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___
 
 

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.

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
2  Inside Cover Page of Prospectus.........................................N/A
3  Summary Information, Risk Factors and Ratio of Earnings to
     Fixed Charges.................................................... 9 to 15
4  The Company........................................................16 to 17
5  Business Objectives......................................................17
6  Available Information Concerning IRET....................................17
7  Risk Factors.......................................................18 to 21
8  Compensation Table.................................................21 to 22
9  Conflict of Interest...............................................22 to 24
10 Determination of Offering Price..........................................24
11 Dilution.................................................................24
12 Selling Security Holders................................................N/A
13 Plan of Distribution.....................................................24
14 Use of Proceeds....................................................25 to 27
15 Selected Financial Data.. .............................................. 27
16 Management's Discussion and Analysis of Financial Condition                
     and Results of Operations........................................27 to 34
17 Financial Results for Three Months Ending July 31, 1999............34 to 37
18 Structure of IRET..................................................37 to 38
19 General Information as to Investors Real Estate Trust..............36 to 37
20 Policy with Respect to Certain Activities..........................38 to 40
21 Investment Policies of Investors Real Estate Trust.................40 to 41
22 Description of Real Estate.........................................41 to 44
23 Shares Available for Future Sale...................................44 to 45
24 Operating Partnership Agreement....................................45 to 48
25 Tax Treatment of IRET and Its Security Holders.....................48 to 58
26 Market Price Of and Dividends on IRET's Shares of Beneficial               
     Interest.........................................................58 to 62
27 Dividend Reinvestment Plan...............................................62
28 Description of IRET's Securities...................................62 to 63
29 Legal Proceedings.......................................................N/A
30 Security Ownership of Certain Beneficial Owners
     and Management...................................................63 to 64
31 Directors and Executive Officers...................................63 to 64
32 Executive Compensation.............................................64 to 67
33 Certain Relationships and Related Transactions.....................64 to 67
34 Selection, Management and Custody of IRET's Investments..................67
35 Policies with Respect to Certain Transactions......................67 to 68
36 Interests of Named Experts and Counsel...................................68
37 Limitations of Liability.................................................68
38 Disclosure of Commission Position on Indemnification for Securities
     Act Liabilities..................................................68 to 70
39 Glossary of Terms..................................................71 to 76
40 Financial Statements and Information..............................76 to 112

Part II.  Information Not Required in Prospectus

ITEM

41 Other Expenses of Issuance and Distribution.............................117
42 Sales to Special Parties................................................117
43 Recent Sales of Unregistered Securities.................................117
44 Indemnification of Directors and Officers...............................117
45 Treatment of Proceeds from Stock Being Registered.......................117
46 Financial Statements and Exhibits................................118 to 119
47 Undertakings.....................................................119 to 121 
48 Index of Exhibits.......................................................122
49 Security Sales Agreement..........................................123 & 124
50 Opinion RE Legality.....................................................125
51 Opinion RE Tax Matters..................................................126
52 Consent Letter from Pringle & Herigstad, P.C., RE Opinion of Legality...127
53 Consent Letter from Brady Martz & Associates, P.C., RE Financial
     Information...........................................................128
54 Financial Data Schedule for Investors Real Estate Trust (As Of
      July 31, 1999).......................................................129
55 Subscription Agreement - Investors Real Estate Trust..............130 & 131

Effective Date: ____________, 1999 Prospectus
 
 

 

THE OFFERING	PER SHARE	TOTAL
Public Price	$8.40	$8,400,000
Selling Commission	$  .67	$   670,000
Proceeds to IRET	$7.73	$7,730,000

TRADING SYMBOL
NASDAQ Small Cap Market - IRETS

THE COMPANY
The Trust is a Real Estate Investment Trust formed on July 31, 1970. IRET owns approximately 6,500 apartment units and 1,300,000 square feet of commercial property in North Dakota and nine other states.

USE OF PROCEEDS
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."

INVESTMENT IN THE SHARES INVOLVES MATERIAL RISKS AND THERE IS NO GUARANTEE OF RETURN ON INVESTMENT. SEE "RISK FACTORS." AMONG SUCH RISKS ARE THE FOLLOWING:

 

*	THE ESTIMATED BOOK VALUE OF TRUST SHARES AFTER THIS OFFERING WILL BE $4.74. A PURCHASER PAYING $8.40 PER SHARE WILL INCUR AN IMMEDIATE BOOK VALUE DILUTION OF $3.66 PER SHARE.
*	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 OF 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.
*	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.

SUMMARY OF THE OFFERING...................................................9-15
THE COMPANY.................................................................16
BUSINESS OBJECTIVES.........................................................17
     Portfolio Mix..........................................................17
     Leverage...............................................................17
AVAILABLE INFORMATION CONCERNING IRET.......................................17
     Securities and Exchange Commission.....................................17
     Reports to Security Holders............................................18
     Incorporation by Reference.............................................18
RISK FACTORS................................................................18
     Price of Shares Arbitrarily Determined.................................18
     Price Exceeds Book Value...............................................18
     High Leverage..........................................................18
     Failure to Qualify as a Real Estate Investment Trust...................19
     Best Efforts Sale......................................................19
     Business Environment...................................................19
     Risks Related to Mortgage Lending......................................19
     Relationship with Advisor..............................................20
     Conflict of Interest...................................................20
     Environmental Liability................................................20
     Competition............................................................21
     Liquidity..............................................................21
     Front-End Fees.........................................................21
COMPENSATION TABLE..........................................................21
CONFLICTS OF INTEREST.......................................................22
     Transactions with Affiliates and Related Parties.......................23
     Compensation to the Advisor and Conflicts of Interest..................23
     Competition by IRET with Affiliates....................................23
     Non-Arm's Length Agreements............................................23
     Lack of Separate Representation........................................24
DETERMINATION OF OFFERING PRICE.............................................24
DILUTION....................................................................24
PLAN OF DISTRIBUTION........................................................24
WHO MAY INVEST..............................................................24
USE OF PROCEEDS.............................................................25
SELECTED FINANCIAL DATA - ANNUAL............................................27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
     AND RESULTS OF OPERATIONS..............................................27
     General................................................................27
     Results of Operations..................................................28
     Property Acquisitions..................................................30
     Property Dispositions..................................................31
     Dividends..............................................................32
     Funds From Operations..................................................32
     Liquidity and Capital Resources........................................33
     Impact of Inflation....................................................34
     Economic Conditions....................................................34
     Year 2000 Costs........................................................34
FINANCIAL RESULTS FOR THREE MONTH PERIOD ENDED JULY 31, 1999................34
     Results From Operations................................................34
     Funds From Operations..................................................34
     Operating Income.......................................................34
     Capital Gains..........................................................35
     Property Acquisitions..................................................35
     Pending Acquisitions...................................................35
     Financial Condition....................................................36

GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST.......................36
     Organization of IRET...................................................36
     Governing Instruments of IRET..........................................36
     Independent Trustees...................................................36
     Shareholder Meetings...................................................37
STRUCTURE OF IRET...........................................................37
POLICY WITH RESPECT TO CERTAIN ACTIVITIES...................................38
     To Issue Senior Securities.............................................38
     To Borrow Money........................................................38
     To Make Loans To Other Persons.........................................39
     Mortgage Loans Receivable..............................................39
     To Invest in the Securities of Other Issuers for the Purpose of
           Exercising Control...............................................39
     To Underwrite Securities of Other Issuers..............................39
     To Engage in the Purchase and Sale (or Turnover) of Investments........39
     To Offer Securities in Exchange for Property...........................39
     To Repurchase or Otherwise Reacquire Its Shares or Other Securities....39
     To Make Annual and Other Reports to Shareholders.......................39
INVESTMENT POLICIES OF IRET.................................................40
     Investments in Real Estate or Interests in Real Estate.................40
     Investments in Real Estate Mortgages...................................40
     Investments in Other Securities........................................40
     Investments in Securities Of or Interests In Persons Primarily
           Engaged in Real Estate Activities................................41
DESCRIPTION OF REAL ESTATE..................................................41
     INVESTMENT PORTFOLIO - INVESTORS REAL ESTATE TRUST
           AS OF JULY 31, 1999..............................................41
     Title..................................................................44
     Insurance..............................................................44
     Planned Improvements...................................................44
     Contracts or Options to Sell...........................................44
     Occupancy and Leases...................................................44
SHARES AVAILABLE FOR FUTURE SALE............................................44
OPERATING PARTNERSHIP AGREEMENT.............................................45
     Management.............................................................45
     Transferability of Interests...........................................45
     Capital Contribution...................................................46
     Exchange Rights........................................................47
     Registration Rights....................................................47
     Operations.............................................................47
     Distributions..........................................................47
     Allocations............................................................48
     Term...................................................................48
     Fiduciary Duty.........................................................48
     Tax Matters............................................................48
TAX TREATMENT OF IRET AND ITS SECURITY HOLDERS..............................48
     Federal Income Tax.....................................................48
     North Dakota Income Tax................................................50
     Taxation of IRET's Shareholders........................................50
     Taxation of Tax-Exempt Shareholders....................................50
     Tax Considerations for Foreign Investors...............................51
     Backup Withholding.....................................................51
     State and Local Taxes..................................................51
     Other Tax Considerations...............................................52
     Tax Aspects of the Operating Partnership...............................52
     Classification as a Partnership........................................52
     Income Taxation of the Operating Partnership and Its Partners..........53
     Partners, Not Partnerships, Subject To Tax.............................53
     Partnership Allocations................................................53
     Tax Allocations With Respect To Contributed Property...................54

     Basis in Operating Partnership Interest................................54
     Sale of Operating Partnership's Property...............................55
ERISA CONSIDERATIONS........................................................55
      Employee Benefit Plan, Tax-Qualified Retirement Plans
        and IRAS............................................................55
      Status of IRET and the Operating Partnership under ERISA..............56
MARKET PRICE OF AND DIVIDENDS ON IRET'S SHARES OF BENEFICIAL INTEREST.......58
     Market for the Shares of Beneficial Interest...........................58
     Dividend and Share Price History.......................................60
DIVIDEND REINVESTMENT PLAN..................................................62
DESCRIPTION OF IRET'S SECURITIES............................................62
     Description of Shares of Beneficial Interest...........................62
     Restrictions on Transfer...............................................63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............64
EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...64
ADVISORY AGREEMENT..........................................................65
     Basic Compensation.....................................................65
     Additional Compensation................................................66
     Limitation.............................................................66
     Roger R. Odell.........................................................66
     Thomas A. Wentz, Sr....................................................67
SELECTION, MANAGEMENT AND CUSTODY OF IRET'S INVESTMENTS.....................67
     Management of IRET's Investments.......................................67
POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS...............................67
INTERESTS OF NAMED EXPERTS & COUNSEL........................................68
LIMITATIONS OF LIABILITY....................................................68
LEGAL MATTERS...............................................................70
EXPERTS.....................................................................70
GLOSSARY OF TERMS...........................................................71
CONSOLIDATED FINANCIAL STATEMENTS - FISCAL YEAR ENDED 
      APRIL 30, 1999 AND 1998 AND INDEPENDENT AUDITOR'S REPORT....F-1 to F-35
CONSOLIDATED FINANCIAL STATEMENTS - THREE MONTH PERIOD ENDED
     JULY 31, 1999 (UNAUDITED)....................................F-36 to F-39

THIS SECTION SUMMARIZES INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND IS INTENDED FOR QUICK REFERENCE ONLY. THIS IS NOT A COMPLETE DESCRIPTION OF THE INVESTMENT. YOU SHOULD READ AND EVALUATE ALL OF THIS PROSPECTUS BEFORE YOU PURCHASE OUR SHARES. THE PLACE IN THE PROSPECTUS WHERE YOU CAN FIND MORE INFORMATION ABOUT EACH TOPIC IS IDENTIFIED AT THE END OF EACH PARAGRAPH.

RISK FACTORS
An investment in our shares involves risk, including the risk of loss of your entire investment. See "Risk Factors" for a more complete discussion of factors that you should consider before purchasing our shares. These risks include:

 

*	BOOK VALUE The book value of IRET shares of beneficial interest is substantially less than the purchase price to new shareholders under this Offering. As of July 31, 1999, the book value of the 19,923,692 shares then outstanding was $4.59. Assuming all of the shares registered under this Offering are sold, the estimated resulting book value will be $4.74 per share. Thus, a purchasing shareholder paying $8.40 per share under this Offering will incur an immediate book value dilution of $3.66 per share.
*	PRICE OF SHARES ARBITRARILY DETERMINED The price of our shares has been arbitrarily determined by us and is a higher price than the price paid by the current holders of our shares and may be higher than the current market price of the shares.
*	FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST We intend to continue to qualify as a real estate investment trust under the Internal Revenue Code, but may fail to do so.
*	BEST EFFORTS SALE  The shares are being sold by the Soliciting Dealers on a "best efforts" basis. The selling agents are only required to use their best efforts to locate purchasers of the shares, but are not obligated to ensure that a minimum number or that even any shares are sold.
*	BUSINESS ENVIRONMENT The results of our operations will depend upon the availability of opportunities for the profitable investment and reinvestment of the funds available to us and general economic conditions over which we have no control.
*	HIGH LEVERAGE We seek to borrow approximately 70% of the cost of real estate purchased or constructed.
*	RELATIONSHIP WITH ADVISOR Our operating expenses, including compensation to the advisor and the trustees, must be met regardless of profitability.
*	CONFLICTS OF INTEREST We are 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 we are 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 our shares under this Offering would be able to resell such shares when desired. Since October 17, 1997, our shares have been listed for trading on the National Association of Securities Dealers Automated Quotation System Small Capitalization Index (NASDAQ), but no assurance can be given that such listing will continue.

CONFLICTS
The advisory company and the trustees are able to personally invest in competing real estate and to conduct other business activities which may be in conflict with our business activities. See "Conflicts of Interest."

IRET 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 IRET are not restricted from engaging for their own accounts in business activities of the type conducted by IRET, and occasions may arise when the interests of IRET would be in conflict with those of one or more of the trustees, the Advisor or their affiliates. Any transactions between IRET and any trustee, the Advisor or any of their affiliates, other than the purchase or sale, in the ordinary course of IRET's business, will require the approval of a majority of the trustees who are not interested in the transaction.

The Advisor and its affiliates may receive compensation from IRET for providing various services. See "Compensation Table" and "The Advisory Agreement."

The Advisor is entitled to receive an advisory fee equal to a percentage of the Net Invested Assets of IRET. See "Advisory Agreement." The Advisor also will receive fees in connection with IRET's acquisition or construction of real properties 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 or for the account of others, of interests in entities engaged in the real estate business and any other business.

Neither the Advisor nor its affiliates are prohibited from providing the same services to others, including competitors.

All agreements and arrangements, including those relating to compensation, between IRET and the Advisor or any of their affiliates will not be the result of arm's-length negotiations.

