INVESTORS REAL ESTATE TRUST, S-11, 1999-05-11

INVESTORS REAL ESTATE TRUST
S-11, 1999-05-11
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

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

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

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

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

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

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

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

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

Copies of communications to:

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

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

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

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
Title of securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be registered registered offering price aggregate offering registration fee
per unit price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Real 750,000 shares $8.10 per share $6,075,000.00 $1,214.40
Estate Trust Shares aggregate offering
of Beneficial price
Interest
</TABLE>

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

I
Page 1 of 183
<PAGE>

Cross Reference Sheet

Part I. Information Required in Prospectus

<TABLE>
<CAPTION>
Page Location In
Item This S-11 Filing
- ---- ----------------
<S> <C>
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.......................................................10-17
4 Determination of Offering Price..........................................27
5 Dilution.................................................................27
6 Selling Security Holders................................................N/A
7 Plan of Distribution................................................27 & 28
8 Use of Proceeds.......................................................28-30
9 Selected Financial Data...............................................30-31
10 Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................31-40
11 General Information as to Investors Real Estate Trust.................41-44
12 Policy with Respect to Certain Activities.............................44-46
13 Investment Policies of Investors Real Estate Trust..................46 & 47
14 Description of Real Estate............................................47-51
15 Tax Treatment of IRET and Its Security Holders........................57-65
16 Market Price Of and Dividends on IRET's Shares of Beneficial
Interest............................................................68-72
17 Description of IRET's Securities.........................................73
18 Legal Proceedings.......................................................N/A
19 Security Ownership of Certain Beneficial Owners
and Management......................................................73-76
20 Directors and Executive Officers......................................73-76
21 Executive Compensation................................................76-80
22 Certain Relationships and Related Transactions........................76-80
23 Selection, Management and Custody of IRET's Investments..................80
24 Policies with Respect to Certain Transactions.......................80 & 81
25 Limitations of Liability..............................................81-82
26 Financial Statements and Information.................................89-130
27 Interests of Named Experts and Counsel...................................83
28 Disclosure of Commission Position on Indemnification for
Securities Act Liabilities..........................................81-82

Part II. Information Not Required in Prospectus
Item
- ----
30 Other Expenses of Issuance and Distribution.............................131
31 Sales to Special Parties................................................131
32 Recent Sales of Unregistered Securities.................................131
33 Indemnification of Directors and Officers...............................132
34 Treatment of Proceeds from Stock Being Registered.......................132
35 Financial Statements and Exhibits...................................132-134
36 Undertakings......................................................134 & 135
</TABLE>

II
Page 2 of 183

<PAGE>

37 Index of Exhibits.................................................137 & 138
38 Security Sales Agreement..........................................139 & 140
39 Second Restated Declaration of Trust - Investors Real Estate
Trust..........................................................141 to 176
40 Opinion RE Legality...............................................177 & 178
41 Opinion RE Tax Matters..................................................179
42 Consent Letter from Pringle & Herigstad, P.C., RE Opinion of Legality...180
43 Consent Letter from Brady Martz & Associates, P.C., RE Financial
Information...........................................................181
44 Financial Data Schedule for Investors Real Estate Trust (As of
January 31, 1999).....................................................182
45 Subscription Agreement - Investors Real Estate Trust....................183

III
Page 3 of 183
<PAGE>

Effective Date: ____________, 1999 Prospectus

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

For 750,000 Shares of Beneficial Interest
$8.10 per Share

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

<TABLE>
<CAPTION>
THE OFFERING: Per Share Total
--------- -----
<S> <C> <C>
Public Price $8.10 $6,075,000
Selling Commission $ .65 487,500
----- ----------
Proceeds to IRET $7.45 $5,587,500
</TABLE>

The offering price may be higher than the market price of our shares on the
day of purchase.

TRADING SYMBOL: NASDAQ SmallCap Market-SM- - IRETS

THE COMPANY: The Trust is a Real Estate Investment Trust formed on July 31,
1970. IRET owns approximately 5,250 apartment units and 975,000 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
$4.51. A PURCHASER PAYING $8.10 PER SHARE WILL INCUR AN IMMEDIATE
BOOK VALUE DILUTION OF $3.59 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.

