1996, and
1995, 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 $16,517, $25,054 and $16,586 for the years ended April 30, 1997,
1996 and 1995, respectively.

The future minimum lease payments to be received under these operating
leases for the commercial properties as of April 30, 1997, are as follows:

F-14 Page 106 of 233

<PAGE>

Year ending April 30

1998 $ 3,915,469
1999 3,837,598
2000 3,639,671
2001 3,601,838
2002 3,486,406
Thereafter 25,631,642
-----------
$44,112,624
-----------
-----------

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, 1997 are as follows:

Year ending April 30,

1998 $1,513,357
1999 192,186
2000 298,323
2001 84,946
2002 91,647
Later years 928,474
----------
$3,108,933
----------
----------

Details concerning mortgage loans receivable from related parties can
be found in Note 9. Non-performing mortgage loans receivable were
$174,911 at April 30, 1997 and $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
$30,000 and $151,800, respectively. The average balance of impaired
loans for the year ended April 30, 1997 was approximately $276,000.
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 $33,000 in 1997 and $31,600
in 1996. Interest income on non-performing loans recognized on a cash
basis amounted to approximately $-0- in 1997 and $18,600 in 1996.

F-15 Page 107 of 233

<PAGE>

NOTE 5 - MARKETABLE SECURITIES

The amortized cost and estimated market values of marketable
securities held-to-maturity at April 30, 1997 and 1996 are as follows:

1997 Gross Gross
Amortized Unrealized Unrealized Fair
Issuer Cost Gains Losses Value
------ ---- ----- ------ -----

GNMA $4,055,459 $ - $166,031 $3,889,428
---------- ---------- -------- ----------
---------- ---------- -------- ----------
1996
GNMA $4,411,857 $ - $129,412 $4,282,445
---------- ---------- -------- ----------
---------- ---------- -------- ----------

The amortized cost and estimated market values of marketable securities
available-for-sale at April 30, 1997 and 1996 are as follows:

1997 Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----

Equity shares in
other REIT's $596,961 $90,015 $3,510 $683,466
-------- ------- ------ --------
-------- ------- ------ --------
1996

Equity shares in
other REIT's $ - $ - $ - $ -
-------- ------- ------ --------
-------- ------- ------ --------

There were no realized gains or losses on sales of securities for the
years ended April 30, 1997, 1996 and 1995.

Marketable securities held-to-maturity 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 following is a summary of the maturities of securities
held-to-maturity at April 30, 1997 and 1996:

1997 1996
---- ----
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----

Due after 10 years $ 4,055,459 $3,889,428 $ 4,411,857 $ 4,282,445
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------

NOTE 6 - MORTGAGES PAYABLE

Mortgages payable as of April 30, 1997, included mortgages on
properties owned totaling $115,608,689, and mortgages of $126,257 on
property sold on contract. The carrying value of the related real
estate owned was $165,399,893 and the carrying value of the related
mortgage loans receivable was $353,480 as of April 30, 1997.

F-16 Page 108 of 233

<PAGE>

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.

Monthly installments are due on the mortgages with interest rates
ranging from 7.13% to 10.00% and with varying maturity dates through
November 30, 2034.

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

Years ending April 30,
1998 $ 2,763,852
1999 2,953,508
2000 6,115,493
2001 3,258,957
2002 3,520,246
Later years 97,122,890
------------
Total payments $115,734,946
------------
------------ '

As of April 30, 1997, the Trust had lines of credit available from two
financial institutions. An unsecured line of credit was issued form
First Western Bank & Trust on September 6, 1996, in the amount of
$2,000,000 carrying an interest rate equal to prime and maturing
September 1, 1997. A second unsecured line of credit from First
International Bank & Trust was issued September 12, 1996, in the
amount of $2,500,000 carrying an interest rate equal to prime and
maturing September 12, 1997. Interest payments are due monthly on
both notes. As of April 30, 1997, the Trust had no unpaid balances on
either line of credit.

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

1998 $ 4,454,245
1999 837,611
2000 1,502,516
2001 92,082
2002 849,792
Thereafter 451,059
------------
$ 8,187,305
------------
------------

NOTE 8 - DEFERRED GAIN FROM PROPERTY DISPOSITIONS

F-17 Page 109 of 233

<PAGE>

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 $146,361, $476,913, and $19,917 for the years ended April
30, 1997, 1996 and 1995, 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, 1997, Odell-Wentz & Associates received
total fees under said agreement of $489,533. The fees for April 30,
1996 were $484,086, and for April 30, 1995 were $339,128.

For the years ended April 30, 1997, 1996 and 1995, the Trust has
capitalized $177,834, $115,993 and $49,323, respectively, of these
fees, with the remainder of $311,699, $368,093 and $289,805,
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 $408,904, $281,717 and $212,018 for services rendered for
years ended April 30, 1997, 1996 and 1995, respectively.

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 $291,143 for the year ended April 30, 1997, $269,656
for the year ended April 30, 1995, and $272,615 for the year ended
April 30, 1995.

The Trust paid fees and expense reimbursements to the law firm in which
Thomas A. Wentz, Sr. is a partner totaling $36,045, $23,488 and $4,890
for the years ended April 30, 1997, 1996 and 1995, respectively.

Investment certificates issued by the Trust to officers and trustees
totaled $519,528 at April 30, 1997 and $1,258,133 at April 30, 1996.

NOTE 10 - MARKET PRICE RANGE OF SHARES

Investors Real Estate Trust shares are traded on the
Over-The-Counter-Market. The price range is as follows:

F-18 Page 110 of 233

<PAGE>

BID ASK
--- ---
LOW HIGH LOW HIGH
--- ---- --- ----
1995 $ 5.49 $ 5.89 $ 6.10 $ 6.40
1996 5.89 6.30 6.40 6.85
1997 6.44 6.62 7.00 7.20

NOTE 11 - 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.

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:

<TABLE>
1997 1996
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Mortgage loan receivable $ 3,108,933 $ 3,108,933 $ 4,932,138 $ 4,949,278
Cash 1,718,257 1,718,257 2,715,274 2,715,274
Marketable securities
held-to-maturity 4,055,459 3,889,428 4,411,857 4,282,445
Marketable securities
available-for-sale 683,466 683,466 - -

FINANCIAL LIABILITIES
Mortgages payable $115,734,946 $113,007,861 $71,699,059 $70,694,035
Investment certificates
issued 8,187,305 8,136,971 5,802,469 5,692,317

F-19 Page 111 of 233

<PAGE>

Accrued interest
payable 1,012,193 1,012,193 656,080 656,080
</TABLE>

F-20 Page 112 of 233

<PAGE>

ADDITIONAL INFORMATION

F-21 Page 113 of 233

<PAGE>

INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION

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

Our report on our audit of the basic consolidated financial statements of
Investors Real Estate Trust and Subsidiaries for the years ended April 30, 1997,
1996 and 1995, 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 19 through 35 related to the 1997, 1996 and 1995
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 35 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, 1997, 1996 and 1995, 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, 1994, and 1993, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the two years ended April 30, 1994 and 1993, none of which is presented
herein, and we expressed unqualified opinions on those consolidated financial
statements. In our opinion, the information on page 30 relating to the 1994 and
1993 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 23, 1997

F-22 Page 114 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1997 AND 1996

Schedule I
MARKETABLE SECURITIES

April 30, 1997 April 30, 1996
-------------- --------------

Principal Principal
Amount Market Amount Market
------ ------ ------ ------

GNMA Pools $ 4,055,459 $ 3,889,428 $ 4,411,857 $ 4,282,445
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------

Cost Market Cost Market
---- ------ ---- ------
Equity shares in
other REIT'S $ 596,961 $ 683,466 $ - $ -
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------

F-23 Page 115 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1997 AND 1996

Schedule IV
NONCURRENT INDEBTEDNESS OF RELATED PARTIES

MORTGAGE LOANS RECEIVABLE

<TABLE>
Beginning Ending
Balance Additions Deductions Balance
------- --------- ---------- -------
<S> <C> <C> <C> <C>
Year ended April 30, 1996

Chateau Properties, Ltd $ 1,331,175 $ - $ 1,331,175 $ -
Investors Management
and Marketing 118,137 - 118,137 -
------------ ----------- ------------ ------------
$ 1,449,312 $ $ 1,449,312 $ -
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>

There were no balances outstanding during the year ended April 30, 1997.