IRET, the Advisor and the principals of IRET and Advisor are not represented by separate counsel. IRET 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, Jr., is a trustee of IRET and a partner in Pringle & Herigstad, P.C. See "Conflicts of Interest."

WHO MAY INVEST
We are offering shares to residents of the following states: North Dakota, South Dakota, Montana, and Minnesota. Other states may be added by a supplement to this Prospectus. Special disclaimers and investor qualification standards may apply to some of the above states. See "Who May Invest."

A BRIEF DESCRIPTION OF OUR COMPANY
We are a North Dakota Real Estate Trust which has been in business since 1970. We have our only office in Minot, North Dakota, and own a diversified portfolio of apartment complexes and commercial properties in North Dakota and 10 other states. We currently own over 6,500 apartment units and 1,300,000 square feet of commercial property the total original investment in real estate assets exceeds $350,000,000. See "The Company."

CAPITALIZATION
The following shows the amount of assets we owned on July 31, 1999, as well as the liabilities that we owed and the partnership and shareholder equity. We also show the total assets that will be owned IF we sell all of the 1,000,000 shares being offered.
 

(1) Reflects costs of issue of $728,000 deducted from total sale proceeds of $8,400,000 resulting in the addition of $7,672,000 to total assets.

WE ARE A "REAL ESTATE INVESTMENT TRUST"
The federal income tax code contains special provisions for companies that wish to operate as real estate investments trusts ("REITS"). A REIT will not be subject to federal income tax if it complies with tax laws. We have qualified as a REIT and intend to do so in the future. See "Tax Treatment of IRET and Its Security Holders."

UPREIT
We are structured as an "Umbrella Real Estate Investment Trust" or UPREIT. This means that we conduct our business through a limited partnership -IRET Properties, a North Dakota Limited Partnership. Through our subsidiary, IRET, Inc., we act as the general partner of the limited partnership and own approximately 85.3% of the partnership's assets as of September 30, 1999. By operating as an UPREIT, we are able to acquire real estate in exchange for limited partnership units of IRET Properties which are exchangeable on a one-for-one basis for our shares, subject to certain restrictions. See "Operating Partnership Agreement."

EXTERNALLY ADVISED
We have no employees. Instead, our business is conducted through independent contractors. Our advisor is Odell-Wentz & Associates, LLC, a North Dakota Limited Liability Company, whose members are Roger R. Odell and Thomas A. Wentz, Sr. The advisory company receives fees based on the capitalization of IRET as well as compensation for giving advice with respect to property purchases based on the purchase price of each property that is acquired. The independent trustees who serve on the Board of Trustees also receive compensation. The following is a summary of the compensation paid to the advisor and the trustees as well as other administrative expenses incurred during the past five fiscal years. See "Advisory Agreement."

PROPERTY MANAGEMENT
We hire independent property managers to provide the day-to-day management of each real estate investment that we own. See "Management of IRET's Investments."

OFFERING PRICE
The offering price of $8.40 has been arbitrarily determined by our Board of Trustees. The price is higher than the price at which our shares have traded and have been sold in the past. See "Market Price of and Dividends on IRET's Shares of Beneficial Interest."

DIVIDENDS
We have paid 113 consecutive quarterly dividends beginning June 30, 1971. Dividends are paid in mid-January, April 1st, July 1st and October 1st of each year. The dividend paid on October 1, 1999, was $.126 per share. See "Dividend History."

USE OF PROCEEDS
We will use the net proceeds from the sale of shares under this offering to continue our apartment building program. We are currently building apartments in Bismarck, Jamestown and Grand Forks, North Dakota, Rochester, Minnesota, and Billings, Montana. See "Use of Proceeds."

SHAREHOLDER DEMOCRACY RIGHTS
The following is a brief summary of the rights afforded to shareholders pursuant to the Declaration of Trust:

 

*	SHARES: CERTIFICATES OF BENEFICIAL INTEREST The units into which the beneficial interest in IRET will be divided shall be designated as SHARES. The certificates evidencing ownership of SHARES in IRET will be designated as Certificates of Beneficial Interest or SHARES and shall be in such form as the TRUSTEES may from time to time prescribe.
*	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 pre-emptive rights.
*	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.
*	SHARES PURCHASED BY IRET IRET may repurchase or otherwise acquire its own SHARES on such terms and conditions as the TRUSTEES deem appropriate.

 

	conditions as the TRUSTEES deem appropriate.
*	TRANSFERABILITY OF SHARES SHARES in IRET shall be transferable in accordance with the procedure prescribed from time to time in the TRUSTEES' Regulations.
*	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. 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.

 

	or dissolve or liquidate IRET.
*	LIABILITY OF SHAREHOLDERS The SHARES of IRET shall be non-assessable by IRET.
*	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.
*	ACCESS TO RECORDS Any SHAREHOLDER and any designated representative thereof shall be permitted access to the records of IRET at all reasonable times, and may inspect and copy any of them.
*	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.

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

IRET, pursuant to the requirements of Sections 856-858 of the Internal Revenue Code which govern real estate investment trusts, invests in real estate, real estate equities and real estate mortgages.

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

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 are as follows:
 
 

As indicated above, IRET's principal source of operating revenue is rental income from real estate properties owned by IRET. A minor amount of revenue is derived from interest on short-term investments in government securities and interest on savings deposits. In addition to operating income, IRET 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 IRET. Since the inception of IRET and until January 1, 1986, Roger R. Odell, 12 South Main, Minot, North Dakota, served as advisor to IRET, providing office facilities, administering day-to-day operations of IRET, and advising with respect to investments and investment policy. Effective January 1, 1986, IRET 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 has been the advisor to IRET.

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. From 1962 to August 1, 1998, Mr. Wentz was a practicing attorney with Pringle & Herigstad, P.C. He has been a member of Odell-Wentz & Associates since 1985.

IRET seeks to realize shareholder value by regular increases in the quarter-yearly cash dividends paid to its shareholders and in appreciation in the value of its shares of Beneficial Interest. See "Market Price and Dividends on IRET's Shares of Beneficial Interest" for a description of share prices and dividends during its 29 year history.

PORTFOLIO MIX
IRET'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 surrounding states 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 14 years or longer.

LEVERAGE
An essential ingredient of IRET'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. IRET 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.
 
 

SECURITIES AND EXCHANGE COMMISSION
IRET is currently a reporting company pursuant to the Securities 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 IRET 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 the above location at prescribed rates.

IRET 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 IRET and the Shares, reference is made to the Registration Statement and such exhibits and financial statement schedules, copies of which may be examined without charge at or obtained upon payment of prescribed fees from, the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available for inspection and copying at the regional offices of the Commission located at 13th Floor, 7 World Trade Center, New York, New York, 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The Commission maintains a Website at http://www.sec.gov. Reports, proxy and information statements and other information regarding registrants that file electronically with the Commission (including IRET) 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
IRET shall furnish shareholders with annual reports on or about July 25th of each year containing financial statements audited by IRET'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 IRET deems appropriate or as required by law.

INCORPORATION BY REFERENCE
Copies of any document or part thereof incorporated by reference in this prospectus but not attached is available free of charge upon request to Timothy P. Mihalick, 12 South Main Street, Minot, ND 58701 (701-852- 1756).
 
 

An investment in the shares involves various risks. You should carefully consider the following risks:

PRICE OF SHARES ARBITRARILY DETERMINED
The price of the shares has been arbitrarily determined by IRET and is a higher price than the price paid by most of the current holders of IRET'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 may be higher than the price at which IRET shares trade on the NASDAQ Small-Cap Market.

PRICE EXCEEDS BOOK VALUE
The book value of IRET shares of beneficial interest is substantially less than the purchase price to new shareholders under this Offering. As of July 31, 1999, the book value of the 19,923,692 shares then outstanding was $4.59. Assuming all of the shares registered under this Offering are sold, the estimated resulting book value will be $4.74 per share. Thus, a purchasing shareholder paying $8.40 per share under this Offering will incur an immediate book value dilution of $3.66 per share.

HIGH LEVERAGE
IRET seeks to borrow approximately 70% of the cost of real estate purchased or constructed. This amount of leverage may expose IRET to cash flow problems in the event rental income decreases. Such a scenario may require IRET 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
IRET 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 IRET believes that it is organized and will continue to operate in such a manner, no assurance can be given that IRET will remain qualified as a REIT. Qualification as a REIT involves the application of highly technical and complex code provisions for which there are only limited judicial or administrative interpretations. No assurance can be given that legislation, new regulations, administrative interpretations or court decisions will not significantly change the tax laws with respect to qualifications as a REIT or the federal income tax considerations of such qualifications. If in any taxable year IRET failed to qualify as a REIT, IRET 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, IRET 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 IRET's shareholders would be reduced for each of the years involved. Although IRET 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 IRET'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 IRET. In the event fewer than all the Shares are sold during the offering period (which is 365 days from the date of this document), IRET would have fewer cash assets to apply toward its business plan. In such event, the fixed operating expenses of IRET, 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 IRET will depend, among other things, upon the availability of opportunities for the investment and reinvestment of the funds of IRET. 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, IRET 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 IRET's investments. In the area in which IRET operates, the economy is dependent on the areas of agriculture and mineral development. If these areas do not perform satisfactorily, the ability of IRET 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 IRET to foreclose its mortgage or engage in negotiations which may involve further outlays to protect IRET's investment. The mortgages securing IRET's loans may be, in certain instances, subordinate to mechanics' liens, materialmen's liens, or government liens and, in instances in which IRET invests in a junior mortgage, to liens of senior mortgages, and IRET may be required to make payments in order to maintain the status of the prior lien or to discharge it entirely. In certain areas, IRET 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 IRET in such cases may be less than its total investment, with resultant losses to IRET.

Loans made by IRET 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 IRET receives on its loans may not be held to exceed the statutory maximum, in which case IRET may be subjected to the penalties imposed by the statutes.

RELATIONSHIP WITH ADVISOR
Certain operating expenses of IRET, including compensation to the advisor and trustees, must be met regardless of profitability. The advisor's fee is computed as a percentage of the investments of IRET. See "Advisory Agreement." IRET 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 IRET operates, the loss of the Advisor, for any reason, would likely have a material adverse affect on IRET's operations. The Advisor may terminate its relationship upon 60 days notice by either the Advisor or IRET.

CONFLICT OF INTEREST
The Advisor is entitled to receive an advisory fee equal to a percentage of the Net Invested Assets of IRET. See "Advisory Agreement." The Advisor also will receive fees in connection with IRET'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 or 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 IRET, 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 IRET. All agreements and arrangements, including those relating to compensation, between IRET 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) IRET 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 IRET's operating expenses, including compensation to the Advisor during the operating stage of IRET; (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 IRET's independent trustees. IRET, the Advisor and the principals of IRET and Advisor are not represented by separate counsel. IRET is represented by the law firm of Pringle & Herigstad, P.C., which has also acted and will continue to act as counsel to IRET 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 IRET. It is the policy of IRET to obtain a Phase I environmental survey upon purchasing property and, as of the date of this Prospectus, IRET is unaware of any environmental liability with respect to properties in its portfolio.

COMPETITION
Investments of the types in which IRET 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 IRET's areas of investment. Investments must thus be made by IRET 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 IRET. 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. IRET cannot predict the effect which such factors will have on its operations.

LIQUIDITY
No assurance can be given that a purchaser of IRET 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.

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

The following table sets forth the fees and other compensation which IRET is to pay in association with this offering. The total operating expenses of IRET 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 IRET in 1970, this requirement has been met.

IRET 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 IRET are not restricted from engaging for their own accounts in business activities of the type conducted by IRET, and occasions may arise when the interests of IRET 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

TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
The Advisor and its affiliates may receive compensation from IRET for providing various services. IRET'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 IRET than IRET could obtain from unrelated persons or entities and are consistent with IRET'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 IRET. (See "Advisory Agreement".) The Advisor also will receive fees in connection with IRET'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 IRET, or vice-versa. The decision whether to liquidate IRET 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 IRET as a whole. IRET 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 IRET.

COMPETITION BY IRET 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 or for the account of others, of interests in entities engaged in the real estate business and any other business. Any trustee or officer of IRET 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 IRET, 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 IRET.

NON-ARM'S-LENGTH AGREEMENTS
All agreements and arrangements, including those relating to compensation, between IRET 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) IRET intends to be in substantial compliance with the Statement of Policy Regarding Real Estate Investment Trusts adopted by the North American Securities Administrators Association,

LACK OF SEPARATE REPRESENTATION
IRET, the Advisor and the principals of IRET and Advisor are not represented by separate counsel. IRET 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, Jr., is a trustee of IRET and, until December 31, 1999, will be a partner in Pringle & Herigstad, P.C.
 
 

The offering price of $8.40 per share has been arbitrarily established by IRET and is higher than the recent market price for said shares. See "Market Price Of and Dividends on IRET's Shares of Beneficial Interest."

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 July 31, 1999, the book value of the 19,923,692 shares then outstanding was $4.59. Assuming all of the shares registered under this Offering are sold, the estimated resulting book value will be $4.74 per share. Thus, a purchasing shareholder paying $8.40 per share under this Offering will incur an immediate book value dilution of $3.66 per share.

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

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:

For each share sold, the selling Broker-Dealer shall receive a commission of eight percent (approximately $.67 per share). No other compensation or fees other than the percentage commission shall be paid by IRET to said Broker-Dealers. The relationship between the Broker-Dealers and IRET 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
In order to purchase shares, an investor must be a resident of one of the following states: North Dakota, South Dakota, Montana, Minnesota, Colorado and such other states as may be added by a supplement to this Prospectus. In the following states, the following disclaimers apply and the purchaser must satisfy the following investor qualifications imposed by that state:

MINNESOTA
 

*	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.
*	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.

The following table sets forth information concerning the projected use of proceeds from the sale of units, assuming that the entire offering of 1,000,000 shares is old. 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 91 percent of the total sale proceeds raised by this offering will be invested by IRET in real property or related investments.
 

As of the date of this Prospectus, IRET is constructing apartment buildings in Bismarck, ND, and Jamestown, ND and plans to construct the additional apartments described below. These apartments are of a design and type previously constructed by IRET during the past four years in Sioux Falls, South Dakota (98 units), Bismarck, North Dakota (183 units), Minot, North Dakota (196 units), Billings, Montana (232 units) and Grand Forks, North Dakota (250 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. IRET intends to continue the construction of this type of apartment building as follows:

                 APARTMENTS UNDER CONSTRUCTION

         CITY                                
              UNITS                               ESTIMATED COST

 Bismarck, ND                    67                 
   4,500,000
 Jamestown, ND                   27                    2,200,000
 Rochester, MN                  219                   14,500,000

 PLANNED APARTMENT CONSTRUCTION

       CITY                              
                  UNITS                              ESTIMATED COST

 Sioux Falls, SD               225                   $16,500,000

Total - Current and Planned Apartment Construction   $37,700,000

IRET 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 IRET will successfully complete this construction program.

IRET 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 - Fiscal Year Ended April 30, 1999", and expects to concentrate its efforts and resources on the planned apartment construction projects described above during the next 18 month period.