1 Page 4 of 183
<PAGE>

- 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.

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

THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.

2 Page 5 of 183
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PROSPECTUS PAGE
---------------
<S> <C>
SUMMARY OF THE OFFERING...................................................7-14

THE COMPANY.................................................................15

BUSINESS OBJECTIVES.........................................................16
Portfolio Mix..........................................................16
Leverage...............................................................16

AVAILABLE INFORMATION CONCERNING IRET.......................................16
Securities and Exchange Commission.....................................16
Reports to Security Holders............................................17
Incorporation by Reference.............................................17

RISK FACTORS................................................................17
Price of Shares Arbitrarily Determined.................................17
High Leverage..........................................................18
Failure to Qualify as a Real Estate Investment Trust...................18
Best Efforts Sale......................................................18
Business Environment...................................................18
Risks Related to Mortgage Lending......................................19
Relationship with Advisor..............................................19
Conflict of Interest...................................................19
Environmental Liability................................................20
Competition............................................................20
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 the Trust with Affiliates...............................23
Non-Arm's Length Agreements............................................24
Lack of Separate Representation........................................24

DETERMINATION OF OFFERING PRICE.............................................24

DILUTION....................................................................24

PLAN OF DISTRIBUTION........................................................24

WHO MAY INVEST..............................................................25

USE OF PROCEEDS.............................................................25

SELECTED FINANCIAL DATA - ANNUAL............................................27

3 Page 6 of 183
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..............................................28
General................................................................28
Nine Months Ended January 31, 1999.....................................28
Fiscal Year 1998 Compared to Fiscal Year 1997..........................30
Fiscal Year 1997 Compared to Fiscal Year 1996..........................35

GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST.......................38
Organization of Iret...................................................38
Governing Instruments of IRET..........................................38
Independent Trustees...................................................38
Shareholder Meetings...................................................39

STRUCTURE OF IRET...........................................................40

POLICY WITH RESPECT TO CERTAIN ACTIVITIES...................................41
To Issue Senior Securities.............................................41
To Borrow Money........................................................41
To Make Loans To Other Persons.........................................41
Mortgage Loans Receivable..............................................42
To Invest in the Securities of Other Issuers for the Purpose of
Exercising Control...............................................42
To Underwrite Securities of Other Issuers..............................42
To Engage in the Purchase and Sale (or Turnover) of Investments........42
To Offer Securities in Exchange for Property...........................42
To Repurchase or Otherwise Reacquire Its Shares or Other Securities....42
To Make Annual and Other Reports to Shareholders.......................42

INVESTMENT POLICIES OF IRET.................................................43
Investments in Real Estate or Interests in Real Estate.................43
Investments in Real Estate Mortgages...................................43
Investments in Other Securities........................................44
Investments in Securities Of or Interests In Persons Primarily
Engaged in Real Estate Activities................................44

DESCRIPTION OF REAL ESTATE..................................................44
INVESTMENT PORTFOLIO - INVESTORS REAL ESTATE TRUST
AS OF JULY 31, 1998..............................................44
Real Estate Owned................................................44 to 48
Title..................................................................48
Insurance..............................................................48
Planned Improvements...................................................48
Contracts or Options to Sell...........................................48
Occupancy and Leases...................................................48

SHARES AVAILABLE FOR FUTURE SALE............................................49

OPERATING PARTNERSHIP AGREEMENT.............................................50
Management.............................................................50
Transferability of Interests...........................................50
Capital Contribution...................................................51

4 Page 7 of 183
<PAGE>

Exchange Rights........................................................52
Registration Rights....................................................52
Operations.............................................................52
Distributions..........................................................53
Allocations............................................................53
Term...................................................................53
Fiduciary Duty.........................................................53
Tax Matters............................................................53