F-24 Page 116 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995

Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION

CHARGED TO COSTS AND EXPENSES
-----------------------------
1997 1996 1995
---- ---- ----
ITEM
- ----
Maintenance and repairs $ 1,812,496 $ 1,702,365 $ 1,338,236
Taxes, other than payroll and
income taxes
Property taxes 2,515,631 1,873,720 1,078,712
Royalties * * *
Advertising costs * * *

* Less than 1 percent of total revenues

F-25 Page 117 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1997

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION

<TABLE>
COST CAPITALIZATION SUBSEQUENT
INITIAL COST TO TRUST TO ACQUISITION
------------------------------------------ ------------------------------
BUILDING & CARRYING
ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
APARTMENTS
1112 32nd Ave. SW $ 395,737 $ 50,000 $ 543,147 $ 1,950 $ 0
1305 Birch St., Marshall, MN 116,968 35,000 275,000 92,791 0
177 10th Ave E, Dickinson 230,341 40,000 318,109 13,868 0
312 12th Ave NW, Mandan, ND 29,892 20,000 236,750 5,062 0
405 Grant Ave, Harvey, ND 0 13,584 157,211 47,404 0
4301-4313 9th Ave SW, Fargo 506,456 52,870 908,727 45,282 0
Beulah Condos, ND 0 6,360 336,589 85,686 0
Bison Properties 114,153 100,210 1,348,127 131,288 0
Candlelight Apts, Fargo, ND 519,133 80,040 757,977 12,306 0
Century Apts, Dickinson 1,559,661 100,000 1,564,598 152,344 0
Century Apts, Williston, ND 2,640,305 200,000 3,166,750 293,732 0
Circle Fifty, Billings, MT 0 491,247 1,456,757 0 63,098
Colton Heights Properties 361,356 80,000 734,286 2,754 0
Columbia Park Phase II, GF 0 661,855 14,981 0 0
Cottonwood Lake, Bismarck 0 1,055,862 0 0
Crestview Apts, Bismarck 2,748,588 235,000 4,290,031 118,170 0
Eastgate Properties 0 23,917 1,490,181 231,974 0
Forest Park Estates, G Forks 4,127,732 810,000 5,579,164 394,384 0
Hill Park Properties 1,437,430 224,750 2,562,296 36,302 0
Jenner Prop. - UPREIT 0 5,400 0 0
Legacy Apts, Grand Forks 3,986,207 700,000 6,021,189 47,636 177,986
Miramont Apts, Ft. Collins, CO 11,566,494 1,470,000 12,765,460 0 0
Neighborhood Apt, Co Springs, CO 7,501,027 1,033,592 9,811,600 4,369 0
North Pointe 49, Bismarck 1,345,937 143,500 2,120,413 9,161 123,687
Oak Manor Apts, Dickinson 234,590 25,000 225,000 40,726 0
Oakwood Estates, S Falls, SD 2,200,254 342,800 2,783,950 275,469 0
Oxbow 120 Units, Sioux Falls 3,486,180 404,072 4,494,441 55,940 0
Park Meadows, Waite Park, MN 8,025,780 1,143,450 9,099,297 0 0
Park Place, Waseca, MN 0 40,000 634,737 136,083 0
Parkway Apts, Beulah, ND 0 7,000 40,738 45,992 0
Pine Cone Apts, Ft. Collins 10,591,870 904,545 12,167,093 7,946 0
Pointe West Apts, Minot 2,284,864 240,000 3,537,775 46,620 0
Prairie Winds Apts, S Falls 1,363,526 144,097 1,816,011 8,169 0
Rocky Meadows 96, Billings 2,950,765 655,985 5,588,113 34,518 103,378
Rosewood/Oakwood, S Falls 1,306,291 200,000 1,738,245 0 0
Scottsbluff, NE 0 60,000 570,000 77,592 0
South Pointe Phase I, Minot 2,711,007 275,000 4,252,511 17,098 279,140
South Pointe Phase II, Minot 2,937,082 275,000 4,898,464 17,099 123,732
Southview Apts, Minot 0 185,000 468,585 15,164 0
Southwind Apts, Grand Forks 3,589,435 400,000 5,033,683 96,531 0
Sweetwater Properties 224,267 90,767 1,208,847 281,152 0
Virginia Apts, Minot 0 37,600 163,036 18,729 0
West Stonehill, St Cloud, MN 8,119,358 939,000 10,167,355 123,274 0
Woodridge Apts, Rochester 4,379,282 370,000 6,028,096 0 0
------------ ------------ ------------ ---------- ----------
$ 93,591,968 $ 14,367,103 $131,380,720 $3,024,569 $ 871,021
------------ ------------ ------------ ---------- ----------
------------ ------------ ------------ ---------- ----------

F-26 Page 118 of 233
<PAGE>

SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)

COST CAPITALIZATION SUBSEQUENT
INITIAL COST TO TRUST TO ACQUISITION
------------------------------------------ ------------------------------
BUILDING & CARRYING
ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
------------ ------------ ------------ ------------ ----------
OFFICE BUILDINGS
1st Avenue Building $ 0 $ 30,000 $ 219,496 $ 546,452 $ 0
401 South Main 0 70,600 334,308 70,341 0
408 1st Street SE, Minot 0 10,000 34,836 2,037 0
Creekside Office Bldg, Billings 912,165 311,310 1,088,149 199,871 0
Lester Chiropractic Clinic 0 25,000 243,917 0 0
Walters 214 So. Main, Minot 10,086 27,055 76,076 7,918 0
------------ ------------ ------------ ---------- ----------
$ 922,251 $ 473,965 $ 1,996,782 $ 826,619 $0
------------ ------------ ------------ ---------- ----------

COMMERCIAL
Arrowhead Shopping Center $ 0 $ 100,359 $ 1,063,925 $1,273,998 $0
Barnes & Noble, Fargo 2,229,880 540,000 2,752,012 0 0
Barnes & Noble, Omaha, NE 2,415,703 600,000 3,099,101 0 0
Carmike Theatre, Grand Forks 1,676,716 183,515 2,292,653 2,501 67,068
Computer City, Kentwood, MI 1,534,724 225,000 1,888,574 0 0
Edgewood Vista, Missoula, MT 647,500 108,900 853,528 0 0
Hutchinson Tech, S Falls, SD 2,349,413 244,800 4,029,426 154,800 0
Lindberg Bldg, Eden Prairie 813,700 198,000 1,154,404 103,385 0
Minot Plaza, Minot, ND 0 50,000 452,898 2,339 0
Pet Food Warehouse, Fargo 802,327 324,148 900,325 27,216 27,245
Pioneer Seed, Moorhead, MN 326,808 56,925 548,075 48,876 0
Retail Warehouse, Boise, ID 3,577,824 765,000 4,874,576 0 0
Stone Container, Fargo 3,153,155 440,251 4,409,079 59,999 89,156
Superpumper, Bottineau, ND 0 15,000 186,013 100,000 0
Superpumper, Crookston, MN 0 13,125 214,513 201,500 0
Superpumper, Emerado, ND 0 25,000 225,564 46,500 0
Superpumper, Grand Forks, ND 0 80,000 405,007 0 0
Superpumper, Langdon, ND 0 59,674 151,500 28,038 0
Superpumper, New Town, ND 0 69,900 180,100 0 0
Superpumper, Sidney, MT 0 12,000 108,600 0 0
Wedgewood, Sweetwater, GA 1,566,720 334,346 2,475,654 0 0
------------ ------------ ------------ ---------- ----------
$ 21,094,470 $ 4,445,943 $ 32,265,167 $2,049,151 $183,469
------------ ------------ ------------ ---------- ----------
TOTALS $115,608,689 $ 19,287,011 $165,642,669 $5,900,339 $1,054,490
------------ ------------ ------------ ---------- ----------
------------ ------------ ------------ ---------- ----------
</TABLE>

F-27 Page 119 of 233
<PAGE>

SCHEDULE XI (CONTINUED)