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

 

*

DEPRECIATION REVENUE As a "Real Estate Investment Trust" under the Internal Revenue Code, IRET must distribute at least 95% of its taxable income. However, in computing taxable income, a deduction for depreciation of the buildings owned by IRET is allowed. In the Fiscal year ended April 30, 1999, this depreciation deduction was $5,966,874. The amount of this depreciation may be used by IRET to acquire addition real estate investments.

*

LOANS IRET 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 shareholders of IRET. (No assurance can be given that the income actually earned on real estate investments made by IRET will be higher than the interest rate paid on IRET's mortgage loans.) As of July 31, 1999, the ratio of mortgage liabilities to total Trust real estate assets was $191,282,163 of mortgage liabilities to $304,790,777 of net real estate owned or 62.8%. Thus, as much as $73,571,270 could be borrowed on the existing portfolio before reaching a debt ratio of 70% (present investment in real estate of $304,790,777, minus mortgages of $191,282,163 equals $113,508,614 divided by 30% = $378,362,047, minus present real estate owned of $304,790,777 equals $73,571,270) (no assurance can be given that this amount of borrowed funds would be available).

 

*

MARKETABLE SECURITIES/CREDIT LINE IRET maintains an investment in marketable government insured securities ($2,908,156 as of July 31, 1999) which securities are held in brokerage accounts with Smith Barney. The current policy of said broker is to allow IRET to borrow up to 90% of the market value of these securities for short-term needs. Also, IRET may enter into short-term credit line borrowing agreements with banks if the need arises. (As of the date of this Prospectus, IRET has credit lines of $11,500,000.) No assurance can be given that either of these borrowing arrangements would be available to IRET.

GENERAL
IRET has operated as a "real estate investment trust" under Sections 856-858 of the Internal Revenue Code since its formation in 1970 and 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). IRET, through its wholly owned subsidiary, IRET, Inc., is the general partner of IRET Properties, a North Dakota limited partnership (the "Operating Partnership"). All business operations for IRET are conducted through the Operating Partnership. No other material change in IRET's business is contemplated at this time.

This discussion and analysis should be read in conjunction with the attached audited financial statements prepared by Brady Martz & Associates, certified public accountants, which firm has served as the auditor for IRET since its inception.

Certain matters included in this discussion are forward-looking statements within the meaning of federal securities laws. Although IRET believes that the expectations reflected in such forward-looking statements are

FISCAL YEAR 1999 COMPARED TO FISCAL YEARS 1998 AND 1997

OVERVIEW
A continuation of stable occupancy rates for IRET's apartment communities and good results from newly acquired properties resulted in another year of significant increases in Funds From Operations and earnings for IRET's 29th year, which ended April 30, 1999. Total assets and shareholder equity also increased materially.

FUNDS FROM OPERATIONS
Funds From Operations of the Operating Partnership (taxable income increased by non-cash deductions of real estate asset depreciation and amortization, and reduced by capital gain income and other extraordinary income items) for Fiscal 1999 increased to $11,778,502 ($.6753 per share), compared to $9,447,425 ($.6042 per share) for Fiscal 1998 and $7,144,622 ($.51 per share) received in Fiscal 1997. These increases in Funds From Operations resulted primarily from increased revenues from existing and newly acquired rental properties as detailed below.

NET INCOME
The Operating Partnership's income for Fiscal Year 1999 increased to $7,604,135 from the $5,014,909 earned in Fiscal 1998 and the $3,897,849 earned in Fiscal 1997. On a per share basis, net income was $.33 per share in Fiscal 1999, compared to $.29 in Fiscal 1998 and $.25 in Fiscal 1997.

These increases in net income resulted from increased capital gains and rental income, which is detailed below.

REVENUES
Total revenues of the Operating Partnership for Fiscal 1999 were $39,927,262, compared to $32,407,545 in Fiscal 1998 (an increase of 23%) and $23,833,981 in Fiscal 1997. The increase in revenues received during Fiscal 1999 in excess of the prior year revenues was $7,519,717. This increase resulted from:
 

As shown by the above analysis, the Fiscal 1999 and 1998 increases in revenues resulted primarily from the addition of new real estate properties to the operating partnership's portfolio.

Rents received on properties owned at the beginning of Fiscal 1998 increased by $893,976 (2.2%) in Fiscal 1998 and another $1,081,995 (2.1%) in Fiscal 1999, and the occupancy level for those properties increased from 90% during Fiscal 1997 to 94% in Fiscal 1998 and to 95% in Fiscal 1999. Thus, the new properties acquired during Fiscal Years 1998 and 1999 generated most of the new revenues during the past two years.

CAPITAL GAINS
The Operating Partnership realized capital gain income for Fiscal 1999 of $1,947,184.

This compares to $465,499 of capital gain income recognized in Fiscal 1998 and the $398,424 recognized in Fiscal 1997.

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

NET INCOME
The $2,589,226 increase in net taxable income for Fiscal 1999 over the net income earned in the prior fiscal year resulted from:
 

RESULTS FROM FULLY STABILIZED PROPERTIES
IRET defines fully stabilized properties as those both owned at the beginning of the prior Fiscal Year AND having completed the rent-up phase (90% occupancy). "Same store" results of these properties for Fiscal 1999 and 1998 were as follows:
 

PROPERTY ACQUISITIONS
The Operating Partnership added $62,455,508 of real estate investments to its portfolio during Fiscal 1999, compared to the $39,014,222 added in the prior year, as detailed below:

APARTMENTS

UNITS                 COMMUNITY NAME
  182        Heritage Manor, Rochester, MN                   $ 7,371,208
   64        Westwood Park, Bismarck, ND                       2,025,455
   67      **Country Meadows II, Billings, MT                  1,321,962
   60        Clearwater, Boise, ID                            
3,786,463
   67      **Legacy III, Grand Forks, ND                       2,260,345
  100        Van Mall Woods, Vancouver, WA                     6,021,312
   27      **The Meadows by IRET, Jamestown, ND                1,502,301
  165        Castle Rock, Billings, MT                         5,614,223
   67        Cottonwood II, Bismarck, ND                       4,645,444
  204        Ivy Club, Vancouver, WA                          11,676,076
1,003                                        
                $62,455,508

COMMERCIAL
Edgewood Vista, East Grand Forks,
  MN (Assisted Living)                                      
$   892,500
Edgewood Vista, Minot, ND
  (Assisted Living)                                      
    $ 6,191,410

APARTMENTS
UNITS     COMMUNITY NAME
 125   Jenner Properties-Grand Forks
       (90), Devils Lake (18) &
       Dickinson (17), ND                                 
   $ 2,350,000
 108   Kirkwood Manor-Bismarck, ND                             3,175,000
 248   Magic City Realty Portfolio                             5,270,000
  67   Country Meadows-Billings, MT                            4,496,134
 122   Park East Apartments-Fargo, ND                          4,900,000
**67   Legacy Apartments (Phase II)-
       Grand Forks, ND                                  
       3,489,937
  67   Cottonwood Apartments-Bismarck,
        ND                                   
                  4,522,347
  64   Chateau Apartments-Minot, ND                            2,364,090
 *67   Cottonwood Apartments (Phase II)
       Bismarck, ND                                  
          1,362,804

 935                                       Total 
            $39,014,222

PROPERTY DISPOSITIONS
Real estate assets sold by the Operating Partnership during Fiscal 1998 and 1999 were as follows:
 

                                        BOOK VALUE &
PROPERTY SOLD                       SALES PRICE         SALES COSTS      
                  GAIN
(Fiscal 1999)

Fairfield Apts.,
Marshall, MN             $  466,000      $ 385,878         $   80,122
Superpumper,
Emerado, ND              $  297,000      $ 138,854         $  158,146
Bison Apts.,
Jamestown, ND            $1,760,000      $ 418,101         $1,341,899

Park Place Apts.,
Waseca, MN               $  960,000      $ 593,983         $  366,017

Installment Sale                                       
         1,000
                                         
                  $1,947,184
(Fiscal 1998)
Scottsbluff Apts.,
Scottsbluff, NE          $  940,000      $ 613,862         $  326,138
Superpumper
Bottineau, ND            $  330,000      $ 246,421         $   83,579
Superpumper
New Town, ND             $  250,000      $ 224,486         $   25,414

Installment & Misc. Sales                                  $   30,365
                                         
                  $  465,496

DIVIDENDS
The following dividends were paid during Fiscal Years 1997, 1998 and 1999:
 

    DATE                                 
    1997                     1998                   
 1999

July 1                $.0975        $.10125        $.11
October 1,            $.095         $.1030         $.115
January 15,(16th)     $.0975        $.105          $.12
April 1, 1999         $.10          $.107          $.1225
                      $.39          $.41625        $.4675

The Fiscal 1999 dividends increased 12.3% over the dividends paid during Fiscal Year 1998 and 19.9% over Fiscal 1997.

FUNDS FROM OPERATIONS
The funds derived during Fiscal 1999 by the Trust from its operations increased by 25% over the prior year and by 65% from the Fiscal 1997 level ($11,778,502 in Fiscal 1999, versus $9,447,425 in 1998 and $7,144,604 in 1997). On a per share basis, Funds From Operations increased to $.6753 per share from $.6042 in Fiscal 1998 (an increase of 12%) and the $.51 generated in Fiscal 1997. (IRET uses the definition of "Funds From Operations" recommended by the National Association of Real Estate Investment Trusts to mean "net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures calculated on the same basis." It is emphasized that funds from operations as so calculated and presented does not represent cash flows from operations as defined under generally accepted accounting principles and should not be considered as an alternative to net income as an indication of operating performance or to cash flows as a measure of liquidity or ability to fund all cash needs.) (See the Consolidated Statements of Cash Flows in the Consolidated Financial Statements attached hereto.)

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

                                      
               Fiscal                    Fiscal       
          Fiscal                  Fiscal              
    Fiscal
ITEM                                          
     1999                      1998                   1997                    1996
             1995 (Restated)

Net Income (GAAP)       $7,604,135    $5,014,909    $3,897,849    $4,611,970    $3,967,830
Adjustments
  Gain from Property
    Sales               (1,947,184)     (465,499)     (398,424)     (994,163) 
   (407,512)

Operating Income       $ 5,656,951    $4,549,410    $3,499,425    $3,617,807    $3,560,318
Plus Depreciation        5,966,874     4,791,907     3,584,591     2,261,724     1,767,294
Plus Amortization      $   154,677       106,108        60,588        97,900  
      20,659

Funds from Operations  $11,778,502   $ 9,447,425    $7,144,604    $5,977,431    $5,348,271
Dividends Paid         $ 8,193,538   $ 6,518,627    $5,508,689    $4,439,034    $3,660,986

                       $ 3,584,964   $ 2,928,798    $1,635,915    $1,538,397   
$1,687,285

Management expects that the Funds From Operations (as defined above) will continue to improve during Fiscal 2000 and will continue to exceed dividends paid in the coming year.

LIQUIDITY AND CAPITAL RESOURCES
Important investment and financing events in Fiscal 1999 were:

 

*	The net proceeds from sale of Shares of Beneficial Interest under Best Efforts offerings were $18,387,260;
*	An additional $6,485,927 of equity capital was contributed to the Operating Partnership in UPREIT transactions for a total increase of equity capital of $24,873,187;
*	Five property loans were refinanced at a lower interest rate than the old loans. The new loans totaled $11,400,000. The payoff of the old loans was $8,737,840, resulting in refinancing proceeds of $2,662,110. At 4-30-99, the weighted interest rate on the $175,071,069 of mortgage indebtedness owed by IRET was 7.12%.
*	Nearly $65,000,000 of new real estate investments were acquired by the Operating Partnership. IRET's financial condition at the end of Fiscal 1999 continued at the very strong level of its prior fiscal year.
*	IRET's shareholder equity increased to $85,783,294 from $68,152,626 on April 30, 1998, a gain of $17,630,668 (26%). Equity capital on April 30, 1997 was $59,997,619. These increases result from the sale of Shares of Beneficial Interest and the reinvestment of dividends in new shares.
*	Liabilities of the Operating Partnership increased to $191,229,475 from $148,276,615 on April 30, 1998. IRET's liabilities on April 30, 1997, were $126,995,322.

 

*	Total assets of the Operating Partnership increased to $291,493,311 from $224,718,514 on April 30, 1998. Total assets on April 30, 1997, were $186,993,943.
*	Cash and marketable securities were $7,412,236 compared to the year earlier figure of $6,389,446 and $6,457,182 on April 30, 1997.
*	In addition to its cash and marketable securities, IRET Properties has unsecured line of credit agreements with First International Bank & Trust, Bremer Bank and First Western Bank & Trust, all of Minot, North Dakota, of $11,500,000, none of which was in use on April 30, 1999.

ECONOMIC CONDITIONS
Fiscal 1999 saw continued stable economic conditions in the northern plains states in which IRET operates. Occupancy rates for residential properties increased slightly from the year earlier level. However, the current economic outlook for much of IRET's trade area is guarded due to a depressed farm economy. Continued low commodity prices and uncertain weather will impact IRET's operating results.

YEAR 2000 COSTS
IRET has requested its principal vendors to inform it of any anticipated problems associated with the Year 2000 issue for computer hardware and software. IRET itself does not own or operate computer systems and will have no direct costs to up-date such systems. However, IRET could be impacted by computer failures of its third-party vendors. IRET has been informed by these service providers (including its Advisor - Odell-Wentz & Associates, LLC) that computer systems are now Year 2000 compliant. IRET does not anticipate that the Year 2000 problem will have any material cost to it.

RESULTS FROM OPERATIONS
Investors Real Estate Trust's (NASDAQ: IRETS) First Quarter which ended on July 31, 1999, produced continued good results. Stable occupancy, rent increases, lower interest rates and good performances by newly acquired properties contributed to satisfactory gains in revenues, operating income and Funds from Operations.

FUNDS FROM OPERATIONS
Funds from Operations for the first three months of Fiscal 2000 increased to $3,350,071, from $2,603,229 for the same period of the prior fiscal year, an increase of 29%. On a per share basis, Funds from Operations increased to 17.2 cents from 15.7 cents in the prior year, an increase of nearly 10%. Funds from Operations is the generally accepted measure of performance for real Estate Investment Trusts.

OPERATING INCOME
Operating income increased to $1,801,322 for the First Quarter of Fiscal 2000, compared to $1,327,854 earned in the same period of the prior fiscal year, an increase of 36%.

CAPITAL GAINS
Income from the sale of investments declined to $257,895 from the $366,017 gain in the prior fiscal year. This year's gain resulted from the sale of four Superpumper convenience stores. We have entered into sales contracts on smaller apartment properties in Devils Lake and Mandan, ND, and a large commercial property in Sioux Falls, SD, which should close in the second quarter.

We are optimistic that the remainder of the current fiscal year will see a continuation of satisfactory operating results. Occupancy rates in our apartment communities continue to be stable. We anticipate good results from the new properties that we are adding to our portfolio.