TAX TREATMENT OF IRET AND ITS SECURITY HOLDERS..............................54
Federal Income Tax.....................................................54
North Dakota Income Tax................................................55
Taxation of IRET's Shareholders........................................56
Taxation of Tax-Exempt Shareholders....................................56
Tax Considerations for Foreign Investors...............................57
Backup Withholding.....................................................57
State and Local Taxes..................................................58
Other Tax Considerations...............................................58
Tax Aspects of the Operating Partnership...............................58
Classification as a Partnership........................................58
Income Taxation of the Operating Partnership and Its Partners..........60
Partners, Not Partnerships, Subject To Tax.............................60
Partnership Allocations................................................60
Tax Allocations With Respect To Contributed Property...................60
Basis in Operating Partnership Interest................................61
Sale of Operating Partnership's Property...............................61

ERISA CONSIDERATIONS........................................................62

MARKET PRICE OF AND DIVIDENDS ON IRET'S SHARES OF BENEFICIAL INTERESTS......65
Market for the Shares of Beneficial Interest...........................65
Dividend and Share Price History.......................................67

DIVIDEND REINVESTMENT PLAN..................................................69

DESCRIPTION OF IRET'S SECURITIES............................................70
Description of Shares of Beneficial Interest...........................70
Restrictions on Transfer...............................................70

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............70

EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...73

ADVISORY AGREEMENT..........................................................74
Basic Compensation.....................................................75
Additional Compensation................................................75
Limitation.............................................................76
Roger R. Odell.........................................................76
Thomas A. Wentz, Sr....................................................76

5 Page 8 of 183
<PAGE>

SELECTION, MANAGEMENT AND CUSTODY OF IRET'S INVESTMENTS.....................77
Management of IRET's Investments.......................................77

POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS...............................77

LIMITATIONS OF LIABILITY....................................................78

LEGAL MATTERS...............................................................79

EXPERTS.....................................................................80

GLOSSARY OF TERMS...........................................................80

CONSOLIDATED FINANCIAL STATEMENTS - AS OF APRIL 30, 1998 AND 1997
AND INDEPENDENT AUDITOR'S REPORT.......................................F-1 to F-37
- NINE MONTHS ENDED JANUARY 31, 1999 (UNAUDITED)......................F-38 to F-42
</TABLE>

6 Page 9 of 183
<PAGE>

SUMMARY OF THE OFFERING

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.

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

RISK FACTORS. An investment in our shares involves risk, including the risk
of loss of your entire investment. See "Risk Factors" at page 17 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 January 31, 1999, the book value of the 18,134,700 shares
then outstanding was $4.40. Assuming all of the shares registered under
this Offering are sold, the estimated resulting book value will be $4.51
per share. Thus, a purchasing shareholder paying $8.10 per share under
this Offering will incur an immediate book value dilution of $3.59 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.

7 Page 10 of 183
<PAGE>

- - 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.

<TABLE>
<CAPTION>
TYPE Minimum Cap Maximum Percentage
- ---- ------- --- ------------------
<S> <C> <C> <C>
Selling agent commission
8% of the amount sold -0- $ 487,500 8.02%

Legal Fees $15,000 $ 15,000 .00247%

Advertising, Printing and
Promotion Expenses $15,000 $ 136,500 .0225%

Registration Fees $10,000 $ 10,000 .00165%

Accounting Fees $ 1,000 $ 1,000 .0007%
------- --------- -------
$41,000 $ 650,000 10.69%
</TABLE>

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" at page 22.

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.

8 Page 11 of 183
<PAGE>

The Advisor and its affiliates may receive compensation from IRET for
providing various services. See "Compensation Table" at page 21 and "The
Advisory Agreement" at page 74.

The Advisor is entitled to receive an advisory fee equal to a percentage of
the Net Invested Assets of IRET. See "Advisory Agreement" at page 74. 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" at page 22.

OUR OFFERING. We are offering to sell to the public 750,000 of our shares of
Beneficial Interest at a price of $8.10 per share. We will be represented by
brokerage firms who are members of the National Association of Securities
Dealers who will use their best efforts to sell our shares to the public for
an 8% commission. If you decide to buy our shares, you will pay $8.10 per
share of which approximately $.65 will be paid to the selling brokerage firm
and the balance of approximately $7.45 will be paid to us. See "Plan of
Distribution" at page 24.