<TABLE>
LIFE ON WHICH
BUILDINGS LATEST INCOME
AND ACCUMULATED DATE STATEMENT
LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
------------ ------------ ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
APARTMENTS
1112 32nd Ave. SW $ 50,000 $ 545,100 $ 595,100 $ 20,412 1996 12-40 years
1305 Birch St., Marshall, MN 35,360 367,431 402,791 67,353 1988 12-40 years
177 10th Ave E, Dickinson 40,278 331,699 371,977 60,338 1989 12-40 years
312 12th Ave NW, Mandan, ND 20,000 241,812 261,812 44,521 1989 12-40 years
405 Grant Ave, Harvey, ND 14,674 203,525 218,199 26,092 1991 12-40 years
4301-4313 9th Ave SW, Fargo 68,868 938,011 1,006,879 203,842 1988 12-40 years
Beulah Condos, ND 78,339 350,296 428,635 291,695 1983 12-40 years
Bison Properties 100,210 1,479,416 1,579,626 1,076,049 1972 25-40 years
Candlelight Apts, Fargo, ND 80,040 770,283 850,323 85,625 1993 12-40 years
Century Apts, Dickinson 126,738 1,690,204 1,816,942 497,446 1986 12-40 years
Century Apts, Williston, ND 274,971 3,385,511 3,660,482 1,059,727 1986 12-40 years
Circle Fifty, Billings, MT 491,247 1,519,855 2,011,102 0 1996 40 years
Colton Heights Properties 80,095 736,945 817,040 320,817 1984 33-40 years
Columbia Park Phase II, GF 676,836 0 676,836 0 1996 40 years
Cottonwood Lake, Bismarck 1,055,862 0 1,055,862 0 1997 40 years
Crestview Apts, Bismarck 235,000 4,408,201 4,643,201 378,360 1994 12-40 years
Eastgate Properties 28,639 1,717,433 1,746,072 1,265,208 1970 33-40 years
Forest Park Estates, G Forks 811,954 5,971,595 6,783,548 644,490 1993 12-40 years
Hill Park Properties 245,653 2,577,695 2,823,348 1,055,567 1985 33-40 years
Jenner Prop. - UPREIT 0 5,400 5,400 0 1996 40 years
Legacy Apts, Grand Forks 700,000 6,246,811 6,946,811 78,276 1996 40 years
Miramont Apts, Ft. Collins, CO 1,470,000 12,765,460 14,235,460 159,568 1996 40 years
Neighborhood Apt, Co Springs, CO 1,033,592 9,815,969 10,849,561 122,700 1996 40 years
North Pointe 49, Bismarck 143,500 2,253,261 2,396,761 82,734 1995 12-40 years
Oak Manor Apts, Dickinson 29,012 261,714 290,726 47,606 1989 12-40 years
Oakwood Estates, S Falls, SD 342,800 3,059,419 3,402,219 329,988 1993 12-40 years
Oxbow 120 Units, Sioux Falls 404,072 4,550,381 4,954,453 282,784 1994 12-40 years
Park Meadows, Waite Park, MN 1,143,450 9,099,297 10,242,747 113,741 1997 40 years
Park Place, Waseca, MN 40,000 770,820 810,820 268,803 1988 12-40 years
Parkway Apts, Beulah, ND 11,816 81,914 93,730 10,673 1988 12-40 years
Pine Cone Apts, Ft. Collins 904,545 12,175,039 13,079,584 608,454 1994 40 years
Pointe West Apts, Minot 240,000 3,584,395 3,824,395 311,075 1994 12-40 years
Prairie Winds Apts, S Falls 144,097 1,824,179 1,968,277 204,428 1993 12-40 years
Rocky Meadows 96, Billings 655,984 5,726,009 6,381,994 71,575 1996 40 years
Rosewood/Oakwood, S Falls 200,000 1,738,246 1,938,246 21,728 1996 40 years
Scottsbluff, NE 60,000 647,592 707,592 134,553 1988 40 years
South Pointe Phase I, Minot 275,000 4,548,749 4,823,749 166,362 1995 12-40 years
South Pointe Phase II, Minot 275,000 5,039,295 5,314,295 62,991 1996 40 years
Southview Apts, Minot 185,000 483,749 668,749 31,818 1994 12-40 years
Southwind Apts, Grand Forks 409,892 5,120,322 5,530,214 190,097 1996 12-40 years
Sweetwater Properties 94,270 1,486,496 1,580,766 931,837 1972 33-40 years
Virginia Apts, Minot 37,600 181,765 219,365 58,191 1987 12-40 years
West Stonehill, St Cloud, MN 939,000 10,290,629 11,229,629 382,817 1995 40 years
Woodridge Apts, Rochester 370,000 6,028,095 6,398,095 75,351 1996 40 years
------------ ------------ ------------ -----------
$ 14,623,394 $135,020,019 $149,643,413 $11,845,692
------------ ------------ ------------ -----------

F-28 Page 120 of 233
<PAGE>

SCHEDULE XI (CONTINUED)

BUILDINGS LATEST INCOME
AND ACCUMULATED DATE STATEMENT
LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
------------ ------------ ------------ ------------ -------- -------------
OFFICE BUILDINGS
1st Avenue Building $ 67,710 $ 728,238 $ 795,948 $ 296,575 1981 20-40 years
401 South Main, Minot 70,722 404,527 475,249 114,020 1987 12-40 years
408 1st Street SE, Minot 10,016 36,858 46,873 20,140 1986 12-40 years
Creekside Office Bldg, Billings 311,310 1,288,020 1,599,330 162,195 1992 40 years
Lester Chiropractic Clinic 25,000 243,916 268,917 52,010 1988 40 years
Walters 214 So Main, Minot 27,829 83,220 111,049 72,240 1978 12-40 years
------------ ------------ ------------ -----------
$ 512,587 $ 2,784,779 $ 3,297,366 $ 717,180
------------ ------------ ------------ -----------

COMMERCIAL
Arrowhead Shopping Center $ 100,411 $ 2,337,870 $ 2,438,282 $ 2,067,593 1973 15 1/2-40 years
Barnes & Noble, Fargo 540,000 2,752,012 3,292,012 172,001 1994 40 years
Barnes & Noble, Omaha, NE 600,000 3,099,101 3,699,101 116,216 1995 40 years
Carmike Theatre, Grand Forks 183,516 2,362,221 2,545,737 147,576 1994 40 years
Computer City, Kentwood, MI 225,000 1,888,574 2,113,574 23,607 1996 40 years
Edgewood vista, Missoula, MT 108,900 853,528 962,428 10,669 1997 40 years
Hutchinson Tech, S Falls, SD 244,800 4,184,226 4,429,026 463,012 1993 40 years
Lindberg Bldg, Eden Prairie 198,000 1,257,789 1,455,789 163,558 1992 40 years
Minot Plaza, Minot, ND 50,000 455,237 505,237 50,980 1993 40 years
Pet Food Warehouse, Fargo 324,148 954,786 1,278,934 58,940 1994 40 years
Pioneer Seed, Moorhead, MN 56,925 596,951 653,876 77,259 1992 40 years
Retail Warehouse, Boise, ID 765,000 4,874,576 5,639,576 426,525 1994 40 years
Stone Container, Fargo 440,251 4,558,235 4,998,485 168,319 1995 40 years
Superpumper, Bottineau, ND 15,000 286,013 301,013 50,421 1989 40 years
Superpumper, Crookston, MN 13,125 415,652 428,777 69,465 1988 40 years
Superpumper, Emerado, ND 25,000 272,064 297,064 134,362 1986 19-40 years
Superpumper, Grand Forks, ND 80,000 405,007 485,007 65,814 1991 40 years
Superpumper, Langdon, ND 59,674 179,538 239,212 51,040 1987 31 1/2-40 years
Superpumper, New Town, ND 69,900 180,100 250,000 24,764 1992 40 years
Superpumper, Sidney, MT 12,000 108,600 120,600 12,217 1993 40 years
Wedgewood, Sweetwater, GA 334,346 2,475,654 2,810,000 30,946 1996 40 years
------------ ------------ ------------ -----------
$ 4,445,996 $ 34,497,734 $ 38,943,730 $ 4,385,284
------------ ------------ ------------ -----------
TOTALS $ 19,581,977 $172,298,162 $191,884,509 $16,948,156
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>

F-29 Page 121 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES

SCHEDULE XI (CONTINUED)

Reconciliations of total real estate carrying value for the three years ended
April 30, 1997, 1996 and 1995 are as follows:

1997 1996 1995
------------ ------------ -----------
Balance at beginning of year $131,447,734 $ 90,892,662 $63,861,793
Additions during year
- acquisitions 59,377,674 40,660,975 27,371,289
- improvements 1,463,878 635,791 344,255
------------ ------------ -----------
$192,289,286 $132,189,428 $91,577,337
Deductions during year
- cost of real estate sold (404,777) (741,694) (684,675)
------------ ------------ -----------
Balance at close of year $191,884,509 $131,447,734 $90,892,662
------------ ------------ -----------
------------ ------------ -----------

Reconciliations of accumulated depreciation for the three years ended April
30, 1997, 1996 and 1995 are as follows:

1997 1996 1995
----------- ----------- -----------
Balance at beginning of year $13,551,571 $11,732,655 $10,097,374
Additions during year
- provisions for depreciation 3,584,591 2,261,724 1,767,294
Deduction during year
- accumulated depreciation
on real estate sold (188,006) (442,808) (132,013)
----------- ----------- -----------
Balance at close of year $16,948,156 $13,551,571 $11,732,655
----------- ----------- -----------
----------- ----------- -----------

F-30 Page 122 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1996

SCHEDULE XII
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE

<TABLE>
Final Periodic Carrying Delinquent
Interest Maturity Payment Face Amount Amount of Principal
Rate Date Terms of Mortgage Mortgage or Interest
-------- --------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
RESIDENTIAL
Billings, MT - 144 units 9% 9-1-98 Monthly - $1,500,000 $ 193,657 $ -
Higley Heights, Phoenix, AZ 8% 3-31-04 Monthly - 809,786 669,048 -