PROPERTY ACQUISITIONS
The following properties were acquired by IRET during the First Quarter and are producing income:
 

PENDING ACQUISITIONS
The following are under construction or under purchase contract:
 

ORGANIZATION OF IRET
Investors Real Estate Trust is a registered real estate investment trust organized and governed under the laws of North Dakota. IRET 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 IRET
IRET was organized on July 31, 1970. IRET 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 63 years of age. The existence of IRET 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. IRET has 9 Trustees.

INDEPENDENT TRUSTEES
IRET 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, IRET considers the following Trustees as independent:

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

John F. Decker has served as an independent Trustee since August 18, 1998. Mr. Decker is an Investment Advisor and Managing Director with Piper, Jaffray, Inc., and resides in Everett, Washington.

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.

Jeffrey 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.

Stephen L. Stenehjem has served as an independent Trustee since 1999. He is the President and Chief Executive Officer of Watford City BancShares, Inc.; owner of First International Insurance and President and Chairman of First International Bank, Watford City, North Dakota.

IRET considers the following Trustees as not independent:

C. Morris Anderson has served as a Trustee since 1970. He was a partner and founder of Magic City Realty, Ltd., the owner of rental properties now owned by IRET. 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.

Timothy P. Mihalick has served as a Trustee since 1999. He is a Vice President and Chief Operating Officer of IRET and its Advisor - Odell-Wentz & Associates, L.L.C.

Thomas A. Wentz, Jr., has served as a Trustee since 1996. He is a partner in IRET'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 IRET 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 of not less than 10% of the outstanding shares of 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.
 
 

IRET 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 IRET operates. All assets (except for Qualified REIT Subsidiaries) and liabilities of IRET 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 IRET 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, IRET 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."

IRET's interest in the Operating Partnership will entitle it to receive all quarterly or yearly cash distributions from the Operating Partnership and to be allocated its pro-rata share of the profits and losses of the Operating Partnership. IRET owned in excess of 90.54% of the Operating Partnership on April 30, 1999. 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 IRET, the lender financing the properties required, as a condition of the loan, that the properties be owned by a "single asset entity." Accordingly, IRET has organized four wholly owned subsidiary corporations for the purpose of holding title to

IRET formerly was the general partner and held investment interests in 7 limited partnerships. They were: 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., were consolidated with IRET for financial reporting purposes. All of these partnerships have been merged into IRET Properties, with Chateau on April 1, 1998, and the other six on May 1, 1998.
 
 

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

TO ISSUE SENIOR SECURITIES
IRET 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 6 1/2% for 6 months; 7% for 1 year; 7 1/2% for 3 years and 8% for 5 of  35 years). In the event of dissolution of IRET, the Investment Certificates would be paid in preference to the shares of Beneficial Interest. As of July 31, 1999, the Investment Certificates outstanding totaled $112,530,595. The Trust does not plan on issuing other senior securities in the future.

TO BORROW MONEY
IRET plans to continue to borrow money. IRET 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. IRET intends to continue borrowing funds in the future. Over the past three fiscal years, IRET has borrowed funds as follows:

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

                                      
                   Fiscal                       
            Fiscal                              
    Fiscal
                                          
                1999                                      1998 
                                   1997

Cost of Property
  Acquired               $62,455,508           $39,014,223           $59,377,674
Net Increase in
  Mortgages Payable      $41,011,095           $18,325,028           $44,035,887
Percent of Acquisition
  Price Represented by
  Net Increase in
  Mortgages Payable          66%                    47%         
         74%

TO MAKE LOANS TO OTHER PERSONS
As part of IRET'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.

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

IRET had the following outstanding mortgage loans at the end of its most recent Fiscal Year:

                                      
                     Real Estate                    
                 4/30/99
Location                                         
      Security                                       Balance
                 Rate

FARGO, ND
Great Plains Software       Office Complex             $9,185,758      9.5%

GILBERT, AZ
NE1/4-27-2-6                Commercial Land               742,811       
 8%

OTHER MORTGAGES
Over $100,000                                       
   $  294,968      8-9%
$20,000 to $99,999                                       
387,895      8-9%
Less than $20,000                                       
  109,782      7-9%

                TOTAL                          
       $10,721,214
                Unearned Discounts                        
(1,898)
                Allowance for Losses                     (120,314)
                Deferred Gain                         
     (1,000)

                                          
            $10,598,002
                                          
             ==========

TO INVEST IN THE SECURITIES OF OTHER ISSUERS FOR THE PURPOSE OF EXERCISING CONTROL
Other than the formation of its Operating Partnership - IRET Properties - and its three Qualified REIT Subsidiaries, IRET has not invested in the securities of other issuers for the purpose of exercising control over such issuer and has no plans to do so. The decision to do so is vested solely in the Board of Trustees and may be changed without a vote of the shareholders.

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

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

TO OFFER SECURITIES IN EXCHANGE FOR PROPERTY
Commencing on February 1, 1997, IRET operates principally through IRET Properties, a North Dakota Limited Partnership, of which IRET is the sole general partner. Such a structure allows IRET to offer Limited Partnership Units in exchange for real estate. IRET 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.

TO REPURCHASE OR OTHERWISE RE-ACQUIRE ITS SHARES OR OTHER SECURITIES
As a "real estate investment trust" under federal income tax laws, IRET intends to invest only in real estate assets. IRET is authorized, but not obligated, to repurchase its own shares and has and may do so from time to time if the trustees deem such action to be appropriate. See "Determination of Offering Price."

TO MAKE ANNUAL AND OTHER REPORTS TO SHAREHOLDERS
IRET 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

INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE
IRET currently owns real estate located in 10 states. The company may invest in real estate or interests in real estate which is located anywhere in the United States.

IRET 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 IRET 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 IRET's real estate shall be delegated to a management company as it pertains to the day-to-day management. All major operating decisions concerning IRET'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. IRET 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 IRET must not exceed 80%. As of April 30, 1999, the ratio of total liabilities ($191,229,475) to total assets ($291,493,311) was 65.6%.

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

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

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

INVESTMENTS IN REAL ESTATE MORTGAGES
While IRET has made mortgage loans in the past, it is the current policy of IRET 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
IRET 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
IRET owns shares in five publicly traded REITs, acquired at a cost of $791,318. No other purchases of such securities 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.

IRET owned the following properties as of April 30, 1999:

COMMERCIAL PROPERTIES
 

APARTMENT COMMUNITIES BY IRET
 
 
 

    N/A = property held less than 12 months

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 April 30, 1999, IRET had not entered into any contracts or options to sell any of the above properties, except the four Superpumper properties. As of October 15, 1999, the following additional properties have been sold or are under contract to sell:

 

Hutchinson Technology office/warehouse building - Sioux Falls, SD	$5,200,000
18 unit Pleasant view Apartments - Mandan, ND	$   385,000
24 units - Sweetwater apartments - Devils Lake, ND	$   480,000

Under its Restated Declaration of Trust, IRET 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 three prior registrations of 6,350,000 shares of Beneficial Interest will be freely tradable by persons other than "affiliates" of IRET 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 IRET's Securities Restrictions on Transfer."

Pursuant to the Operating Partnership Agreement, the Limited Partners (other than IRET) will have exchange rights which, beginning one year after the acquisition of such limited partnership units, enabling them to cause the operating partnership to exchange their limited partnership units for cash or, at the option of the General Partner, Trust shares of Beneficial Interest on a one-for-one basis. Shares of Beneficial Interest of IRET, other than those issued under this registration and the prior registrations which were effective July 9, 1996, March 14, 1997, and December 15, 1998 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 IRET or any "affiliate"; of IRET, 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

IRET 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."
 
 

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

MANAGEMENT
The Operating Partnership has been organized as a North Dakota limited partnership pursuant to the terms of the Agreement of Limited Partnership of the Operating Partnership (the "Operating Partnership Agreement";). Pursuant to the Operating Partnership Agreement, the General Partner, as the sole general partner of the Partnership, has full, exclusive and complete responsibility and discretion in the management and control of the Operating Partnership, and the Limited Partners have no authority in their capacity as Limited Partners to transact business for, or participate in the
management activities or decisions of, the Operating Partnership except as required by applicable law. However, any amendment to the Operating Partnership Agreement that would (i) adversely affect the Exchange Rights (as defined herein), (ii) adversely affect the Limited Partners' rights to receive cash distributions, (iii) alter the Operating Partnership's allocations of 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 ("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 had it exercised its right to redemption and received Shares of Beneficial Interest in exchange for its OP Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer.

Notwithstanding the foregoing paragraph, IRET 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 IRET, are contributed to the Operating Partnership as a capital contribution in exchange for Units with a fair market value, as reasonable determined by IRET, equal to the agreed value of the assets so contributed.

In respect of any Transaction described in the preceding two paragraphs, IRET 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 IRET (except its Qualified REIT Subsidiaries) 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, IRET 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 IRET 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 IRET'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 IRET (i) has concluded in good faith that such issuance is in the best interest of IRET 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 IRET to contribute the proceeds of a share offering by IRET as additional capital to the Operating Partnership. Upon such contribution, the General Partner or IRET, as applicable, will receive additional Units and the General Partner's or IRET'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 IRET. In addition, if the General Partner or IRET contributes additional capital to the Operating Partnership, the General Partner will revalue the property of the Operating Partnership to its fair market value (as determined by the General Partner) and the capital accounts of the partners will be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the capital accounts previously) would be allocated among the partners under the terms of the Operating Partnership Agreement if there were a taxable disposition of such property for such fair market value on the date of the revaluation.

EXCHANGE RIGHTS
Pursuant to the Operating Partnership Agreement, the Limited Partners (other than IRET) 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 IRET being owned by fewer than 100 persons (determined without reference to any rules of attribution), (iii) result in IRET being "closely held" within the meaning of Section 856(h) of the Code, (iv) cause IRET to own, actually or constructively, 10% or more of the ownership interest in a tenant of IRET'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 IRET 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 IRET and the General Partner (collectively, the "Trust Expenses") and IRET Expenses will be treated as expenses of the Operating Partnership. IRET Expenses generally will  include (i) all expenses relating to the operation and continuity of existence of IRET and the General Partner, (ii) all expenses relating to the public offering and registration of securities by IRET, (iii) all expenses associated with the preparation and filing of any periodic reports by IRET under federal, state or local laws or regulations, (iv) all expenses associated with compliance by IRET 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

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 IRET, 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 IRET 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 IRET'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.
 
 

FEDERAL INCOME TAX
Since its organization, IRET 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, IRET must continue to meet the following requirements, among others:
 

(1)

At the end of each fiscal quarter at least 75% of the total assets of IRET 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 IRET, the securities of any one issuer acquired by IRET may not represent more than 5% of the value of IRET's assets or more than 10% of the outstanding voting securities of such issuer.

As a real estate investment trust, IRET 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, IRET will be taxed as a corporation at corporate income tax rates. IRET will not be entitled to carry back or carry forward any net operating losses.

So long as IRET has met the statutory requirements for taxation as a real estate investment trust, distributions made to IRET'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. IRET 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 IRET, whether ordinary or capital losses.

If, in any taxable year, IRET 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 IRET in computing its taxable income. Such distributions, to the extent made out of IRET'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 IRET, 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 IRET, the contemplated method of operation of IRET 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 IRET, the conduct of its affairs and, with certain limitations, the management and disposition of IRET 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 IRET to meet the requirements of any

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

TAXATION OF IRET'S SHAREHOLDERS
If IRET qualifies as a REIT, and so long as IRET so qualifies, distributions made to IRET'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 IRET'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. IRET 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 IRET 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 IRET and received by the shareholder on December 31 of such year, despite that the dividend is actually paid by IRET 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 IRET.

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 IRET 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 IRET should not, subject to certain exceptions described below, be UBTI to a qualified plan, IRA or other tax-exempt entity (a "Tax-Exempt Shareholder") provided that Tax-Exempt Shareholder has not held its shares as "debt financed property" within the meaning of the Code and the shares are not otherwise used in an unrelated trade or business of the Tax-Exempt Shareholder. Similarly, income from the sale of Common Stock should not, subject to certain exceptions described below, constitute UBTI unless the Tax-Exempt Shareholder has held such Common Stock as a dealer (under Section 512(b)(5)(B) of the Code) or as "debt financed property" within the meaning of Section 514 of the Code.

For Tax-Exempt Shareholders which are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from federal income taxation under sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code respectively, income from an investment in IRET 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 IRET. 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 IRET (rather than by IRET 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 IRET. 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 shares could be changed prospectively or retroactively by future Treasury Regulations.

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

STATE AND LOCAL TAXES
IRET or its shareholders may be subject to state or local taxation in the state or local jurisdiction in which IRET'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 IRET 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 IRET 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 IRET's ownership interest in the joint venture exceeds 10%, IRET would cease to qualify as a REIT. Furthermore, in such a situation even if IRET ownership does not exceed 10%, distributions from the joint venture to IRET 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 IRET to qualify as a REIT for the taxable year in which such distribution was received and the interest in the joint venture held by IRET would not qualify as a "real estate asset" which could make it more difficult for IRET to meet the 75% asset test described above. Finally, in such a situation IRET would not be able to deduct its share of losses generated by the joint venture in computing its taxable income. See "Failure of IRET to Qualify as a Real Estate Investment Trust" above for a discussion of the effect of IRET's failure to meet such tests for a taxable year. IRET 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 IRET's investment in the Operating Partnership. The discussion does not cover state or local tax laws or any federal tax laws other than income tax laws.

CLASSIFICATION AS A PARTNERSHIP
IRET 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

IRET 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 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, IRET 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 IRET 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, IRET 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 IRET, without regard to whether IRET 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 section704(b) of the Code and the Treasury Regulations promulgated thereunder.

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 IRET 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 IRET (i) may be allocated lower amounts of depreciation deductions for tax purposes with respect to contributed Properties than would be allocated to IRET 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 IRET as a result of such sale. These allocations may cause IRET to recognize taxable income in excess of cash proceeds, which might adversely affect IRET's ability to comply with the REIT distribution requirements, although IRET does not anticipate that this event will occur. The foregoing principles also will affect the calculation of IRET's earnings and profits for purposes of determining which portion of IRET's distributions is taxable as a dividend. The allocations described in this paragraph may result in a higher portion of IRET's distributions being taxed as a dividend than would have occurred had IRET purchased the Properties for cash.

BASIS IN OPERATING PARTNERSHIP INTEREST
IRET'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 IRET, (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) IRET's allocable share of the Operating Partnership's loss and (B) the amount of cash distributed to IRET, including constructive cash distributions resulting from a reduction in IRET's share of indebtedness of the Operating Partnership.