WHO MAY INVEST. We are offering shares to residents of the following states:
North Dakota, South Dakota, Montana, Minnesota, Iowa, Colorado, Tennessee,
Michigan and Washington. 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" at page 25.

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 9 surrounding states. We currently
own over 5,250 apartment units and 975,000 square feet of commercial property
the total original investment in real estate assets exceeds $300,000,000.
See "The Company" at page 15.

9 Page 12 of 183
<PAGE>

CAPITALIZATION. The following shows the amount of assets we owned on January
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 750,000 shares being offered.

<TABLE>
<CAPTION>
As of January 31, 1999 After sale of 750,000 shares
<S> <C> <C>
Total Assets $ 264,979,779 $ 270,406,279
Less Liabilities (172,555,300) (172,555,300)
Less Minority Interest
in Operating
Partnership (12,619,372) (12,619,372)
------------- -------------
Shareholders' Equity $ 79,805,107 $ 85,230,107
</TABLE>

(1) Reflects costs of issue of $650,000 deducted from total sale proceeds of
$6,075,000 resulting in the addition of $5,425,000 to total assets.

FINANCIAL INFORMATION. The following table will give you an overview of our
financial performance during the past five years. See "Financial Statements"
at pages F-1 to F-37.

SELECTED FINANCIAL DATA - ANNUAL
<TABLE>
<CAPTION>
Year Ended April 30
--------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data (Restated)

Revenue $ 32,407,545 $ 23,833,982 $ 18,659,665 $ 13,801,123 $ 11,583,008
Operating income 4,691,198 3,499,443 3,617,807 3,560,318 3,135,426
Gain on repossession/
sale of investments 465,499 398,424 994,163 407,512 64,962

Minority interest portion
of operating partnership
income (141,788) (18) --- --- ---
Net income 5,014,909 3,897,879 4,611,970 3,967,830 3,200,388
Balance Sheet Data
Total real estate
investments 213,211,369 177,891,168 122,377,909 84,005,635 63,972,042
Total assets 224,718,514 186,993,943 131,355,638 94,616,744 72,391,548
Shareholders' equity 68,152,626 59,997,619 50,711,920 37,835,654 29,997,189

Consolidated Per Share Data
Net income $ .32 $ .28 $ .38 $ .38 $ .36
Gain of repossession/
sale of investments .03 .03 .08 .04 .01
Dividends .42 .39 .37 .34 .33
Tax status of dividend
Capital gain 2.9% 21.0% 1.6% 11.0% 7.37%
Ordinary income 97.1% 79.0% 98.4% 89.0% 92.63%
Return of capital 0.0% 0.0% 0.0% 0.0% 0.00%
</TABLE>

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."

10 Page 13 of 183
<PAGE>

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 90% of the partnership's assets. 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" at page 50.

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" at page 74.

<TABLE>
<CAPTION>
Fiscal Years Ending April 30
----------------------------
1994 1995 1996 1997 1998
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisor's and Trustees'
Compensation $304,898 $336,142 $458,019 $559,149 $745,907
Advisory Investigation
Fee 89,514 49,836 117,506 177,834 141,465
Other Administrative
Expenses 46,557 79,974 162,588 158,627 271,738
-------- -------- -------- -------- ----------
TOTAL FEES $366,406 $440,969 $465,952 $895,610 $1,159,110

Fees as Percent of Net
Invested Assets of the
Trust .68% 0.55% 0.6% 0.5% 0.5%
</TABLE>

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" at page 77.

OFFERING PRICE. The offering price of $8.10 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" at page 65.

DIVIDENDS. We have paid 112 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 April 1, 1999, was $.1225 per share.
See "Dividend History" at page 67.

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, and
Billings, Montana. See "Use of Proceeds" at page 25.

11 Page 14 of 183
<PAGE>

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.

- - SALE OF SHARES.