Sweetwater Springs Balloon
Retirement Center 9% 7-1-97 Payment - 1,540,239 983,737 -
Melanie Bentsinger 8% 6-1-25 Monthly - 217,761 214,162 -
Rolland Hausman 9% 2-1-16 Monthly - 315,659 308,710 -
Other - over $100,000 9-12% 5-1-97 to
8-1-07 Monthly - 2,336,446 439,993 102,696
- from $50,000 - 99,999 14% 5-31-97 Monthly - 1,550,000 78,471 -
- from $20,000 - 49,999 8-9% 9-1-97 to
5-1-00 Monthly - 1,295,396 215,849 -
- less than $20,000 7% 3-1-02 Monthly - 16,500 5,306 -
---------- ---------- --------
Total $9,581,787 $3,108,933 $102,696
---------- --------
---------- --------

Less - Unearned discounts (10,524)
- Deferred gain from property dispositions (18,713)
- Allowance for loan losses (124,881)
----------
$2,954,815
----------
----------
</TABLE>

F-31 Page 123 of 233
<PAGE>

SCHEDULE XII (CONTINUED)

1997 1996
----------- -----------
MORTGAGE LOANS RECEIVABLE,
BEGINNING OF YEAR $ 4,932,138 $ 5,815,772

New participations in and
advances on mortgage loans 2,835,212 1,790,070
----------- -----------
$ 7,767,350 $ 7,605,842
Collections (4,516,202) (2,647,434)
Write-off through allowance (142,215) (26,270)
----------- -----------

MORTGAGE LOANS RECEIVABLE,
END OF YEAR $ 3,108,933 $ 4,932,138
----------- -----------
----------- -----------

F-32 Page 124 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
SELECTED FINANCIAL DATA

<TABLE>
YEAR ENDED APRIL 30
-------------------
1997 1996 1995 1994 1993
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data
Revenue $ 23,833,982 $ 18,659,665 $13,801,123 $11,583,008 $ 8,048,916
Operating income 3,499,443 3,617,807 3,560,318 3,135,426 2,222,313
Gain on repossession/
sale of investments 398,424 994,163 407,512 64,962 145,165
Minority interest of
portion of operating
partnership income (18) - - - -
Net income 3,897,849 4,611,970 3,967,830 3,200,388 2,367,478

Consolidated Balance Sheet Data
Total real estate
investments $177,891,168 $122,377,909 $84,005,635 $63,972,042 $49,492,380
Total assets 186,993,943 131,355,638 94,616,744 72,391,548 54,248,011
Shareholders' equity 59,997,619 50,711,920 37,835,654 29,997,189 23,347,449

Consolidated Per Share Data
Operating income $.25 $.30 $.34 $.35 $.28
Gain on sale of
investments .03 .08 .04 .01 .01
Dividends .39 .37 .34 .33 .31
Tax status of dividend
Capital gain 21.0% 1.6% 11.0% 7.4% 4.1%
Ordinary income 79.0% 98.4% 89.0% 92.6% 74.0%
Return of capital 0.0% 0.0% 0.0% 0.0% 21.9%
</TABLE>

F-33 Page 125 of 233
<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1997, 1996 AND 1995

GAIN FROM PROPERTY DISPOSITIONS

<TABLE>
Total
Original Unrealized Realized Realized Realized
Property Gain 4/30/97 4/30/97 4/30/96 4/30/95
- -------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Brooklyn Addition * $ 25,000 $ 3,000 $ 1,000 $ 1,000 $ 1,000
1411 South 20th * 34,696 - - 1,177 3,292
1302 South 19 1/2 * 87,669 15,713 6,732 6,215 5,739
600 Maple * 60,025 - - 41,253 859
406 17th Street-Mandan * 233,522 - 138,629 5,143 4,609
Chateau* 684,914 - - 422,125 4,418
419 and 404-Minot 82,053 - - - 82,053
Yankton, SD 305,542 - - - 305,542
108 4th Avenue SE-Minot 173,244 - - 173,244 -
Mobridge, SD 293,035 - - 293,035 -
Lantern Court 50,971 - - 50,971 -
Hutchinson, MN 252,063 - 252,063 - -
--------
$ 18,713 $398,424 $994,163 $407,512
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>

* THE GAIN FROM THE SALE OF THESE PROPERTIES IS BEING REALIZED BASED
ON THE INSTALLMENT METHOD. THE AMOUNT OF DEFERRED GAIN REALIZED
WAS $146,361, $476,913 AND $19,917 FOR THE YEARS ENDED APRIL 30,
1997, 1996 AND 1995, RESPECTIVELY.

F-34 Page 126 of 223

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1997

MORTGAGE LOANS PAYABLE

<TABLE>
Final Periodic Carrying Delinquent
Interest Maturity Payment Face Amount Amount of Principal
Rate Date Terms of Mortgage Mortgage or Interest
-------- ---------- -------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1112 32nd Ave. SW, Minot, ND 8.50% 07/20/2010 Monthly $ 425,000 $ 395,737 $ 0
177 10th Ave. E, Dickinson, ND 8.375% 11/01/2018 Monthly 250,963 230,341 0
214 South Main 9.00% 05/01/98 Monthly 45,000 10,086 0
4301 9th Ave, Sunchase I 8.65% 09/01/2002 Monthly 364,765 187,090 0
4313 9th Ave, Sunchase II 8.069% 02/01/2014 Monthly 370,000 319,365 0
Barnes & Noble Stores 7.98% 11/01/2010 Monthly 4,900,000 4,645,582 0
Candlelight Apts 8.50% 12/01/99 Monthly 578,000 519,133 0
Carmike - Grand Forks 8.65% 06/05/2014 Monthly 1,750,000 1,676,716 0
Century Apts - Dickinson 7.9125% 03/01/2006 Monthly 1,595,000 1,559,661 0
Century Apts - Williston 7.9125% 03/01/2006 Monthly 2,700,000 2,640,305 0
Creekside - Billings 8.35% 05/01/2013 Monthly 1,023,750 912,165 0
Crestview Apts - Bismarck 8.38% 01/01/2004 Monthly 3,150,000 2,748,588 0
Computer City 7.75% 02/01/2001 Monthly 1,565,361 1,534,724 0
Edgewood Vista - Missoula 9.75% 4/15/2012 Monthly 647,500 647,500 0
Fairfield - Marshall 9.00% 01/01/98 Monthly 275,000 116,968 0
Forest Park Estates IDS 7.625% 05/01/2003 Monthly 4,500,000 4,127,732 0
Hutchinson Technology 8.75% 08/01/2008 Monthly 2,800,000 2,349,413 0
Legacy Apts - Grand Forks 7.773% 01/01/2004 Monthly 4,000,000 3,986,207 0
Lindberg Bldg, Eden Prairie 8.75% 12/01/2008 Monthly 950,000 813,700 0
Mandan Apts - 312 12th 8.75% 08/01/99 Monthly 134,767 29,892 0
Miramont Apts 8.25% 08/01/2036 Monthly 11,582,472 11,566,494 0
Neighborhood Apts - Rochester 7.98% 12/20/2006 Monthly 7,525,000 7,501,027 0
North Pointe - Bismarck 49 8.05% 08/01/2015 Monthly 1,400,000 1,345,937 0
Oak Manor Apts 27 Plex-Dickinson 8.75% 02/01/99 Monthly 250,000 234,590 0
Oakwood Estates Sioux Falls 7.9125% 03/01/2006 Monthly 2,250,000 2,200,254 0
Oxbow Sioux Falls 7.9125% 03/01/2006 Monthly 3,565,000 3,486,180 0
Park Meadows Phase I 8.25% 01/10/2007 Monthly 2,600,000 2,586,527 0
Park Meadows Phase II 7.8990% 01/10/2007 Monthly 2,214,851 2,204,254 0
Park Meadows Phase III 3.84% 30 yr bond Monthly 3,235,000 3,235,000 0
Pet Food Warehouse 8.50% 12/01/2010 Monthly 840,000 802,327 0
Pinecone Ft Collins 7.125% 12/01/2034 Monthly 10,685,215 10,591,870 0
Pioneer Building - Fargo 8.375% 12/01/2006 Monthly 425,000 326,808 0
Pointe West Apts 8.34% 01/01/2004 Monthly 2,625,000 2,284,864 0
Prairie Winds Apts - Sioux Falls 7.76% 05/01/2018 Monthly 1,470,000 1,363,526 0
Rocky Meadows - Billings 8.00% 08/01/2016 Monthly 3,000,000 2,950,765 0
RoseWood Ct - Sioux Falls 7.60% 09/01/96 Monthly 1,323,000 1,306,291 0
Smith's Home Furnishings 9.75% 03/29/2003 Monthly 3,750,000 3,577,824 0
South Pointe - Phase II 8.58% 06/05/2016 Monthly 3,000,000 2,937,082 0
South Pointe - Minot 98 8.14% 09/01/2015 Monthly 2,800,000 2,711,007 0
Southwind Apts 8.74% 04/28/2010 Monthly 3,780,000 3,589,435 0
Stone Container 8.25% 12/01/2010 Monthly 3,300,000 3,153,155 0
Wedgewood Retirement 8.38% 04/23/2017 Monthly 1,566,720 1,566,720 0
West Stonehill 9.21% 02/01/98 Monthly 8,232,569 8,119,358 0
Woodridge - Rochester 7.85% 12/01/2016 Monthly 4,410,000 4,379,282 0
Colton Heights 8.75% 06/01/2007 Monthly 730,000 361,356 0
Colton Heights 9.00% 09/01/97 Monthly 437,232 25,689 0
Grafton 24 Plex 9.75% 03/20/2003 Monthly 270,000 94,874 0
Grafton 18 Plex 9.75% 03/20/2003 Monthly 198,000 129,393 0
Hill Park Properties 7.9125% 03/01/2006 Monthly 1,470,000 1,437,430 0
Jamestown 610 10.00% 06/01/99 Monthly 250,000 53,757 0
Jamestown 611 10.00% 01/01/2000 Monthly 230,000 60,396 0
Melton/Olson/Thompson 8.50% 12/01/98 Monthly 400,000 57,302 0
1516 N Bismarck 8.00% 08/01/99 Monthly 246,000 43,266 0
------------ ------------ --
$122,086,165 $115,734,946 $0
------------ ------------ --
------------ ------------ --
</TABLE>