If the allocation of IRET's distributive share of the Operating Partnership's loss would reduce the adjusted tax basis of IRET'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 IRET's adjusted tax basis below zero. To the extent that the Operating Partnership's distributions, or any decrease in IRET's share of the indebtedness of the Operating Partnership (such decrease being considered a constructive cash distribution to the partners), would reduce IRET's adjusted tax basis below zero, such distributions (including such constructive distributions) will constitute taxable income to IRET. Such distributions and constructive distributions normally will be characterized as capital gain, and, if IRET's partnership interest in the Operating Partnership has been held for longer than the long-term capital gain holding period, 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 partner (including IRET) 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. IRET's Declaration of Trust provides that any decision to sell any real estate asset in which a trustee, or officer of IRET, 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."

IRET'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 IRET's ability to satisfy the income tests for REIT status. See "Federal Income Tax Considerations" above. IRET, however, does not presently intend to allow the Operating Partnership to acquire or hold any property that represents inventory or other property held primarily for sale to customers in the ordinary course of IRET's or the Operating Partnership's trade or business.
 
 

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 an ERISA Plan's investments to be (i) prudent and in the best interests of the ERISA Plan, its

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

Regulations of the Department of Labor (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. IRET currently has in excess of 3,500 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 on 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 is $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. IRET believes that the restrictions imposed under the Declaration of Trust on the transfer of IRET's Shares of Beneficial Interest will not result in the failure of the Shares to be "freely transferable." IRET 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 IRET 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 presumption 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 IRET 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

MARKET FOR IRET SHARES OF BENEFICIAL INTEREST
Since October 17, 1997, IRET shares of Beneficial Interest have traded on the NASDAQ Small-Cap market under the symbol "IRETS." The following sets forth high and low closing sale prices for the fiscal periods indicated as well as the total volume and total number of trades during such periods:
 

Fiscal Quarter Ended        High        Low       Total Volume    Total Trades

     10-31-97*            $ 7.125     $6.563         35,154         
     45
     01-31-98               7.313      6.625        339,857       
      204
     04-30-98               7.344      7.031        437,487       
      196
     07-31-98               7.250      7.000        359,835       
      118
     10-31-98               7.500      7.000        489,586       
      232
     01-31-99               7.688      7.000        343,128       
      249
     04-30-99               8.000      7.000        445,900       
      313
     07-31-99              17.875      7.063      1,306,088          
   754
     10-31-99               8.438      7.000        962,576       
      746

IRET also offered primary Shares of Beneficial Interest for sale to the public under Best Efforts offerings through various brokers registered with the National Association of Securities Dealers. Primary shares were sold at $7.20 per share from 5-01-97 to 12-31-97, at $7.45 per share from 1-05-98 to 11-20-98, at $7.85 from 1- 15-98 to 4-30-99 at $8.10 from 6-4-99 to 7-20-99 AND AT $8.25 FROM 09-01-99 TO 11-19-99. IRET also repurchased its shares during this period. Following is a summary, by quarter-year, of the sale of primary shares and repurchase of shares by IRET:
 

As of May 31, 1999, IRET had 3,092 shareholder accounts. No shareholder held 5% or more of the 19,066,954 Shares of Beneficial Interest outstanding on 4-30-99. IRET has no other classes of stock and there were no warrants, stock options or other contractual arrangements requiring the issuance of its stock.

IRET has paid quarterly dividends since July 1, 1971. Dividends paid during the past three fiscal years and the current fiscal year to date were as follows:
 

                                      
                                   FISCAL YEAR

                        1997           1998     
    1999     2000

July 1st              $.0925        $.10125       $.11      $.124
October 1st            .0950         .10300        .115      .126
January 5th            .0975         .10500        .12
April 1st              .1000         .10700        .1225
Total                 $.385         $.41625      $.4675

                                 Dividend/
  Date                             Share           
     Price(1)
-----------------------------------------------------------------
 6/30/71                         $.0125              
     $1.00
10/30/71                         $.015                
    $1.00
  1/1/72                         $.015               
     $1.00
  4/1/72                         $.015               
     $1.10
  7/1/72                         $.016               
     $1.10
 10/1/72                         $.016               
     $1.10
  1/1/73                         $.016               
     $1.10
  4/1/73                         $.0165               
    $1.30
  7/1/73                         $.0165               
    $1.30
 10/1/73                         $.0165               
    $1.30
  1/1/74                         $.0175               
    $1.30
  4/1/74                         $.0175               
    $1.40

  7/1/74                         $.0175               
    $1.40
 10/1/74                         $.0185               
    $1.40
  1/1/75                         $.02               
      $1.40
  4/1/75                         $.02               
      $1.50
  7/1/75                         $.02               
      $1.50
 10/1/75                         $.02               
      $1.50
  1/1/76                         $.021               
     $1.50
  4/1/76                         $.021               
     $1.60
  7/1/76                         $.0225               
    $1.60
 10/1/76                         $.0225               
    $1.70
  1/1/77                         $.0225               
    $1.70
  4/1/77                         $.0225               
    $1.80
  7/1/77                         $.025               
     $1.80
 10/1/77                         $.025               
     $1.80
  1/1/78                         $.025               
     $1.80
  4/1/78                         $.025               
     $1.80
  7/1/78                         $.0275               
    $1.90
 10/1/78                         $.0275               
    $1.90
  1/1/79                         $.0275               
    $2.00
  4/1/79                         $.0275               
    $2.10
  7/1/79                         $.0275               
    $2.00
 10/1/79                         $.03               
      $2.00
  1/1/80                         $.03               
      $1.70
  4/1/80                         $.0325               
    $1.70
  7/1/80                         $.035               
     $1.70
 10/1/80                         $.035               
     $1.80
  1/1/81                         $.035               
     $1.80
  4/1/81                         $.035               
     $1.80
  7/1/81                         $.035(2)               
  $1.70
 10/1/81                         $.035(2)               
  $1.70
  1/1/82                         $.035(2)               
  $1.70
  4/1/82                         $.035(2)               
  $1.70
  7/1/82                         $.0375               
    $1.70
 10/1/82                         $.04               
      $1.70
  1/1/83                         $.0425               
    $1.90
  4/1/83                         $.045               
     $2.07
  7/1/83                         $.0475               
    $2.20
 10/1/83                         $.05               
      $2.61
  1/1/84                         $.0525               
    $2.66
  4/1/84                         $.055               
     $2.75
  7/1/84                         $.05625               
   $2.75

 10/1/84                         $.0575              
     $2.79
  1/1/85                         $.05875               
   $2.84
  4/1/85                         $.06               
      $2.88
  7/1/85                         $.06125               
   $2.97
 10/1/85                         $.0625               
    $3.11
  1/1/86                         $.06375               
   $3.15
  4/1/86                         $.065               
     $3.20
  7/1/86                         $.066               
     $3.29
 10/1/86                         $.067               
     $3.38
  1/1/87                         $.068               
     $3.47
  4/1/87                         $.069               
     $3.56
  7/1/87                         $.0695               
    $3.56
 10/1/87                         $.07               
      $3.65
  1/1/88                         $.07               
      $3.65
  4/1/88                         $.071               
     $3.74
  7/1/88                         $.075               
     $3.74
 10/1/88                         $.071               
     $3.83
  1/1/89                         $.072               
     $3.92
  4/1/89                         $.0725               
    $4.01
  7/1/89                         $.073               
     $4.10
 10/1/89                         $.0735               
    $4.19
  1/1/90                         $.074               
     $4.28
  4/1/90                         $.0745               
    $4.28
  7/1/90                         $.075               
     $4.37
 10/1/90                         $.0755               
    $4.50
  1/5/91                         $.076               
     $4.50
  4/1/91                         $.0765               
    $4.59
  7/1/91                         $.077               
     $4.68
 10/1/91                         $.0775               
    $4.77
  1/5/92                         $.078               
     $4.86
  4/1/92                         $.0785               
    $4.95
  7/1/92                         $.079               
     $4.95
 10/1/92                         $.0795               
    $5.04
  1/5/93                         $.08               
      $5.13
  4/1/93                         $.0805               
    $5.22
  7/1/93                         $.081               
     $5.31
 10/1/93                         $.0815               
    $5.31
  1/5/94                         $.082               
     $5.40
  4/1/94                         $.0825               
    $5.49
  7/1/94                         $.088               
     $5.49
 10/1/94                         $.084               
     $5.63
  1/1/95                         $.085               
     $5.89
  4/1/95                         $.08625               
   $5.89
  7/1/95                         $.0925               
    $6.03
 10/1/95                         $.08875               
   $6.16
  1/5/96                         $.09               
      $6.16
  4/1/96                         $.09125               
   $6.30
  7/1/96                         $.0975               
    $6.30
 10/1/96                         $.09               
      $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
 1/16/98                         $.105               
     $6.85
  4/1/98                         $.107               
     $6.85
  7/1/98                         $.11               
      $6.85
 10/1/98                         $.115               
     $6.85
 1/15/99                         $.12               
      $7.25
  4/1/99                         $.1225               
    $7.3125
  7/1/99                         $.124               
     $7.65
 10/01/99                        $.126                
    $7.875

DIVIDEND REINVESTMENT PLAN

Pursuant to its Dividend Reinvestment Plan, IRET may, from time to time, repurchase shares of Beneficial Interest in the open market for purposes of fulfilling its obligations under the Plan or, if sufficient shares are not available on the open market, IRET will issue additional shares of Beneficial Interest.

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

The Shares are traded on the NASDAQ Small Cap Market. The price at which the Shares will be purchased will be the aggregate weighted average price of all shares purchased with the total amount of reinvested dividends. Since the agent responsible for purchasing the shares is also able to purchase newly issued shares directly from IRET under this Registration without payment of the full commission, it is unlikely that the price of shares purchased under the Plan will exceed price of newly issued shares offered under a primary offering. If the reinvestment price involves a fraction, it will be expressed in one-eighth of a point, with a rounding out to the next higher one-eighth of a point.

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

DESCRIPTION OF SHARES
The shares of beneficial interest of IRET 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 IRET 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% 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."

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."

As of date of this prospectus, no persons, or any Trustee or officer individually was known by IRET to own beneficially more than 5% of the outstanding shares of Beneficial Interest.

Collectively, the Trustees and officers owned 9.44% of such shares on May 31, 1999.

The following tabulation shows the ownership of and compensation paid by IRET to its Trustees, Trustees Emeritus and Officers during its Fiscal Year ended April 30, 1999. IRET has no retirement, bonus or any deferred, direct or indirect compensation plan and no other compensation will accrue, directly or indirectly, to any of the following persons, except as noted below:
 

                                         
                    CASH COMPENSATION
                                SECURITIES         
            FOR YEAR ENDED
NAME                            OWNERSHIP (1)            
      APRIL 30, 1999
-----------------------------------------------------------------------------
TRUSTEES
C. Morris Anderson                185,754                      
   12,001.00
Ralph A. Christensen               42,659                        
15,265.25
John F. Decker                     23,392                   
       7,933.00
Mike F. Dolan                     236,770                   
      13,683.25
J. Norman Ellison, Jr.             19,177                         12,101.00
Daniel L. Feist                   526,269                    
     12,201.00
Patrick G. Jones                   96,403                    
     12,201.00
Jeffrey L. Miller                 162,908                      
   13,583.25
Thomas A. Wentz, Jr.              174,255                         
   (3)

TRUSTEE EMERITUS
John D. Decker                     63,312                  
        4,268.00

OFFICERS
Roger R. Odell                    290,538                   
         (2)
President
Thomas A. Wentz, Sr.              224,976                         (2
and 3)
Vice President
Timothy P. Mihalick                16,014                       
     (2)
Vice President
Diane K. Bryantt                    1,688                    
        (2)
Secretary

IRET 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 management services, IRET also incurs administrative expenses for trustees' fees, accountants' fees, printing and postage, filing fees and other related expenses incurred in connection with administering IRET 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 IRET paid to the Advisor, the trustees and the other administrative expenses:
 
 

FISCAL YEARS ENDING APRIL 30
                                       
                              1995          1996  
        1997          1998          1999
Advisor's and Trustees'
 Compensation             $336,142      $458,019      $559,149    $  745,907    $  927,063
Other Administrative
 Expenses                   79,974       162,588       158,627      
 271,738       320,479
                           
           TOTAL          $416,116      $620,607      $717,776    $1,017,645  
  $1,247,542

For the Fiscal Years 1995-1999, the amount of these acquisition fees were $49,836, $117,506, $177,834, $141,468 and $177,834, respectively.

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

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,

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 1999 by action of the Board of Trustees at its December, 1998 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 IRET. 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 IRET and, in addition, a percentage fee for investigating and negotiating the acquisition of new investments. For the year ending April 30, 1998, Odell-Wentz & Associates, L.L.C., received compensation and reimbursement of disbursements under said Agreement of $740,393. The terms of said Advisory Agreement are explained above. Investors Management & Marketing, Inc., a firm in which Mr. Odell is a minority shareholder also furnishes real estate management services to IRET and receives as compensation four percent (4%) of rents received from such real estate.

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 IRET. 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 IRET and, in addition, a percentage fee for investigating and negotiating the acquisition of new investments. For the year ending April 30, 1999, Odell-Wentz & Associates, L.L.C., received compensation and reimbursement of disbursements under said Agreement of $951,234. The terms of said Advisory Agreement are explained above.

Until August 1, 1998, Mr. Wentz was also a member of the law firm of Pringle & Herigstad, P.C., counsel for IRET. During the fiscal year ending April 30, 1999, IRET paid Pringle & Herigstad, P.C., the sum of $33,022 for legal services rendered and disbursements made on behalf of IRET.

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

No trustee, officer or advisor of IRET, or any person affiliated with any such persons, shall sell any property or assets to IRET or purchase any property or assets from IRET, 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 IRET or shortly thereafter and fully disclosed in the prospectus filed with the North Dakota State Securities Commissioner;
b.	The acquisition of federally insured or guaranteed mortgages at prices not exceeding the currently quoted prices at which the Federal National Mortgage Association is purchasing comparable mortgages;
c.	The acquisition of other mortgages on terms not less favorable to IRET than similar transactions involving unaffiliated parties; or,
d.	The acquisition by IRET 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.

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, except as it may pertain to legal fees incurred in the normal course of business.

Mr. Thomas A. Wentz, Jr. is the named counsel for the registrant.  Mr. Wentz, Jr., is a member of the law firm of Pringle & Herigstad, P.C., counsel for the Trust.  During the fiscal year ending April 30, 1999, the Trust paid Pringle & Herigstad, P.C., the sum of $33,022 for legal services rendered and disbursements made on behalf of the Trust.  Mr. Wentz, Jr., as of the date of this registration statement, is a voting Trustee and Officer of the registrant.

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 IRET provides as follows:

A. INDEMNIFICATION OF TRUSTEES.

 

1.

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

a.	The TRUSTEES, ADVISORS or AFFILIATES have determined, in good faith, that the course of conduct which caused the loss or liability was in the best interests of IRET.
b.	The TRUSTEES, ADVISORS or AFFILIATES were acting on behalf of or performing services for IRET.

 

c.	Such liability or loss was not the result of: i. negligence or misconduct by the TRUSTEES, excluding the    INDEPENDENT TRUSTEES, ADVISORS or    AFFILIATES; or  ii. gross negligence or willful misconduct by the INDEPENDENT TRUSTEES.
d.	Such indemnification or agreement to hold harmless is recoverable only out of IRET NET ASSETS and not from SHAREHOLDERS.