The TRUSTEES may from time to time issue and sell by private or public
offering, or exchange SHARES in IRET in such number or for such sums of
money, real estate assets, or other considerations, and on such terms as
they deem proper. The SHAREHOLDERS shall have no preemptive rights.

- - 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.

- - 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.

- - MEETINGS.

1. There shall be an annual meeting of the SHAREHOLDERS of IRET.

12 Page 15 of 183
<PAGE>

- - VOTING RIGHTS OF SHAREHOLDERS.

1. The voting rights per share of equity securities of IRET (other than
the publicly held equity securities of IRET) sold in a private
offering shall not exceed voting rights which bear the same
relationship to the voting rights of the publicly held SHARES of IRET
as the consideration paid to IRET for each privately offered IRET
share bears to the book value of each outstanding publicly held share.

2. The majority of the outstanding SHARES may, without the necessity of
concurrence by the TRUSTEES, vote to:

a. amend the DECLARATION OF TRUST;

b. terminate IRET;

c. remove the TRUSTEES.

3. The majority of SHAREHOLDERS present in PERSON or by proxy at an
Annual Meeting at which a quorum is present, may vote to elect the
TRUSTEES. A quorum shall be 50% of the then outstanding SHARES.

4. Without concurrence of a majority of the outstanding SHARES, the
TRUSTEES may not:

a. amend the DECLARATION OF TRUST, except for amendments which do not
adversely affect the rights, preferences and privileges of
SHAREHOLDERS;

b. sell all or substantially all of the IRET's assets other than in
the ordinary course of the IRET's business or in connection with
liquidation and dissolution;

c. cause the merger or other reorganization of IRET; or

d. dissolve or liquidate IRET.

- - 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.

13 Page 16 of 183
<PAGE>

- - 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.

A PROSPECTIVE PURCHASER SHOULD ALSO REVIEW THE ATTACHED FULL PROSPECTUS.

THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.

THIS IS THE END OF THE SUMMARY SECTION.

14 Page 17 of 183
<PAGE>

THE COMPANY

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" at
page 40.

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 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:

<TABLE>
<CAPTION>
Fiscal Year Ending 4/30
1998 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
REVENUE FROM OPERATIONS
Real Estate Rentals $31,694,586 $22,972,368 $17,635,297
Interest, Discount &
Fees 712,959 861,613 1,024,368
----------- ----------- -----------
$32,407,545 $23,833,981 $18,659,665

EXPENSE $27,716,347 $20,334,538 $15,041,858
----------- ----------- -----------

NET REAL ESTATE INVESTMENT
INCOME $ 4,691,198 $ 3,499,443 $ 3,617,807
GAIN ON SALE OF INVESTMENTS
(CAPITAL GAIN) 465,499 398,424 994,163
MINORITY INTEREST PORTION
OF OPERATING PARTNERSHIP
INCOME (141,788) (18) -0-
----------- ----------- -----------

NET INCOME $ 5,014,909 $ 3,897,849 $ 4,611,970
----------- ----------- -----------
----------- ----------- -----------

PER SHARE
Net Income $ .32 $ .28 $ .38
Dividends Paid $ .42 $ .39 $ .37
</TABLE>

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

15 Page 18 of 183
<PAGE>

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.

BUSINESS OBJECTIVES

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" at page 65 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.

AVAILABLE INFORMATION CONCERNING IRET

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

16 Page 19 of 183
<PAGE>

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).

RISK FACTORS

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.

17 Page 20 of 183
<PAGE>

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 January 31, 1999, the book value of the
18,134,700 shares then outstanding was $4.40. Assuming all of the shares
registered under this Offering are sold, the estimated resulting book value
will be $4.51 per share. Thus, a purchasing shareholder paying $8.10 per
share under this Offering will incur an immediate book value dilution of
$3.59 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

18 Page 21 of 183
<PAGE>

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" at page 74. 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" at page 74. The Advisor also will receive fees in connection with
IRET's acquisition or construction business based upon a percentage of the
amount paid.