F-35 Page 127 of 223

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1997

Acquisitions for cash and assumptions of mortgages

Commercial:
Computer City, Kentwood, MI $ 2,113,574
Edgewood Vista, Missoula, MT 962,428
Wedgewood Retirement Inns, Sweetwater, GA 2,810,000
-----------
$ 5,886,002
-----------
-----------

Apartments:
Circle 50, Billings, MT * $ 1,519,855
South Pointe II, Minot, ND ** 1,024,234
Rosewood Court, Sioux Falls, SD 1,938,245
Columbia Park Phase I, Grand Forks, ND ** 3,573,057
Rocky Meadows, Billings, MT ** 2,654,554
Miramont Apts, Fort Collins, CO 14,235,461
Neighborhood Apts, Colorado Springs, CO 10,849,561
Woodridge Apts, Rochester, MN 6,398,096
Cottonwood Lake, Bismarck, ND * 1,055,862
Park Meadows Apts, St Cloud, MN 10,242,747
-----------
$53,491,672
-----------

TOTAL $59,377,674
-----------
-----------

* Property not placed in service at April 30, 1997. Additional costs are
still to be incurred.

** Represents costs to complete a project started in year ending April 30,
1996.

F-36 Page 128 of 223

<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

<TABLE>
QUARTER ENDED
--------------------------------------------------------
7-31-96 10-31-96 1-31-97 4-30-97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $4,966,475 $5,474,027 $6,383,030 $7,010,450
Income before gains on
sale of investments 978,107 1,048,154 1,027,117 446,065
Net gain on sale of investments 252,062 - 138,629 7,733
Minority interest of unitholders
in operating partnership - - - (18)
Net income 1,230,169 1,048,154 1,165,746 453,780

Per share
Income before gains on
sale of investments .07 .08 .07 .03
Net gain on sale of
investments .02 - .01 -

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
</TABLE>

The above financial information is unaudited. In the opinion of management, all
adjustments (which are of a normal recurring nature) have been included for a
fair presentation.

F-37 Page 129 of 233

<PAGE>

"INVESTORS REAL ESTATE TRUST - CONSOLIDATED"
BALANCE SHEET
AS OF SEPTEMBER 30, 1997

A S S E T S
CASH IN BANK $705,078.82
PARTNERSHIP BANKS $4,500.00
GNMA SECURITIES $3,878,816.56
REIT STOCK $764,973.25
REAL ESTATE OWNED $209,381,684.91
REAL ESTATE CONTRACTS $1,873,764.65
CAPITALIZED LOAN COSTS $807,376.99
REAL ESTATE DEPOSITS $117,800.00
GENERAL PARTNERSHIPS $78,469.49
PREPAID INSURANCE $156,426.18
SALES PROCEED DEP/TAX DEFERRED $.00
T AND I ESCROW RE OWNED $1,230,058.14
T AND I ESCROW CONTRACTS $91,747.58
ACCOUNTS RECEIVABLE $221,736.03
--------------
TOTAL ASSETS $219,312,44.60
--------------
--------------
L I A B I L I T I E S
REAL ESTATE MORTGAGES $120,419,703.87
CONTRACT MORTGAGES $2,164,359.64
ACCOUNTS PAYABLE $66,418.48
COMMISSIONS PAYABLE $.00
ACCRUED REAL ESTATE TAXES $1,911,286.91
INVESTMENT CERTIFICATES $9,585,566.77
CONTRACTS - ESCROW $69,868.30
NOTES PAYABLE $261,733.50
ACCRUED INTEREST PAYABLE $787,500.00
ACCRUED INT PAYABLE-INV. CERTS $366,127.93
MINORITY INTEREST IRET PROP. $1,004,407.13
--------------
TOTAL LIABILITIES $136,636,972.53
---------------
---------------

R E S E R V E S
GAIN ON SALE OF INVESTMENT $18,712.58
DISCOUNT ON CONTRACTS $8,146.23
DEPRECIATION - BUILDINGS $18,722,740.57
ALLOWANCE FOR BAD DEBTS $124,880.95
UNREALIZED GAIN ON REIT STOCK $154,907.36
--------------
TOTAL RESERVES $ 19,029,387.69
---------------
---------------
C A P I T A L S H A R E S
ISSUED $68,626,851.69
RETAINED EARNINGS ($6,689,229.29)

F-38 Page 130 of 233

<PAGE>

NET PROFIT / (LOSS) $1,708,459.98
--------------
TOTAL CAPITAL $63,646,082.38
--------------

TOTAL LIAB/ RESERVES/ CAPITAL $219,312,442.60
---------------
---------------

F-39 Page 131 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST

UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIOD

ENDED OCTOBER 31, 1997

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 fro the Fiscal Year ending April 30, 1998.
Reference is made to the footnotes to the Statements prepared by the Trust's
auditors for the Fiscal Year ended April 30, 1997, contained in the Annual
Report for Fiscal 1997. In the opinion of the Trust, there have been no
developments requiring footnote disclosure for the periods covered by the
Financial Statements et forth below that are not adequately disclosed in the
footnotes to the April 30, 1997, statements.

F-40 Page 132 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST

BALANCE SHEETS
FOR THE PERIODS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)

ASSETS: 10-31-97 10-31-96
------------ ------------
Cash $ 2,425,397 $ 1,344,519
Marketable Securities
- GNMA's 3,862,957 4,157,371
- Other REIT's (at cost) 610,066 596,961
Accounts Receivable 262,972 -0-
Tax & Insurance Escrow 1,170,759 1,414,320
Deferred Charges - Loan costs 825,793 748,770
Prepaid Insurance 288,887 172,432
Deposits on Real Estate 842,442 320,000
General Partnerships 78,469 85,576
------------ ------------
$ 10,367,742 $ 8,839,949
------------ ------------
Real Estate Investments
Real Estate Owned $211,087,102 $147,288,224
Less Accumulated Deprec. (19,121,467) (14,773,341)
------------ ------------
Net Real Estate Owned 191,965,635 132,514,883
------------ ------------
Real Estate Mortgages 1,819,591 2,791,154
Less Unearned Discounts (7,671) (14,373)
Less Deferred Gain from
Property Dispositions (18,713) (165,074)
Less Reserve for Bad Debts (124,881) (197,096)
------------ ------------
Net Mortgages and Contracts 1,668,326 2,414,610
Total Real Estate Investments $193,633,961 $134,929,494
------------ ------------
TOTAL ASSETS $204,001,703 $143,769,442
------------ ------------
LIABILITIES:
Accounts Payable &
Other Liabilities $ 2,509,671 $ 2,534,382
Mortgages Payable 122,303,008 79,214,615
Investment Certificates Payable 9,966,593 6,991,458
Due on Credit Lines 3,245,837 -0-
------------ ------------
TOTAL LIABILITIES 138,025,109 $ 88,740,456
------------ ------------
MINORITY INTEREST -
IRET PROPERTIES $ 1,240,368 $ -0-
------------
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Oustanding Shares of 10-31-97 10-31-96
------------ ------------
15,806,231 as of 10-31-97
13,994,747 as of 10-31-96 $ 70,816,091 $ 70,816,091
Undistributed Net Income (6,079,865) (3,921,613)
------------ ------------
Total Shareholders' Equity $ 64,736,226 $ 55,028,986
------------ ------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $204,001,703 $143,769,442
------------ ------------
------------ ------------