2.

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

a.	There has been a successful adjudication on the merits of each count involving alleged securities law violations as to the  particular indemnitee.
b.	Such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee.
c.	A court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of IRET were offered or sold as to indemnification for violations of securities laws.

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

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.

EXPERTS
The balance sheets of IRET as of April 30, 1998, and April 30, 1999, the statements of income, shareholders' equity, and cash flows for each of the three years in the period ended April 30, 1999, 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.
 
 

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 IRET. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, DEVELOPMENT FEE, CONSTRUCTION FEE, non recurring 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, is the advisor. The PERSON responsible for directing or performing the day-to-day business affairs of a REIT, including a PERSON to which an Advisor subcontracts substantially all such functions. To the extent the provisions of this Statement of Policy are germane they shall apply to self-administered REITs.

ADVISORY AGREEMENT
The contract between IRET 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.

BOARD OF TRUSTEES
The nine member BOARD OF TRUSTEES of IRET.

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 IRET's property.

DECLARATION OF TRUST
The Restated Declaration of Trust dated October 24, 1996, for IRET. The declaration of trust, by-laws, certificate, articles of incorporation or other governing instrument pursuant to which a REIT is organized.

DEVELOPMENT FEE
A fee for the development 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.

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 IRET.

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 IRET.

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 ADVISOR of IRET, or AFFILIATES of the ADVISOR.

 

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

 

*	is employed by the ADVISOR or any of its AFFILIATES; or
*	is an officer or director of the ADVISOR or any of its AFFILIATES; or
*	performs services, other than as a TRUSTEE, for IRET; 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 then 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, 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 IRET for money borrowed (including purchase money mortgage loans) outstanding at any time, both secured and unsecured.

LIMITED PARTNERS
The limited partners of the OPERATING PARTNERSHIP.

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

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

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

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

OFFERING EXPENSES
All expenses incurred by and to be paid from the assets of IRET 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.

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:
 

 

i.	SHAREHOLDERS' voting rights;
ii.	the term of existence of the REIT;
iii.	SPONSOR or ADVISOR compensation;
iv.	the REIT'S investment objectives.

SHAREHOLDERS
The registered holders of IRET's SHARES.

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
f.	providing goods or services to the REIT on a basis which was not negotiated at arms length with the REIT.

 

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 IRET'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).

UNIMPROVED REAL PROPERTY
The real property of IRET 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.

                                         
                                        PAGES

INDEPENDENT AUDITOR'S REPORT..........................................................F-1

CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Balance Sheets..................................................F-2 to F-3
  Consolidated Statements of Operations...............................................F-4
  Consolidated Statements of Shareholders' Equity.....................................F-5
  Consolidated Statements of Cash Flows........................................F-6 to F-7
  Notes to Consolidated Financial Statements..................................F-8 to F-21

ADDITIONAL INFORMATION
  Independent Auditor's Report on Additional Information.............................F-22
  Marketable Securities..............................................................F-23
  Supplemental Income Statement Information..........................................F-23
  Real Estate and Accumulated Depreciation...................................F-24 to F-28
  Investments in Mortgage Loans on Real Estate...............................F-29 to F-30
  Selected Financial Data............................................................F-31
  Gain From Property Dispositions....................................................F-32
  Mortgage Loans Payable.............................................................F-33
  Significant Property Acquisitions..................................................F-34
  Quarterly Results of Consolidated Operations (Unaudited)...........................F-35
  First Quarter Fiscal Year 2000 Financial Statements (Unaudited)............F-36 to F-39
      

      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.

Board of Trustees
Investor 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, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended April 30, 1999, 1998 and 1997. 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 of 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, 1999 and 1998, and the consolidated results of its operations and cash flows for the years ended April 30, 1999, 1998 and 1997, in conformity with generally accepted accounting principles.

BRADY, MARTZ & ASSOCIATES, P.C.

May 26, 1999

REAL ESTATE INVESTMENTS                              1999      
       1998

         Property owned                         $295,825,839    
$231,416,322
         Less accumulated depreciation           (26,112,399)     (21,516,129)
                                          
       ------------    ------------
                                          
      $269,713,440     $209,900,193

         Mortgage loans receivable                10,721,214        3,438,308
         Less discounts and allowances              (123,212)        (127,132)
                                          
      ------------     ------------
         Total real estate investments          $280,311,442     $213,211,369
                                          
      ------------     ------------

OTHER ASSETS
         Cash                                 
  $  3,713,053        2,132,220
         Marketable securities -
         Held-to-maturity                          2,964,434     
   3,536,538
         Marketable securities -
                  Available-for-sale                 734,749     
     720,688
         Accounts receivable                          77,438     
      55,326
         Real estate deposits                        300,900      
  2,493,713
         Investment in partnership                         0      
      6,705
         Prepaid insurance                           216,348    
      219,871
         Tax and insurance escrow                  1,761,195        1,254,068
         Deferred charges                          1,413,752     
   1,088,016
                                          
      ------------     ------------
TOTAL ASSETS                                    $291,493,311   
  $224,718,514
                                          
      ------------     ------------
                                          
      ------------     ------------

                                         
              1999            1998

LIABILITIES
         Accounts payable                        $  4,388,270    
$  2,847,080
         Notes payable                                
      0        1,000,000
         Mortgages payable                        175,071,069     
134,059,974
         Investment certificate issued             11,770,136       10,369,561
                                          
      -------------     ------------
         Total liabilities                       $191,229,475     $148,276,615
                                          
      -------------     ------------
MINORITY INTEREST OF UNITHOLDERS IN
         OPERATING PARTNERSHIP                   $ 14,480,542     $  8,289,273
                                          
      -------------     ------------
SHAREHOLDER'S EQUITY
          Shares of beneficial interest
          (unlimited authorization, no
          par value, 19,066,954 shares
          outstanding in 1999 and
          16,391,412 shares outstanding
          in 1998)                                
93,095,819       74,708,559
          Accumulated distributions in
            excess of net income                   (7,255,958)      (6,666,555)
          Accumulated other comprehensive
            Income (loss)                            
(56,567)         110,622
                                          
      -------------    -------------
                                          
       $ 85,783,294     $ 68,152,626
                                          
      -------------    -------------
           TOTAL LIABILITIES AND
                   SHAREHOLDERS' EQUITY          $291,493,311     $224,718,514
                                          
      -------------     ------------
                                          
      -------------     ------------

                                         
      1999            1998            1997

REVENUE
   Real estate rentals                     $ 38,785,287    $ 31,694,586    $ 22,972,368
   Interest, discounts and fees               1,141,975         712,959         861,613
                                          
------------    ------------    ------------
   Total revenue                           $ 39,927,262    $ 32,407,545    $
23,833,981
                                          
------------    ------------    ------------
EXPENSES
   Interest                                $ 12,101,981    $
10,479,104    $  7,638,776
   Depreciation                               5,966,874      
4,791,907       3,584,591
   Utilities and maintenance                  6,356,483       5,142,459       3,741,877
   Taxes and insurance                        4,409,762       3,536,147     
  2,720,495
   Property management                        3,288,267       2,642,977     
  1,870,435
        expenses
   Advisory and trustee                         927,063         745,907  
       559,149
        services
   Operating expenses                           320,479        
271,738         158,627
   Amortization                                 154,677     
    106,108          60,588
                                          
------------    ------------    ------------
   Total expense                           $ 33,525,586    $ 27,716,347    $
20,334,538
                                          
------------    ------------    ------------

OPERATING INCOME                           $  6,401,676    $  4,691,198   
$  3,499,443

GAIN ON SALE OF PROPERTIES                    1,947,184         465,499       
  398,424
MINORITY INTEREST PORTION OF
   OPERATING PARTNERSHIP
       INCOME                                  
(744,725)       (141,788)            (18)
                                          
------------    ------------    ------------
NET INCOME                                 $  7,604,135    $ 
5,014,909    $  3,897,849
                                          
------------    ------------    ------------
                                          
------------    ------------    ------------
Net income per share (basic and diluted)
   Operating income                        $       0.33    $    
   0.29    $       0.25
   Gain on sale of properties                      0.11            0.03  
          0.03
                                          
------------    ------------    ------------
   Net income                              $       0.44  
  $       0.32    $       0.28
                                          
------------    ------------    ------------
                                          
------------    ------------    ------------

                                       
                                          
  Accumulated
                                          
            Shares of    Distributions       Other            Total
                                       Number of   
   Beneficial    in excess of   Comprehensive    Shareholder's
                                         Shares 
       Interest      Net Income     Income (Loss)        Equity
BALANCE MAY 1, 1996                   13,258,908    $ 54,263,917    $ (3,551,997)  $   
        0    $ 50,711,920
Comprehensive income
  Net income                                   0     
          0       3,897,849               0       3,897,849
  Unrealized gain on
    securities available for sale              0               0       
        0          86,505          86,505
                                          
                                          
                ------------
Total comprehensive income                                      
                                    $  3,984,354
Dividends distributed                          0             
  0      (5,508,689)              0      (5,508,689)
Dividends reinvested                     554,681       3,579,744          
     0               0       3,579,744
Sale of shares                         1,403,776       9,025,706       
        0               0       9,025,706
Shares repurchased                      (276,852)     (1,795,416)           
   0               0      (1,795,416)
                                    ------------    
------------   ------------    ------------    ------------
BALANCE APRIL 30, 1997                14,940,513    $ 65,073,951    $ (5,162,837)   $     86,505    $
59,997,619
Comprehensive income
  Net income                                   0     
          0       5,014,909               0       5,014,909
  Unrealized gain on
    securities available for sale              0               0       
        0          24,117          24,117
                                          
                                          
                ------------
Total comprehensive income                                      
                                    $  5,039,026
Dividends distributed                          0             
  0      (6,518,627)              0      (6,518,627)
Dividends reinvested                     639,799       4,290,541          
     0               0       4,290,541
Sale of shares                         1,196,562       8,421,858       
        0               0       8,421,858
Shares repurchased                      (382,462)     (3,077,791)           
   0               0      (3,077,791)
                                    ------------    
-----------    ------------    ------------    ------------
BALANCE APRIL 30, 1998                16,391,412    $ 74,708,559    $ (6,666,555)   $    110,622    $
68,152,626

Comprehensive income
  Net income                                   0     
          0       7,604,135               0       7,604,135
  Unrealized loss on
    securities available for sale              0               0       
        0        (167,189)       (167,189)
                                          
                                          
                -------------
Total comprehensive income                                      
                                    $  7,436,946
Dividends distributed                          0             
  0      (8,193,538)              0      (8,193,538)
Dividends reinvested                     762,051       5,389,464          
     0               0       5,389,464
Sales of shares                        2,368,504      16,284,684        
       0               0      16,284,684
Shares repurchased                      (455,013)     (3,286,888)           
   0               0      (3,286,888)
                                    ------------   
------------    ------------    ------------    ------------
BALANCE APRIL 30, 1999                19,066,954    $ 93,095,819    $ (7,255,958)   $    (56,567)   $
85,783,294
                                    ------------   
------------    ------------    ------------    ------------
                                    ------------   
------------    ------------    ------------    ------------

                                       
                        1999            1998       
     1997
                                          
                 ------------    ------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                       
        $  7,604,135       5,014,909       3,897,849
 Adjustments to reconcile net income to
  net cash provided by operating activities:
         Depreciation and amortization                       6,121,551      
 4,898,015       3,645,179
         Minority interest portion of operating
             partnership income                           
     744,725         141,788              18
         Accretion of discount on contracts                     (2,920)       
  (5,706)         (7,698)
         Gain on sale of properties                         (1,947,184)    
   (465,499)       (398,424)
         Interest reinvested in investment certificates        408,097         349,791        
288,517
         Changes in other assets and liabilities:
           (Increase) decrease in real estate deposits       2,192,813        (350,000)       (100,000)
           (Increase) decrease in other assets                 (11,884)       
377,758        (415,274)
            Increase in tax and insurance escrow              (507,127)         (3,599) 
       (98,942)
            Increase in deferred charges                      (480,413)    
   (558,660)       (180,779)
            Increase (decrease) in accounts payable
               and accrued expenses                         
1,541,190        (225,991)        (69,119)
                                          
                ------------    ------------    ------------
  Net cash provided from operating activities             $ 15,662,983       9,172,806       6,561,327
                                          
                ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from maturity of marketable
    securities held-to-maturity                           $    572,104    
     518,921         356,398
  Principal payments on mortgage loans receivable              372,155         565,359       1,706,202
  Proceeds from sale of property                               435,787     
  1,482,046               0
  Payments for acquisitions and
    improvement of properties                              (45,325,061)   
(22,894,602)    (38,046,177)
  Purchase of marketable securities available-for-sale        (181,250)              0        (596,961)
  Investment in mortgage loans receivable                   (7,655,061)     (2,061,179)     (2,835,212)
                                          
                ------------    ------------    ------------

  Net cash used for investing activities                  $(51,781,326)    (22,389,455)    (39,415,750)
                                          
                ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from sales of shares, net of issue costs      $ 16,284,684       8,421,858       9,025,706
   Proceeds from investment certificates issued              4,591,528       3,283,248       4,225,004
   Proceeds from mortgages payable                          32,326,973      10,612,652 
     27,094,270
   Proceeds from short-term lines of credit                          0      12,900,000 
      8,450,000
   Proceeds from sale of minority interest                           0       
        0               0
   Repurchase of shares and minority interest units         (3,534,813)     (3,077,791)     (1,795,416)
   Dividends paid                                      
     (2,804,074)     (2,228,086)     (1,930,439)
   Distributions paid to minority interest unitholders        (791,458)       (179,185)            (16)
   Redemption of investment certificates                    (3,599,050)     (1,450,783)     (2,128,686)
   Principal payments on mortgage loans                     (3,774,614)     (2,751,301)     (2,634,017)
   Payments on short-term lines of credit                   (1,000,000)    (11,900,000)     (8,450,000)
                                          
                ------------    ------------    ------------
   Net cash provided from financing activities            $ 37,699,176      13,630,612      31,857,406
                                          
                ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH                           $  1,580,833       
  413,963        (977,017)
CASH AT BEGINNING OF YEAR                                    
2,132,220       1,718,257       2,715,274
                                          
                ------------    ------------    ------------
CASH AT END OF YEAR                                       
$  3,713,053       2,132,220       1,718,257
                                          
                ------------    ------------    ------------
                                          
                ------------    ------------    ------------

                                       
                     1999          1998          1997
                                          
               -----------   -----------   -----------
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
   Dividends reinvested                                 
 $ 5,389,464     4,290,541     3,579,744
   Real estate investment and mortgage
    loans receivable acquired through
    assumption of mortgage loans payable
    and accrual of costs                                  12,458,735 
   10,463,677    19,575,635
  Mortgage loan receivable transferred to
   property owned                                      
            0     1,161,878     2,810,000
  Proceeds from sale of properties
   deposited directly with escrow agent                    6,863,691     2,870,387       455,329
  Properties acquired through the issuance of minority
    interest units in the operating partnership            6,485,927     8,325,652             0
  Interest reinvested directly in
    investment certificates                                  408,097 
      349,791       288,517

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the year for:
         Interest paid on mortgages                      $10,998,722     9,613,154 
    6,773,978
         Interest paid on investment certificates            895,214       657,966       508,686
                                          
               -----------   -----------   -----------
                                          
               $11,893,936    10,271,120     7,282,664
                                          
               -----------   -----------   -----------
                                          
               -----------   -----------   -----------

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 primarily 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. Rental revenue from residential properties represents the major source of revenues for the Trust.