19 Page 22 of 183
<PAGE>

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,

20 Page 23 of 183
<PAGE>

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

<TABLE>
<CAPTION>
Type Minimum Cap Maximum Percentage
---- ------- --- ------------------
<S> <C> <C> <C>
Selling agent commission
8% of the amount sold -0- $ 487,500 8.02%

Legal Fees $15,000 $ 15,000 .00247%

Advertising, Printing and
Promotion Expenses $15,000 $ 136,500 .0225%

Registration Fees $10,000 $ 10,000 .00165%

Accounting Fees $ 1,000 $ 1,000 .0007%
------- --------- ------

$41,000 $ 650,000 10.69%
</TABLE>

COMPENSATION TABLE

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.

<TABLE>
<CAPTION>
Item of Compensation Recipient Amount/Method
- -------------------- --------- -------------
<S> <C> <C>
Advisory Fee Odell-Wentz & Associates The advisor will earn
annually an additional
base fee of $37,975 once
the net sale proceeds of
$5,425,000 are invested.
(.7% of net invested
assets).

21 Page 24 of 183
<PAGE>

Advisor Additional Odell-Wentz & Associates 1/2 of 1% of the 1st
Compensation $2,500,000 of value of
all acquired assets,
except new construction
is 1/2 of 1% of the
total cost. Upon
investment of sale
proceeds, the fee will
be a minimum of $12,500
to a possible maximum of
$27,130.

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

Broker-Dealer Fees Selling Brokerage Firms (Eight percent or $.65
of each share sold) for a total
possible commission of $487,500.

Advertising and Up to an additional two
Promotional Expenses percent of gross proceeds of
$6,075,000 ($136,500) may be
paid as compensation for
advertising and promotional
expenses.

Experts' Fees Pringle & Herigstad, P.C. $15,000 for legal fees, plus
filing fees, accounting fees
and printing costs estimated
to be another $16,000.
</TABLE>

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. These individuals and affiliates have been engaged in
the business of real estate for approximately 40 years. With respect to the
conflicts of interest described herein, the trustees of

22 Page 25 of 183
<PAGE>

IRET, of which a majority are independent, will endeavor to exercise their
fiduciary duties to IRET in a manner that will preserve and protect the
rights of IRET and the interests of the shareholders in the event of any
conflicts of interest between IRET and the Advisor or its 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.

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" at page 21 and "The Advisory Agreement" at page 74.

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.

23 Page 26 of 183
<PAGE>

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, 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.

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 a partner in Pringle & Herigstad, P.C.

DETERMINATION OF OFFERING PRICE

The offering price of $8.10 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" at page 65.

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
January 31, 1999, the book value of the 18,134,700 shares then outstanding
was $4.40. Assuming all of the shares registered under this Offering are
sold, the estimated resulting book value will be $4.51 per share. Thus, a
purchasing shareholder paying $8.10 per share under this Offering will incur
an immediate book value dilution of $3.59 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:

24 Page 27 of 183
<PAGE>

For each share sold, the selling Broker-Dealer shall receive a commission of
eight percent (approximately $.65 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,
Washington, Iowa, Tennessee, Michigan, 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:

Tennessee -
Either individually or with a spouse had an annual gross income of at least
$65,000 during the previous calendar year, and be expected to have during
the current calendar year a gross income of at lease $65,000, and a net
worth of at least $250,000 (exclusive of principal residence and its
furnishings and automobile), or, in the alternative, have a minimum net
worth of at least $500,000.

Minnesota, Iowa and Washington -
1) Either individually or with a spouse has an annual gross income of at
least ($60,000 for Minnesota) and ($45,000 for Washington and Iowa)
during the previous calendar year, have a net worth of at least
($60,000 for Minnesota) and ($45,000 for Washington and Iowa)
(exclusive of principal residence and its furnishings and automobile),
and are purchasing shares for only the investors own account or
retirement plan.

2) Either individually or with a spouse have a net worth of at least
($225,000 for Minnesota) and ($150,000 for Washington and Iowa)
(exclusive of the principal residence and its furnishings and
automobiles), and are purchasing shares for only the investors own
account or retirement plan.