F-41 Page 133 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST
<TABLE>
STATEMENT OF OPERATIONS
FOR THE THREE- AND NINE-MONTH PERIODS ENDED JANUARY 31, 1996 AND 1995 (UNAUDITED)

Three Months Ended Six Months Ended
October 31 October 31
------------------------------------------------------
1997 1996 1997 1996
------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING INCOME
Real Estate Rentals $ 7,827,686 $ 5,235,244 $14,834,983 $ 9,985,638
Interest Income 147,614 233,448 448,396 310,319
MORTGAGE DISCOUNT & FEES 20,962 5,335 34,721 6,768
- -------------------------------------------------------------------------------------
$ 7,996,262 $ 5,474,027 $15,180,023 $10,440,502
- -------------------------------------------------------------------------------------
OPERATING EXPENSE
Interest $ 2,530,549 $ 1,633,486 $ 4,972,337 $ 3,054,669
Utilities & Maintenance 1,242,214 826,003 2,360,965 1,600,434
Property Management 669,818 407,893 1,294,965 785,701
Taxes & Insurance 868,863 638,858 1,669,749 1,191,608
Advisory & Trustees Fees 162,729 138,104 313,377 267,321
OPERATING EXPENSES 61,705 48,637 115,171 91,346
- -------------------------------------------------------------------------------------
$ 5,535,878 $ 3,693,071 $10,726,564 $ 6,991,079
- -------------------------------------------------------------------------------------
MINORITY INTEREST (13,140) (13,140)
- -------------------------------------------------------------------------------------
OPERATING INCOME
(Before Reserves) $ 2,447,244 $ 1,780,956 $ 4,440,312 $ 3,449,423
DEPRECIATION/AMORTIZATION (1,227,058) (732,802) (2,326,089) (1,423,162)
- -------------------------------------------------------------------------------------
OPERATING INCOME
(After Reserves) $ 1,220,186 $ 1,048,154 $ 2,114,223 $ 2,026,261
GAIN ON SALE OF
INVESTMENTS 83,579 (2,867) 122,648 252,062
- -------------------------------------------------------------------------------------
NET TAXABLE INCOME $ 1,303,765 $ 1,045,287 $ 2,236,871 $ 2,278,323
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
NET INCOME PER SHARE:
Operating Income
(after depreciation) .08 .08 .14 .15
Gain on Sale of Investments .00 0 .01 .02
- -------------------------------------------------------------------------------------
Total Net Income/Share .08 .09 .15 .17
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
DIVIDENDS PAID PER SHARE .0950 .20425 .1925
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Average Number of Shares
Outstanding 15,551,732 13,882,377 15,373,372 13,721,089
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------

FUNDS FROM OPERATIONS*
Net Taxable Income $ 1,303,765 $ 1,045,287 $ 2,236,871 $ 2,278,323
Adjustments
+depreciation of real
estate owned/
amortization 1,227,058 732,802 2,326,089 1,423,162
-gain (loss) on sale
of investments 83,759 2,867 (122,648) (252,062)
-minority interest 13,140 (13,147)
- -------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS* $ 2,433,924 $ 1,780,956 $ 4,427,165 $ 3,449,423
per share .16 .13 .28 .25
- -------------------------------------------------------------------------------------
</TABLE>

* "Funds from Operations" is defined as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from debt

F-42 Page 134 of 233
<PAGE>

restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures calculated
on the same basis.

F-43 Page 135 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED OCTOBER 31, 1997 AND 1996 (UNAUDITED)

1997 1996
---- ----

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,236,871 $ 2,278,324
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,326,089 1,423,163
Minority interest portion of operating
partnership income 13,147 0
Accretion of discount on contracts (2,853) 0
Gain on Sale of Properties (122,648) (252,062)
Interest reinvested in investment certificates 105,312 61,471
Changes in other assets and liabilities:
Increase (decrease) in real estate deposits 512,800 320,000
(Increase) decrease in other assets (390,639) (342,433)
(Increase) decrease in tax and insurance escrow 79,710 (262,793)
Increase in accounts payable and
accrued expenses 408,304 (574,767)
- -------------------------------------------------------------------------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES $ 5,166,093 $ 2,650,902
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held to maturity $ 192,502 $ 255,861
Principal payments on mortgage loans
receivable 512,439 1,419,511
Proceeds from sale of property 580,000 389,784
Payments for acquisition and improvements
of properties (19,382,971) (12,565,971)
Purchase of marketable securities available
for sale (13,105) (596,961)
Investment in Mortgage loan receivable (206,834) (559,450)
- -------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES $(18,317,969) $(11,657,226)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sales of shares $ 4,861,457 $ 2,960,557
Proceeds from investment certificates issued 2,026,839 1,639,602
Proceeds from mortgages payable 7,937,469 5,835,467
Proceeds from short-term lines of credit 4,941,392 900,000
Proceeds from sale of minority interest 122,050 0
Repurchase of shares (1,193,635) 0
Dividends paid (1,076,596) (934,150)
Redemption of investment certificate (740,553) (506,542)
Principal payments on mortgage loans (1,369,407) (2,259,365)
Payments on short-term lines of credit (1,650,000) 0
- -------------------------------------------------------------------------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES $ 13,859,016 $ 7,635,569
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Cash $ (707,140) $ (1,370,755)
- -------------------------------------------------------------------------------
Cash at Beginning of Year $ 1,718,257 $ 2,715,274
- -------------------------------------------------------------------------------
CASH AT END OF SECOND QUARTER $ 2,425,397 $ 15,344,519
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

F-44 Page 136 of 233

<PAGE>

INVESTORS REAL ESTATE TRUST

SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES 1996 1997
------------ ------------

Dividends reinvested $ 2,058,893 $ 2,151,724

Real estate investment and mortgage loans
receivable acquired through assumption of
mortgage loans payable and accrual of costs 3,691,585 1,565,361
Mortgage loan receivable transferred to
property owned 1,161,878 2,810,000
Proceeds from Sale of Properties deposited
directly with escrow agent 0 455,329
Mortgages paid directly by owner of contract 0 0
Interest reinvested directly in investment
certificates 105,312 61,471

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:
Interest paid on mortgage $ 4,598,216 $ 2,996,724
Interest paid on margin account and other 16,121 0
Interest paid on investment certificates 123,290 93,967
- -------------------------------------------------------------------------------
TOTAL $ 4,737,627 $ 3,090,691

F-45 Page 137 of 233

<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
Advertising, Printing & Promotion Expenses: 15,000 to 313,000
Accounting: 1,000
Registration Fees: 10,000
-------
$52,000 to 349,000

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,
except as follows:

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 October 31, 1997, 546,404
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.

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 bonafide 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)

136 Page 138 of 233
<PAGE>

of said Act. All of said securities were offered and sold only to persons
resident within the State of North Dakota.

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, 1997, 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,
1997 (unaudited) See F-35 through F-38

b) Exhibit Index

Description of Exhibit Location in Form S-11 Filing
---------------------- ----------------------------
(1) Security Sales Agreement Ex-1(i), 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,

137 Page 139 of 233
<PAGE>

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)

Ex-10(i) Marketing Agreement
Dated October 1, 1997

(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

138 Page 140 of 233
<PAGE>

(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;

(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

139 Page 141 of 233
<PAGE>

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
-----------------------------------
Timothy P. Mihalick
Its Secretary

140 Page 142 of 233
<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
--------- ----- ----

Trustee and Chairman November ____, 1997
- -------------------------
Ralph A. Christensen

Trustee and Vice Chairman November ____, 1997
- -------------------------
Mike F. Dolan

Trustee November ____, 1997
- -------------------------
Patrick G. Jones

Trustee November ____, 1997
- -------------------------
J. Norman Ellison

Trustee November ____, 1997
- -------------------------
Daniel L. Feist

Trustee November ____, 1997
- -------------------------
Thomas A. Wentz, Jr.

Trustee November ____, 1997
- -------------------------
Jeff Miller

Vice-President November ____, 1997
- -------------------------
Thomas A. Wentz

Secretary November ____, 1997
- -------------------------
Timothy P. Mihalick

Trustee November ____, 1997
- -------------------------
John D. Decker

141 Page 143 of 233
<PAGE>

INDEX OF EXHIBITS

Description of Exhibit Location in Form S-11 Filing
- ---------------------- ----------------------------
(1) Security Sales Agreements Ex-1(i), 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)

Ex-10(1) Marketing Agreement,
Page _____

(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

142 Page 144 of 233
<PAGE>

(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

143 Page 145 of 233

<PAGE>

EX-1(i) FORM S-11 INVESTORS REAL ESTATE TRUST

SECURITY SALES AGREEMENT

THIS AGREEMENT, made this _____ day of November, 1997, between INVESTORS REAL
ESTATE TRUST, A North Dakota Business Trust, 12 South Main, Minot, North
Dakota 58701 (hereinafter ("IRET"), and NAME AND ADDRESS OF
BROKER,(hereinafter "BROKER").