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 substantially 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 is operated in a manner that allows IRET to continue its qualification as a real estate investment trust under the Internal Revenue Code.

All limited partners of the operating partnership 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 distributes cash on a quarterly basis in the amounts determined by the Trust which results in each limited partner receiving a distribution equivalent to the dividend received by 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. The trust is also the sole shareholder of Miramont - IRET Inc. and Pine Cone - IRET Inc., both of which are invested in real estate. All material intercompany transactions and balances have been eliminated in the consolidated financial statements.

Prior to May 1, 1998, IRET Properties was also a general partner in six limited partnerships, and due to the immaterial involvement of the limited partners, had substantial influence over their operations. These limited partnership were 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

The above partnerships were consolidated in prior year financial statements. Effective May 1, 1998, the related partnerships were acquired by IRET Properties through the issuance of operating partnership units as part of UPREIT transactions.

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. Interest, real estate taxes, and other development costs relating to the acquisition and development of certain qualifying properties are also capitalized. Expenditures for maintenance and repairs which do not add to the value or extend useful lives 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 "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. The securities classified as "held-to-maturity" consist of Government National Mortgage Association securities for which the Trust has 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.

NOTE 1 - CONTINUED

REAL ESTATE DEPOSITS consist of funds held by an escrow agent to be applied toward the purchase of real estate qualifying for gain deferral as a like-kind exchange of property under section 1031 of the Internal Revenue Code. It also consists of earnest money, or "good faith deposits", to be used by the Trust toward the purchase of property or the payment of loan costs associated with loan refinancing.

INVESTMENT IN PARTNERSHIP - The Trust was accounting for its investment in Chateau Properties, Ltd. under the equity method of accounting, wherein the appropriate portion of the earnings or loss was recognized annually. The Operating Partnership had a general partnership interest in the limited partnership. Chateau Properties, Ltd. had invested in real estate properties. During 1998, the real estate in Chateau Properties, Ltd. was acquired through the issuance of operating partnership units.

MINORITY INTEREST - Interests in the operating partnerships held by limited partners are represented by operating partnership units. The operating partnerships' income is allocated to holders of units based upon the ratio of their holdings to the total units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to minority interests in accordance with the terms of the operating partnership agreement.

NET INCOME PER SHARE - Effective May 1, 1998, the Trust adopted Statement of Financial Accounting Standard No. 128, Earnings Per Share. Basic net income per share is computed using the weighted average number of shares outstanding. There is potential for dilution of net income per share due to the conversion option of operating partnership units. However, basic and diluted net income per share are the same. The computation of basic and diluted net income per share can be found in Note 13.

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 the Internal Revenue Code Section
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.

NOTE 1 - CONTINUED

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.

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.

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

ACCOUNTING CHANGES - During the year ended April 30, 1999, the Trust adopted SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and disclosing comprehensive income and its components. Besides net income, SFAS No. 130 requires the reporting of other comprehensive income, defined as revenues, expenses, gains, and losses that under generally accepted accounting principles are not included in net income. Unrealized gains/losses on securities available-for-sale represent the only items presented as other comprehensive income. Comprehensive income is presented in the Consolidated Statements of Shareholders' Equity.

During the year ended April 30, 1999, the Trust adopted SFAS No 131, "Disclosure About Segments of an Enterprise and Related Information." This statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief decision makers in deciding how to allocate resources and in assessing performance. Operating segments of the Trust would include commercial and residential rental operations. Generally, segmental information follows the same accounting policies utilized for consolidated reporting, except, certain expenses, such as depreciation, are not allocated to segments for management purposes. See Note 12 for the Trust's disclosure of segment information in compliance with SFAS No. 131.

THE DIVIDEND REINVESTMENT PLAN is available to all shareholders of the Trust. Under the Dividend Reinvestment Plan, shareholders may elect for their dividends to be used by the plan administrator to acquire additional shares on the NASDAQ Small Cap Market or, if not available, directly from the Trust for approximately 95% of the market price on the date of purchase.

NOTE 2 - OFF-BALANCE-SHEET RISK

The Trust had deposits at First Western Bank and Bremer Bank which exceeded Federal Deposit Insurance Corporation limits by $3,128,203 and $665,255, respectively, at April 30, 1999.

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:
 

There were no repossessions during the years ended April 30, 1999 and 1998.

The above cost of residential real estate owned included construction in progress of $7,492,062 and $753,680 as of April 30, 1999 and 1998, respectively. As of April 30, 1999 the trust expects to fund approximately $5,000,000 during the upcoming year to complete these construction projects and has a commitment to purchase the Great Plains Software building for approximately $15,000,000. The Trust also has outstanding offers to purchase selected properties as part of their normal operations.

Construction period interest of $211,882, $220,573 and $269,513 has been capitalized for the years ended April 30, 1999, 1998 and 1997, respectively.

Residential apartment units are rented to individual tenants with lease terms up to one year. Gross revenues from residential rentals totaled $33,010,126, $27,231,714 and $18,935,111 for the years ended April 20, 1999, 1998 and 1997, respectively.

Gross revenues from commercial property rentals totaled $5,775,161, $4,462,872 and $4,037,258 for the years ended April 30, 1999, 1998 and 1997, respectively. Commercial properties are leased to tenants under terms of leases expiring at various dates through 2013. 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 $101,032, $28,316 and $16,517 for the years ended April 30, 1999, 1998 and 1997, respectively.

NOTE 3 - CONTINUED

The future minimum lease payments to be received under these operating leases for the commercial properties as of April 30, 1999, are as follows:
 

Year ending April 30,
      2000                              $  8,069,271
      2001                                 8,061,284
      2002                                 7,289,618
      2003                                 6,992,587
      2004                                 6,987,797
      Thereafter                          67,613,980
                                         
----------
                                        $105,014,537
                                         ===========

NOTE 4 - MORTGAGE LOANS RECEIVABLE

Mortgage loans receivable consists of nine contracts which are collateralized by real estate. Contract terms call for monthly payments of principals and interest. Interest rates range from 7 to 10.25%. 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 loans contracts as of April 30, 1999 are as follows:
 

Year ending April 30,
       2000                                $  9,323,959
       2001                                   
   85,035
       2002                                   
   92,144
       2003                                   
  202,017
       2004                                   
  113,307
       Later years                              904,752
                                          
  -----------
                                           $
10,721,214
                                          
  ===========

Details concerning mortgage loans receivable from related parties can be found in Note 10.

There were no significant non-performing mortgage loans receivable as of April 30, 1999 and 1998. Non-performing loans are recognized as impaired in conformity with FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan. The average balance of impaired loans for the year ended April 30, 1999 and 1998 was not significant. 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 loans if they had not been non-performing was not significant in 1999, 1998 or 1997. There was no interest income on non-performing loans recognized on a cash basis for 1999, 1998 and 1997.

NOTE 5 - MARKETABLE SECURITIES

The amortized cost and estimated market values of marketable securities held-to-maturity at April 30, 1999 and 1998 are as follows:
 

                                        Gross 
             Gross
1999                 Amortized      Unrealized          Unrealized      
     Fair
                        Cost           Gains     
         Losses             Value

ISSUER
   GNMA             $ 2,964,434     $   34,773          $   21,723     
     $ 2,977,484
                     ==========       ========           ========= 
           =========
1998
ISSUER
   GNMA             $ 3,536,538     $   22,757          $        0 
         $3,559,295
                     ==========      =========           =========  
         =========

The amortized cost and estimated market values of marketable securities available-for-sale at April 30, 1999 and 1998 are as follows:
 

                                        Gross 
             Gross
1999                 Amortized      Unrealized          Unrealized      
       Fair
                        Cost           Gains     
         Losses               Value

Equity shares in
   other REIT's     $   791,316     $   82,524          $  139,091          $  734,749
                     ==========       ========           ========= 
          =========
1998
Equity shares in
   other REIT's     $   610,666     $  110,627          $        0       
   $  720,688
                     ==========      =========           =========  
         =========

There were no realized gains or losses on sales of securities for the years ended April 30, 1999, 1998 and 1997.

Marketable securities held-to-maturity consists of Governmental National Mortgage Association (GNMA) securities bearing interest from 6.5% to 9.5% with maturity dates ranging from May 15, 2016 to September 15, 2023. The following is a summary of the maturities of securities held-to-maturity at April 30, 1999 and 1998:
 

                                  1999       
                       1998
                     ----------------------------------------------------------
                         Amortized      Fair           
Amortized      Fair
                          Cost          Value      
        Cost        Value
                     ----------------------------------------------------------
Due after 10 years     $  791,316    $  734,749       $ 3,536,538   $ 3,559,295
                        =========     =========        ==========   
==========

As of April 30, 1999, the trust had lines of credit available from three financial institutions. An unsecured line of credit was issued by First Western Bank & Trust in the amount of $4,000,000 carrying an interest rate equal to prime and maturing February 1, 2000. A second unsecured line of credit from First International Bank & Trust was issued in the amount of $2,500,000 carrying an interest rate equal to prime and maturing September 15, 1999. A third unsecured line of credit from Bremer Bank was issued in the amount of $5,000,000 carrying an interest rate equal to Bremer Financial Corp.'s reference rate and maturing September 1, 1999. Interest payments are due monthly on all three notes. As of April 30, 1999, the Trust had no unpaid balances on any of their three lines of credit. As of April 30, 1998, the Trust had an unpaid balance of $1,000,000 on the First Western Bank & Trust line of credit and no unpaid balance on the First International Bank & Trust line of credit. The Trust did not have a line of credit available from Bremer Bank as of April 30, 1998.

NOTE 7 - MORTGAGES PAYABLE

Mortgages payable as of April 30, 1999 included mortgages on properties owned totaling $175,064,346 and mortgages of $6,723 on property sold on contract. The carrying value of the related real estate owned was $198,076,573 and the carrying value of the related mortgage loans receivable was $159,965 as of April 30, 1999.

Mortgages payable as of April 30, 1998 included mortgages on properties owned totaling $134,012,050 and mortgages of $47,924 on property sold on contract. The carrying value of the related real estate owned was $190,827,346 and the carrying value of the related mortgage loans receivable was $209,260 as of April 30, 1998.

Monthly installments are due on the mortgages with interest rates ranging from 6.47% to 9.75% and with varying maturity dates through November 30, 2034.

Of the mortgages payable, the balances of fixed rate mortgages totaled $138,616,556 and $85,899,604, and the balances of variable rate mortgages totaled $36,454,513 and $48,160,370 as of April 30, 1999 and 1998, respectively.

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

Years ending April 30,
         2000                       $  4,257,321
         2001                          4,560,488
         2002                          4,897,046
         2003                          8,353,234
         2004                          5,197,797
         Later years                 147,805,183
                                     -----------
         Total payments              175,071,069
                                     ===========

The Trust has placed investment certificates with the public. The interest rates vary from 6% 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
         2000                       $ 7,908,954
         2001                           896,483
         2002                           902,368
         2003                           562,451
         2004                         1,466,151
         Thereafter                      33,729
                                    -----------
                                    $11,770,136
                                     ==========

NOTE 9 - DEFERRED GAIN FROM PROPERTY DISPOSITIONS

Deferred gain represents gain from property dispositions that have been reported on the installment method. With the installment method of reporting, the proportionate share of the gain is recognized at the point cash is received. Deferred gain recognized on the installment basis was $1,000, $16,713 and $146,361 for the years ended April 30, 1999, 1998 and 1997, respectively.

NOTE 10 - 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, 1999, Odell-Wentz & Associates received total fees under said agreement of $951,234. The fees for April 30, 1998 were $740,393 and for April 30, 1997 were $667,367.

For the years ended April 30, 1999, 1998 and 1997, the Trust has capitalized $195,019, $141,468 and $177,834, respectively, of these fees, with the remainder of $756,215, $598,925 and $489,533, respectively, expensed as advisory and trustee fees on the statement of operations. The advisor is obligated to provide office space, staff, office equipment, 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 $609,783, $530,678 and $408,904 for services rendered for years ended April 30, 1999, 1998 and 1997, 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 $157,392, $171,755 and $291,143 for the years ended April 30, 1999, 1998 and 1997, respectively.

The Trust paid fees and expense reimbursements to the law firm in which Thomas A. Wentz, Jr. is a partner totaling $33,022, $62,293 and $36,045 for the years ended April 30, 1999, 1998 and 1997, respectively. Thomas A. Wentz, Jr. is a trustee of the Trust.

NOTE 10 - CONTINUED

Investment certificates issued by the Trust to officers and trustees totaled $2,138,758, $1,219,457 and $519,528, at April 30, 1999, 1998 and 1997, respectively.

The Trust issued 334,172 limited partnership units at $7.20/unit to Roger R. Odell and C. Morris Anderson upon the completion of the UPREIT transaction with Magic City Realty during the year ended April 30, 1998. Mr. Odell and Mr. Anderson owned all of Magic City Realty. Mr. Anderson is also a trustee of the Trust.

NOTE 11 - MARKET PRICE RANGE OF SHARES

Since October 17, 1997, Investors Real Estate Trust traded shares on the NASDAQ Small Capital Market. For the year ended April 30, 1998 a total of 812,498 shares were traded in 445 separate trades. The high trade price during the period was 7.41, low was 6.56, and the closing price on April 30, 1998 was 7.12. For the year ended April 30, 1999, a total of 1,862,187 shares were traded in 1,017 separate trades. The high trade price during the period was 14.00, low was 6.50, and the closing price on April 30, 1999 was 7.50.