3) All retirement plan purchases must be for a minimum of $2,500.00 for
Iowa residents.

USE OF PROCEEDS

The net proceeds from the sale of the 750,000 shares offered to the public
will be added to IRET's operating capital to be used to construct apartment
properties in connection with its general business purposes.

The following table sets forth information concerning the projected use of
proceeds from the sale of units, assuming that the entire offering of 750,000
shares is sold. The figures listed cannot be precisely calculated at the
present time and may vary materially from the amounts shown.

25 Page 28 of 183
<PAGE>

Assuming all the offered shares are sold after deduction from the offering
proceeds of all the front-end fees and expenses associated with the offering,
approximately 89 percent of the total sale proceeds raised by this offering
will be invested by IRET in real property or related investments.

<TABLE>
<CAPTION>
DOLLARS PERCENT
<S> <C> <C>
GROSS OFFERING PROCEEDS 6,075,000 100.00%
SELLING COMMISSIONS - 487,500 8.02%
LEGAL FEES - 15,000 Less than 1% (.00247)
ADVERTISING, PRINTING AND
PROMOTION EXPENSES - 136,500 Less than 3% (.0225)
REGISTRATION FEES - 10,000 Less than 1% (.00165)
ACCOUNTING FEES - 1,000 Less than 1% (.0007)
----------
CASH AVAILABLE FOR CONSTRUCTION
OF PROPERTIES $5,425,000 89.31%
</TABLE>

As of the date of this Prospectus, IRET is constructing 67-unit apartment
buildings in Billings, MT, Bismarck, ND, and Grand Forks, ND, and a 27-unit
apartment complex in 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 (165 units) and Grand Forks, North
Dakota (183 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:

<TABLE>
<CAPTION>
Apartments Under Construction
-----------------------------
City Units Estimated Cost
---- ----- --------------
<S> <C> <C>
Billings, MT 67 $ 4,250,000
Bismarck, ND 67 4,250,000
Grand Forks, ND 67 4,700,000
Jamestown, ND 27 2,200,000

Planned Apartment Construction
------------------------------
City Units Estimated Cost
---- ----- --------------
Rochester, MN 67 $ 4,700,000
</TABLE>

Total - Current and Planned Apartment Construction $20,100,000

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 - Three Months Ended January
31, 1999", and expects to concentrate its

26 Page 29 of 183
<PAGE>

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, 1998, this depreciation deduction was $4,791,907.
The amount of this depreciation is 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 January 31, 1999, the ratio of mortgage
liabilities to total Trust real estate assets was $155,942,643 of
mortgage liabilities to $248,188,248 of net real estate owned or
62.9%. Thus, as much as $59,297,102 could be borrowed on the existing
portfolio before reaching a debt ratio of 70% (present equity in real
estate of $248,188,248, minus mortgages of $155,942,643 equals
$92,245,605 divided by 30% = $307,485,350, minus present real estate
owned of $248,188,248 equals $59,297,102) (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 ($3,169,508 as of January 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.

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA - ANNUAL
--------------------------------
Year Ended April 30
-----------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------
Consolidated Income Statement Data (Restated)
<S> <C> <C> <C> <C> <C>
Revenue $ 32,407,545 $ 23,833,981 $ 18,659,665 $ 13,801,123 $ 11,583,008
Operating income 4,691,198 3,499,443 3,617,807 3,560,318 3,135,426
Gain on repossession/
sale of investments 465,499 398,424 994,163 407,512 64,962
Minority interest portion
of operating partnership
income (141,788) (18) --- --- ---
Net income 5,014,909 3,897,849 4,611,970 3,967,830 3,200,388

27 Page 30 of 183
<PAGE>

Balance Sheet Data
Total real estate
investments $213,211,369 177,891,168 122,377,909 84,005,635 63,972,042
Total assets 224,718,514 186,993,943 131,355,638 94,616,744 72,391,548
Shareholders' equity 68,152,626 59,997,619 50,711,920 37,835,654 29,997,189