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, BROKER 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 BROKER as a Broker to offer said shares of
Beneficial Interest for sale for $7.45 per share with a minimum purchase of
100 shares. BROKER 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 BROKER and its salesmen shall be the responsibility of
BROKER and its salesmen. In the event the offering is terminated, BROKER
will NOT be reimbursed for any out-of-pocket expenses.

4. As compensation for its services hereunder, BROKER shall receive 8%
of the proceeds of all of the securities sold by it and paid for.

5. IRET represents and warrants to BROKER 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.

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- 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.

IRET hereby indemnifies and will hold BROKER 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

BROKER

BY (NAME OF BROKER)
-------------------------------------
Its
---------------------------------

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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:

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TABLE OF CONTENTS

ARTICLE 1 - THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Nature of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Particular Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Conflicts of Interest and Investment Restrictions. . . . . . . . . . . . 10
Sales and Leases to IRET. . . . . . . . . . . . . . . . . . . . . . 10
Sales and Leases to SPONSOR, ADVISOR, TRUSTEES or any AFFILIATE.. . 10
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . 11
Multiple PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Transactions. . . . . . . . . . . . . . . . . . . . . . . . . 12
Appraisal of Real Property. . . . . . . . . . . . . . . . . . . . . 12
Roll-Up Transaction . . . . . . . . . . . . . . . . . . . . . . . . 12
Borrowing Limitations . . . . . . . . . . . . . . . . . . . . . . . 13
Other Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 13
Fees, Compensation and Expenses. . . . . . . . . . . . . . . . . . . . . 15
TRUSTEE'S Review. . . . . . . . . . . . . . . . . . . . . . . . . . 15
ACQUISITION FEES and ACQUISITION EXPENSES . . . . . . . . . . . . . 15
TOTAL OPERATING EXPENSES. . . . . . . . . . . . . . . . . . . . . . 15
Real Estate Commissions on Resale of Property . . . . . . . . . . . 16
Incentive Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ADVISOR Compensation. . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE 2 - SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SHARES: Certificates of Beneficial Interest. . . . . . . . . . . . . . . 17
Sale of SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Offering of SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SHARES Purchased by IRET . . . . . . . . . . . . . . . . . . . . . . . . 18
Transferability of SHARES. . . . . . . . . . . . . . . . . . . . . . . . 18
Effect of Transfer of SHARES or Death, Insolvency, or Incapacity of
SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Redemption and Prohibition on Transfer . . . . . . . . . . . . . . . . . 19

ARTICLE 3 - SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rights and Obligations of SHAREHOLDERS . . . . . . . . . . . . . . . . . 19
Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Voting Rights of SHAREHOLDERS . . . . . . . . . . . . . . . . . . . 20
Liability of SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . 21
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Access to Records . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Distribution Reinvestment Plans . . . . . . . . . . . . . . . . . . 23
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Election of TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE 4 - THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Number, Term of Office, Qualification, and Compensation of TRUSTEES. . . 24
Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Successor TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Actions by TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Title and Authority of TRUSTEES. . . . . . . . . . . . . . . . . . . . . 25
The ADVISOR and Independent Contractor . . . . . . . . . . . . . . . . . 25
Written Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Powers of TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
TRUSTEES' Right to Own SHARES in Trust . . . . . . . . . . . . . . . . . 28
Liability and Indemnification. . . . . . . . . . . . . . . . . . . . . . 29
Non liability of TRUSTEES, ADVISORS or AFFILIATES . . . . . . . . . 29
Indemnification of TRUSTEES . . . . . . . . . . . . . . . . . . . . 29
PERSONS Dealing with TRUSTEES. . . . . . . . . . . . . . . . . . . . . . 30
Administrative Powers of TRUSTEES. . . . . . . . . . . . . . . . . . . . 31

ARTICLE 5 - DURATION AND TERMINATION OF IRET . . . . . . . . . . . . . . . . 31
Termination of IRET. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Organization as a Corporation. . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE 6 - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
When No SHARES are outstanding . . . . . . . . . . . . . . . . . . . . . 32
When SHARES are Outstanding. . . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE 7 - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 32
Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Headings for Reference Only. . . . . . . . . . . . . . . . . . . . . . . 32

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ARTICLE 1 - THE TRUST

SECTION 1. DEFINITIONS.

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
IRET. 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 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.

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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.

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 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

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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.

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

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(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.

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.

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.

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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;

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;

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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 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

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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.

10 Page 157 of 233

<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

<PAGE>

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 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

<PAGE>

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 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.

<PAGE>

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.

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.

<PAGE>

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 8. 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.

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

<PAGE>

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.

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

<PAGE>

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.

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

<PAGE>

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.

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.

<PAGE>

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.

4. 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.

5. 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

<PAGE>

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.

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;

<PAGE>

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;

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.

22 Page 169 of 233

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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;

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.

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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 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

24 Page 171 of 233

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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 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.

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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 nonnegotiable instruments of IRET
therefore; to enter into other obligations

26 Page 173 of 233

<PAGE>

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

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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, 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.

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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.

B. INDEMNIFICATION OF TRUSTEES.

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.

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

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.

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

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.

30 Page 177 of 233

<PAGE>

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.

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

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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.

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.

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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

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EX-3(ii)

AGREEMENT OF LIMITED PARTNERSHIP

IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

12 SOUTH MAIN

MINOT, ND 58701

JANUARY 31, 1997

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TABLE OF CONTENTS

<TABLE>
<S> <C>
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

PARTNERSHIP CONTINUATION AND IDENTIFICATION. . . . . . . . . . . . . . . . . . . . 11

Name, Office and Registered Agent. . . . . . . . . . . . . . . . . . . . . . . 11
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Term and Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Filing of Certificate and Perfection of Limited Partnership. . . . . . . . . . 12
Certificates Describing Partnership Units. . . . . . . . . . . . . . . . . . . 12

BUSINESS OF THE PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

CAPITAL CONTRIBUTIONS AND ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . 13

Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Additional Capital Contributions and Issuances of Additional
Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Issuance of Additional Partnership Interests. . . . . . . . . . . . . . . 13
Certain Deemed Contributions of Proceeds of Issuance
IRET Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Minimum Limited Partnership Interest. . . . . . . . . . . . . . . . . . . 14
Additional Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
No Interest on Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 15
Return of Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . 15
No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 15

PROFITS AND LOSSES; DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 16

Allocation of Profit and Loss. . . . . . . . . . . . . . . . . . . . . . . . . 16
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Minimum Gain Chargeback . . . . . . . . . . . . . . . . . . . . . . . . . 16
Qualified Income Offset . . . . . . . . . . . . . . . . . . . . . . . . . 16
Capital Account Deficits. . . . . . . . . . . . . . . . . . . . . . . . . 17
Allocations Between Transferor and Transferee . . . . . . . . . . . . . . 17
Definition of Profit and Loss . . . . . . . . . . . . . . . . . . . . . . 17
Distribution of Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
IRET Distribution Requirements . . . . . . . . . . . . . . . . . . . . . . . . 18
No Right to Distributions in Kind. . . . . . . . . . . . . . . . . . . . . . . 18
Limitations on Return of Capital Contributions . . . . . . . . . . . . . . . . 18
Distributions upon Liquidation . . . . . . . . . . . . . . . . . . . . . . . . 18
Substantial Economic Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 19

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RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER. . . . . . . . . . . . . . . 19

Management of the Partnership. . . . . . . . . . . . . . . . . . . . . . . . . 19
Delegation of Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Indemnification and Exculpation of Indemnitees . . . . . . . . . . . . . . . . 22
Liability of the General Partner . . . . . . . . . . . . . . . . . . . . . . . 23
Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Conflicts of Interest and Investment Restrictions. . . . . . . . . . . . . . . 25
General Partner Participation. . . . . . . . . . . . . . . . . . . . . . . . . 25
Title to Partnership Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

CHANGES IN GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Transfer of the General Partner's Partnership Interest . . . . . . . . . . . . 26
Admission of a Substitute or Additional General Partner. . . . . . . . . . . . 27
Effect of Bankruptcy, Withdrawal, Death or Dissolution
of a General Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Removal of a General Partner . . . . . . . . . . . . . . . . . . . . . . . . . 28

RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS . . . . . . . . . . . . . . . . . . 29

Management of the Partnership. . . . . . . . . . . . . . . . . . . . . . . . . 29
Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Limitation on Liability of Limited Partners. . . . . . . . . . . . . . . . . . 29
Ownership by Limited Partner of Corporate General
Partner or Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Exchange Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . 33

Purchase for Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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

3 Page 183 of 233

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Tax Matters Partner; Tax Elections; Special Basis Adjustments. . . . . . . . . 37
Reports to Limited Partners. . . . . . . . . . . . . . . . . . . . . . . . . . 37

AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Survival of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Pronouns and Plurals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>

4 Page 184 of 233

<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

5 Page 185 of 233

<PAGE>

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, 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

6 Page 186 of 233

<PAGE>

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.