Prior to October 17, 1997, Investors Real Estate Trust shares were traded on Over-the- Counter-Market. The price range is as follows:
 

                                         
Bid                          Ask
                                      -------------
-------------------------------
                                         Low  
   High           Low        High
                                      -----------------
---------------------------
May 1, 1996 to April 30, 1997         $ 6.44     6.62           7.00        7.20
May 1, 1997 to October 17, 1997         6.62     6.85           7.20        7.45

NOTE 12 - SEGMENT DATA

The following information summarizes the Trust's segment reporting for Residential and Commercial properties along with reconciliations to the consolidated financial statements:

                                        
Commercial    Residential       Total
                                        -
----------------------------------------
 Segment revenue
      Rental revenue                    $ 5,775,161    $33,010,126    $38,785,287
 Segment expenses
      Mortgage interest                   2,417,316      8,782,600     11,199,916
      Utilities and maintenance             113,374      6,243,109      6,356,483
      Taxes and insurance                    91,003      4,318,759      4,409,762
      Property management                    60,612      3,227,655      3,288,267
                                        ----------- 
   -----------    -----------
                                        $ 2,682,206 
    22,572,123     25,254,428
                                        ----------- 
   -----------    -----------
 Segment gross profit                   $ 3,092,856     10,438,003     13,530,859
                                        
==========     ==========

  Reconciliation to consolidated operations:

   Interest discounts and fee revenue                1,141,975
   Other interest expense                             (902,065)
   Depreciation                                     (5,966,874
   Advisory and trust fees                            (927,063)
   Operating expenses                                 (320,479)
   Amortization                                      
(154,677)
                                          
           ----------
Consolidated operating income                       $6,401,676
                                          
           =========

APRIL 30, 1999                                   
                          Commercial       Residential         Total
                                       -------
-------------------------------------------
    Segment Assets
         Property owned                  $  67,250,863    $ 228,574,976    $ 295,825,839
         Less accumulated depreciation      (7,109,615)     (19,002,784)     (26,112,399)
                                        
-------------    -------------    -------------
   Total consolidated property owned     $  60,141,248    $ 209,572,192    $ 269,713,440
                                        
=============    =============    =============

YEAR ENDING APRIL 30, 1998
                                          
Commercial      Residential         Total
                                        
-------------    -------------    -------------
     Segment revenue
         Rental revenue                  $   5,775,161    $  25,919,425    $ 
31,694,586
                                        
-------------    -------------    -------------
     Segment expenses
         Mortgage interest               $   2,048,990    $   7,665,969    $  
9,714,959
         Utilities and maintenance             113,374        5,029,085       
5,142,459
         Taxes and insurance                   229,696        3,306,451   
     3,536,147
         Property management                    50,700        2,592,277  
      2,642,977
                                        
-------------    -------------    -------------
                                         $  
2,442,760    $  18,593,782    $  21,036,542
                                        
-------------    -------------    -------------
     Segment gross profit                $   3,332,401    $   7,325,643    $  10,658,044
                                        
=============    =============
     Reconciliation to consolidated operations:
         Interest discounts and fee revenue                            
    $     712,959
         Other interest expense                              
                   (764,145)
         Depreciation                                
                         (4,791,907)
         Advisory and trust fees                              
                  (745,907)
         Operating expenses                               
                      (271,738)
         Amortization                                
                           (106,108)
                                          
                                 -------------
     Consolidate operating income                                 
          $  4,691,198
                                          
                                 =============
APRIL 30, 1998
                                      Commercial   
   Residential         Total
                                    -------------    
------------    -------------
 Segment Assets
    Property owned                  $  50,429,416      180,986,906      231,416,322
    Less accumulated depreciation      (6,066,393)     (15,449,736)     (21,516,129)
                                    -------------   
-------------    -------------
Total consolidated property owned   $  44,363,023    $ 165,537,170    $ 209,900,193
                                    =============   
=============    =============

NOTE 12 - (CONTINUED)

YEAR ENDING APRIL 30,1997
 

                                   Commercial   Residential 
     Total
                                  -----------   -----------  
-----------
Segment revenue
      Rental revenue              $ 4,063,284   $18,909,084   $22,972,368
                                  -----------   -----------  
-----------

Segment expenses
      Mortgage interest             1,670,216     5,406,681     7,076,897
      Utilities and maintenance       254,248     3,487,629     3,741,877
      Taxes and insurance             225,810     2,494,685     2,720,495
      Property management              45,249     1,825,186     1,870,435
                                  -----------   -----------  
-----------
                                  $ 2,195,523   $13,214,181  
$15,409,704
                                  -----------   -----------  
-----------

 Segment gross profit             $ 1,867,761   $ 5,694,903   $ 7,562,664
                                  ===========   ===========
 Reconciliation to consolidated operations:
      Interest discounts and fee revenue                          861,613
      Other interest expense                                 
    (561,879)
      Depreciation                                   
          (3,584,591)
      Advisory and trust fees                                 
   (559,149)
      Operating expenses                                  
       (158,627)
      Amortization                                   
             (60,588)
                                          
                    -----------
Consolidated operating income                                 $ 3,499,443
                                          
                    ===========
APRIL 30, 1997
                                       Commercial  
    Residential         Total
                                     -------------   
-------------    -------------
Segment Assets
     Property owned                  $  42,241,096    $ 149,643,413    $ 191,884,509
     Less accumulated depreciation      (5,102,464)     (11,845,692)     (16,948,156)
                                      -------------  
-------------    -------------
Total consolidated property owned    $  37,138,632    $ 137,797,721    $ 174,936,353
                                      =============  
=============    =============

NOTE 13 - EARNINGS PER SHARE

Basic earnings per share are computed by dividing the earnings available to stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if potential dilutive securities had been converted to shares. Operating partnership units can be exchanged for shares on a one for one basis. The following tables reconciles amounts reported in the consolidated financial statements for the years ended April 30, 1999, 1998, and 1997:

                                         
              1999          1998          1997
                                          
         -----------   -----------   -----------
NUMERATOR
     Net income applicable to shares               $ 7,604,135   $ 5,014,909   $ 3,897,849
                                          
         ===========   ===========   ===========
     Numerator for basic earnings per share          7,604,135     5,014,909     3,897,849
     Minority interest portion of operating
       partnership income                              744,725   
    141,788            18
                                          
         -----------   -----------   -----------
     Numerator for diluted earnings per share      $ 8,348,860   $ 5,156,697   $ 3,897,867
                                          
         -----------   -----------   -----------
DENOMINATOR
     Denominator for basic earnings per share
         Weighted average shares                    17,441,976    15,636,214    14,044,467
     Effect of dilutive securities
         Convertible operating partnership units     1,662,489       417,445            13
                                          
         -----------   -----------   -----------
     Denominator for diluted earnings per share     19,104,465    16,053,659    14,044,480
                                          
         -----------   -----------   -----------
     Basic earnings per share                      $      0.44   $     
 0.32   $      0.28

                                          
         ===========   ===========   ===========
     Diluted earnings per share                    $      0.44   $     
0.32   $      0.28
                                          
         ===========   ===========   ===========

NOTE 14 - 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.

Notes payable - The carrying amount approximates fair value because of the short maturity of those notes.

Mortgages payable - For variable rate loans that re-price 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 which interest will be paid.

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

                                         
   1999                           1998
                                  Carrying       
Fair           Carrying        Fair
                                   Amount       
  Value           Amount         Value

FINANCIAL ASSETS
  Mortgage loan receivable       $ 10,721,214   $ 10,721,214   $  3,438,308   $  3,438,308
  Cash                              3,713,053      3,713,053   
   2,132,220      2,132,220
  Marketable securities
    held-to-maturity                2,964,434      2,977,484      3,536,538      3,559,295
  Marketable securities
    available-for-sale                734,749        734,749        720,688   
     720,688
FINANCIAL LIABILITIES
  Notes payable                  $          0   $          0 
  $  1,000,000   $  1,000,000
  Mortgages payable               175,071,069    175,561,542    135,059,974    129,354,699
  Investment certificates issued   11,770,136     11,619,938     10,369,561     10,202,603
  Accrued interest payable          1,428,222      1,428,222      1,220,177      1,220,177

Board of Trustees
Investor 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, 1999, 1998 and 1997, 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 24 through 38 related to the 1999, 1998 and 1997 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 39 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, 1999, 1998 and 1997, 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 Subsidiaries as of April 30, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the two years ended April 30, 1996 and 1995, none of which is presented herein, and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information on page 34 relating to the 1996 and 1995 consolidated financial statements is fairly stated in all material respects in relation to the basic consolidated financial statements from which is has been derived.

BRADY, MARTZ & ASSOCIATES, P.C.

May 26, 1999

Schedule I
MARKETABLE SECURITIES
 

                                  April 30, 1999   
                             April 30, 1998
                  -------------------------------------------------------------------------------------
                            Principal              
                      Principal
                             Amount             
Market                   Amount               Market
                  -------------------------------------------------------------------------------------
GNMA Pools                 $2,964,434         $2,977,484             
   $3,536,538           $3,559,295
                       ================================================================================

                              Cost         
      Market                     Cost               Market
                  -------------------------------------------------------------------------------------
Equity shares in
  other REIT's             $  791,316         $  734,749              
  $  610,066           $  720,688
                  =====================================================================================

Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION
 
 

                                       
    Charged to Costs and Expenses
                                ------------------------------------------------------------
                                    1999      
              1998                   1997
                                ------------------------------------------------------------
ITEM
  Maintenance and repairs         $  3,470,202           $ 2,832,772            $1,812,496
Taxes, other than payroll and
   income taxes
      Property taxes              $  4,025,560           $3,162,656       
      $2,515,631
Royalties                                *         
            *                     *
Advertising costs                        *                
     *                     *   

*Less than 1 percent of total revenues

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
 
 
 

                                       
                                          COST
CAPITALIZATION
                                          
           INITIAL COST TO TRUST    SUBSEQUENT TO ACQUISITION
                                          
           ---------------------    -------------------------
                                          
                       BUILDINGS &                  
 CARRYING
APARTMENTS                        ENCUMBRANCES       LAND       I
MPROVEMENTS    IMPROVEMENTS    COSTS    
----------                        ------------   ------------   ------------  
------------   ----------
1112 32ND AVE SW                  $    354,903    $    50,000   $    543,147   $ 
    21,605   $        0
177 10TH AVE E DICKINSON               221,575         40,000        318,109     
    76,470            0
405 GRANT AVE HARVEY                         0         13,584     
   157,211         54,914            0
4301-4313 9TH AVE SW FARGO             415,847         52,870        980,727       
  58,694            0
BEULAH CONDOS ND                             0          6,360 
       336,589        128,500            0
BISON PROPERTIES                             0         38,581  
      333,394        197,808            0
CANDLELIGHT APTS FARGO                 473,605         80,040        757,977    
     61,075            0
CASTLE ROCK BILLINGS                 3,946,539        736,000      4,375,683      
  561,514            0
CENTURY APTS DICKINSON               1,481,672        100,000      1,564,598       
459,683            0
CENTURY APTS WILLISTON               2,508,160        200,000      3,166,750       
542,834            0
CHATEAU APTS MINOT                   1,625,659        122,000      2,242,090     
    42,020            0
CLEARWATER BOISE                     2,652,705        585,000      3,189,463   
      47,736            0
COUNTRY MEADOWS BILLINGS             2,609,222        245,624      3,638,442         
9,855      120,821
COUNTRY MEADOWS PHASE II                     0        245,623      1,897,131   
           0            0
COLTON HEIGHTS PROPERTIES              313,877         80,000        734,286      
  111,759            0
COTTONWOOD LAKE BISMARCK             2,792,497      1,055,862      8,027,224        763,951   
   114,353
CRESTVIEW APTS BISMARCK              3,360,790        235,000      4,290,031       
274,576            0
EASTGATE PROPERTIES                          0         23,917     
 1,490,191        530,188            0 
FOREST PARK ESTS G FORKS             3,849,741        810,000      5,579,164        731,736 
           0
HERITAGE MANOR ROCHESTER             5,014,255        403,256      6,967,952        
50,769            0 
HILL PARK PROPERTIES                 1,365,554        224,750      2,562,296      
  237,113            0
IBM LAND ROCHESTER                           0         11,871    
          0              0            0 
IVY CLUB VANCOUVER                   7,079,422      1,274,000      9,973,755      
  448,913            0
JENNER PROPERTIES                    1,298,052        220,000      2,077,500    
    215,668            0 
KIRKWOOD APTS BISMARCK               2,205,000        449,290      2,729,745       
408,247            0 
LEGACY APTS GRAND FORKS              6,404,073      1,361,855      8,886,258        360,264  
    224,180
LEGACY UNDERGROUND G FORKS                   0        725,277      2,260,345     
         0            0
MAGIC CITY APTS MINOT                2,546,829        532,000      4,738,000       
158,774            0
MANDAN APTS MANDAN                         818         20,000     
   236,500         32,921            0
MEADOWS JMSTWN-INS CLAIM                     0              0     
 1,334,976              0            0
MEADOWS JMSTWN-NEW CONST                     0        167,325        452,685 
             0            0
MIRAMONT APTS FT COLLINS            11,481,696      1,470,000     12,765,460         49,715    
        0
NEIGHBORHOOD APTS CO SPRING          7,291,069      1,033,592      9,811,600        251,991     
       0
NORTH POINTE, BISMARCK, ND           1,678,718        143,500      1,996,726        139,262   
   123,687
OAK MANOR APTS DICKINSON                     0         25,000       
225,000        100,484            0 
OAKWOOD ESTS SIOUX FALLS, SD         2,090,133        342,800      2,783,950        418,581     
       0
OXBOW SIOUX FALLS                    3,311,700        404,072      4,494,441    
     90,760            0
PARK EAST APTS FARGO                 3,466,359         83,000      4,082,665     
   785,662            0 
PARK MEADOWS WAITE PARK, MN          7,753,474      1,143,450      9,099,297        898,267     
       0 
PARKWAY APTS BEULAH, ND                      0          7,000       
  40,738         74,320            0
PINE CONE APTS FT COLLINS, CO       10,472,304        904,545     12,167,093        145,282       
     0
POINTE WEST APTS MINOT, ND           2,372,322        240,000      3,537,775        179,566   
         0 
PRAIRIE WINDS APTS S FALLS, SD       1,307,534        144,097      1,816,011         27,567     
       0
ROCKY MEADOWS 96 BILLINGS, MT        2,788,609        655,985      5,484,735        428,596     
103,378
ROSEWOOD/OAKWOOD S FALLS             1,243,428        200,000      1,738,245         
9,690            0
SOUTH POINTE MINOT, ND               6,418,627        550,000      9,151,175       
191,819      402,672
SOUTHVIEW APTS MINOT, ND                     0        185,000        468,585 
        59,543            0
SOUTHWIND APTS G FORKS, ND           4,048,673        400,000      5,033,683        278,671   
         0
SWEETWATER PROPERTIES                  162,315         90,767      1,208,847     
   539,077            0
VAN MALL WOODS VANCOUVER             4,031,894        600,000      5,421,312        
13,036            0
VIRGINIA APTS MINOT, ND                      0         37,600       
136,036         30,527            0
WEST STONEHILL ST. CLOUD, MN         7,799,243        939,000     10,167,355        386,329     
       0
WESTWOOD PARK BISMARCK, ND           1,254,294        161,114      1,717,304        249,443   
         0
WOODRIDGE APTS ROCHESTER, MN         4,177,096        370,000      6,028,096        135,915     
       0
                                  ------------   ------------  
------------   ------------   ----------
                                  $135,670,283   $ 20,240,607  
$195,173,588    $12,071,690   $1,089,091
                                  ============   ============  
============   ============   ==========