"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

7 Page 187 of 233

<PAGE>

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.

"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 Miramont 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.

8 Page 188 of 233

<PAGE>

"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.

"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).

9 Page 189 of 233

<PAGE>

"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.

"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.

10 Page 190 of 233

<PAGE>

"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 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

11 Page 191 of 233

<PAGE>

(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.

12 Page 192 of 233

<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

13 Page 193 of 233
<PAGE>

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.

(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

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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 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.

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<PAGE>

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 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).

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<PAGE>

(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 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

17 Page 197 of 233
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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.

18 Page 198 of 233
<PAGE>

(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 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,

19 Page 199 of 233
<PAGE>

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
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;

20 Page 200 of 233
<PAGE>

(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;

(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

21 Page 201 of 233
<PAGE>

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.

(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.

22 Page 202 of 233
<PAGE>

(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.

(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

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<PAGE>

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 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.

24 Page 204 of 233
<PAGE>

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.

25 Page 205 of 233

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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).

(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

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<PAGE>

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 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.

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<PAGE>

(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.

(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

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<PAGE>

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 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

29
<PAGE>

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 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

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<PAGE>

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

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<PAGE>

are necessary in order to avoid the Partnership being treated as a
"publicly traded partnership" under section 7704 of the Code.

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.

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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 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.

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<PAGE>

(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, 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.

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<PAGE>

(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.

(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.

35
<PAGE>

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.

(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).

36
<PAGE>

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 an annual report containing financial statements

37
<PAGE>

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.

38
<PAGE>

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.

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.

39
<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.

40
<PAGE>

IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP

EXHIBIT B

INITIAL ASSETS AND LIABILITIES OF THE PARTNERSHIP

The sum of $1,000 cash contributed 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.

41
<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>

November 26, 1997

EXHIBIT EX-5
OPINION RE LEGALITY

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11 DATED NOVEMBER 26, 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 24, 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

221 Page 223 of 233

<PAGE>

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.

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.

222 Page 224 of 233

<PAGE>

November 26, 1997

EXHIBIT EX-8
OPINION RE TAX MATTERS

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11 DATED NOVEMBER 26, 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 connection 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.

223 Page 225 of 233

<PAGE>

EXHIBIT 10(1)

MARKETING AGREEMENT

THIS AGREEMENT IS MADE as of the 1st day of October, 1997, between
INVESTORS REAL ESTATE TRUST, a North Dakota Real Estate Investment Trust, 12
South Main, Minot, ND, (hereinafter "IRET"), and ROGER DOMRES d/b/a ND
INVESTMENT BANKERS, 216 South Broadway, P.O. Box 656, Minot, ND 58702,
(hereinafter "DOMRES").

The purpose of this agreement is to provide for DOMRES to promote and
develop the primary market for shares of Beneficial Interest of IRET by
finding, training and further developing new brokerage firms to sell said
IRET shares pursuant to registered primary offerings of said shares with the
Securities and Exchange Commission and various states.

NASD COMPLIANCE. DOMRES shall be responsible for ensuring that this
agreement is in compliance with all rules and regulations of the National
Association of Securities Dealers and shall make all necessary filings and
reports with NASD.

TERM OF AGREEMENT. This agreement shall become effective on October 1,
1997, and shall continue for a term of two years and shall continue
thereafter until terminated by either party with 60 days' advance written
notice, provided that the agreement shall terminate immediately if not in
compliance with any applicable NASD or securities rules or regulations.
Further, if IRET is unable to continue its listing on the NASDAQ Small-Cap
Market because of a lack of Market Makers, it shall have the option to
terminate this agreement upon 30 days' written notice.

SERVICES PROVIDED. DOMRES agrees to use his best efforts to recruit,
train and encourage individual brokers and brokerage firms not now marketing
IRET shares on the primary market to offer and sell said IRET shares.

EXISTING IRET BROKERS. The following brokerage firms are presently a
party to a marketing agreement with IRET and any IRET shares sold by said
firms are not a part of this marketing agreement:

American Investment Services, Inc. Inland National Securities, Inc.
Phil Chang, President David Theusch, President
600 High Point Lane 21 South Main
E. Peoria, IL 61611-2533 Minot, ND 58701

224 Page 226 of 233
<PAGE>

Garry Pierce Financial Services, LLP ND Capital Inc.
2910 E. Broadway Ave., Suite 33 Bob Walstad, President
Bismarck, ND 58501 1 North Main St.
Minot, ND 58703

In addition, IRET reserves the right to locate and enter into Securities
Sales Agreements with other brokerage firms who, independent of the efforts
of DOMRES, agree to market IRET primary shares. Any disagreement between
IRET and DOMRES as to whether a new brokerage firm who agrees to market IRET
shares has been produced by the efforts of DOMRES and is therefore subject to
the compensation provisions of this agreement shall be settled by arbitration
pursuant to the provisions of Chapter 32-29.2 of the North Dakota Century
Code with each party appointing one arbitrator and the two selecting a third,
and the arbitration procedure conducted as provided in said Chapter 32-29.2.

COMPENSATION. For his services in promoting the sale of IRET securities
on the primary market, DOMRES shall receive 2% of the market price for all
IRET shares sold on the primary market by brokers and brokerage firms
procured by the efforts of DOMRES and subject to this agreement. At the
inception of this agreement, all sales by brokers affiliated with Huntingdon
Securities Corporation, 216 South Broadway, Minot, ND 58701, Berthel Fisher
Financial Services, Inc., 100 2nd Street SE, Cedar Rapids, IA 52401, and
Primevest Financial Services, Inc., 400 First Street South, Suite 300, St.
Cloud, MN 56301, shall be regarded as sales to be compensated under this
agreement. When DOMRES procures other brokerage firms, he shall submit the
name and address of said brokerage firm, together with an executed securities
marketing agreement between said brokerage firm and IRET and an addendum to
this agreement shall be prepared and signed by the parties indicating that
future sales by said brokerage firm shall entitle DOMRES to the compensation
herein provided. Any dispute between the parties concerning the appropriate
compensation payable under this agreement shall be submitted to arbitration
as hereinabove provided.

PAYMENT OF COMPENSATION. All compensation earned by DOMRES under this
agreement shall be paid on a monthly basis for all sales that have occurred
in such month and shall be paid by IRET by the 10th day of the following
month.

225 Page 227 of 233
<PAGE>

AGREEMENT BINDING. This agreement shall be binding on and shall inure to
the benefit of the parties hereto, their heirs, successors and assigns.

INVESTORS REAL ESTATE TRUST, ND INVESTMENT BANKERS
a North Dakota Real Estate
Investment Trust

BY /s/ BY /s/
--------------------------------- -------------------------------
Thomas A. Wentz, Vice-President ROGER DOMRES

226 Page 228 of 233

<PAGE>

EX-23(i)

November 26, 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 November 26, 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

227 Page 229 of 233

<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, 1997, as well as our
Independent Auditor's Report dated May 23, 1997. 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, 1997.

BRADY MARTZ & ASSOCIATES, P.C.

November 26, 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

228 Page 230 of 233

<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> FEB-28-1998
<PERIOD-END> OCT-31-1997
<CASH> 2,425,397
<SECURITIES> 3,862,957
<RECEIVABLES> 1,819,591
<ALLOWANCES> 124,881
<INVENTORY> 0
<CURRENT-ASSETS> 10,367,742
<PP&E> 211,087,102
<DEPRECIATION> 19,121,467
<TOTAL-ASSETS> 204,001,703
<CURRENT-LIABILITIES> 2,509,671
<BONDS> 122,303,008
9,966,593
0
<COMMON> 70,816,091
<OTHER-SE> (6,079,865)
<TOTAL-LIABILITY-AND-EQUITY> 204,001,703
<SALES> 0
<TOTAL-REVENUES> 15,180,023
<CGS> 0
<TOTAL-COSTS> 7,664,915
<OTHER-EXPENSES> 428,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,972,337
<INCOME-PRETAX> 2,114,223
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,114,223
<DISCONTINUED> 0
<EXTRAORDINARY> 122,648
<CHANGES> 0
<NET-INCOME> 2,236,871
<EPS-PRIMARY> .15
<EPS-DILUTED> .15

</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 CORRESPONDENCE
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
---------------------------------------------------------

230 Page 232 of 233

<PAGE>

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)

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