Consolidated Per Share Data
Net income $ .32 $ .28 $ .38 $ .38 $ .36
Gain of repossession/
sale of investments .03 .03 .08 .04 .01
Dividends .42 .39 .37 .34 .33
Tax status of dividend
Capital gain 2.9% 21% 1.6% 11.0% 7.37%
Ordinary income 97.1% 79% 98.4% 89.0% 92.63%
Return of capital 0.0% 0.0% 0.0% 0.00% 0.00%
</TABLE>

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

GENERAL: IRET has operated as a "real estate investment trust" under
Sections 856-858 of the Internal Revenue Code since its formation in 1970.
IRET is in the business of owning income producing real estate investments.
On February 1, 1997, IRET restructured itself as an Umbrella Partnership Real
Estate Investment Trust (UPREIT). No other major changes in IRET's business
has occurred from the organization of IRET in 1970 to the date of this
Prospectus, and none are planned at this time.

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

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 based on
reasonable assumptions, it can give no assurance that the expectations
expressed will actually be achieved. Many factors may cause actual results
to differ materially from IRET's current expectations, including general
economic conditions, local real estate conditions, the general level of
interest rates and the availability of financing, timely completion and lease
up of properties under construction, and various other economic risks
inherent in the business of owning and operating investment real estate.

NINE MONTHS ENDED JANUARY 31, 1999:

RESULTS OF OPERATION. We are pleased to report excellent operating results
for IRET'S Fiscal 1999 Third Quarter which ended January 31, 1999. Revenues,
Net Income, Funds from Operations and Real Estate Owned all reached new highs
and we were successful in finding attractive properties to add to our rapidly
expanding investment portfolio.

FUNDS FROM OPERATIONS. Funds from Operations for the Third Quarter of Fiscal
1999 increased to $3,132,268 from the $2,593,851 reported for the prior year,
an increase of $538,417 or 21%. On a per share basis, Funds from Operations
for the Third Quarter were $.18, compared to $.16 per share earned in the
same period of Fiscal

28 Page 31 of 183
<PAGE>

1998, an increase of 13%. For the first nine months of Fiscal 1999, Funds
from Operations increased to $8,689,640 from the year earlier figure of
$7,033,924, an increase of $1,655,716 or 24%. On a per share basis, Funds
from Operations for the nine month period were $.50 per share compared to the
year earlier figure of $.45 per share, an increase of 11%.

Occupancy rates continue at a good level and we continue to experience good
results from the new properties we are adding to our portfolio.

NET INCOME. Net Income for the Third Quarter rose slightly from the year
earlier figureto $1,654,228 from $1,636,644. For the nine month period, Net
Income was $6,028,620 compared to $3,873,276. As noted in our prior
quarterly report, the change in Net Income is attributable to the increase in
the Gain on Sale of Investments. In the Third Quarter, the gain was $80,121
compared to the year earlier figure of $326,138. However, for the full nine
month period, capital gain income was $1,788,038 compared to $448,786,
reflecting the large gain from the sale of the 90 Unit Bison Apartment
Complex in Jamestown, ND, in the Second Quarter.

OPERATIONS. The Third Quarter saw a slight increase in vacancies in certain
of our apartment communities. Overall, the occupancy rates for our
apartments are still at or above normal levels and we continue to implement
periodic rental increases as conditions allow. The new properties that we
have been adding to our portfolio are performing very well. We continue our
apartment building program in Billings, MT, Bismarck, Jamestown and Grand
Forks, ND. We are also in the process of acquiring land in Rochester, MN to
begin construction of apartments this summer.

SALE OF PROPERTIES. During the Third Quarter, we completed the sale of the
Fairfield Apartment Community in Marshall, MN for $466,000 resulting in a
gain of $80,122. We've also entered into sales agreements for our Superpumper
Convenience Stores and expect to report gains from the sale of these
properties in the Fourth Quarter.

PORTFOLIO ACQUISITIONS. We were successful in acquiring additional
investment properties in the Third Quarter. The following properties were
purchased or completed and added to our portfolio during the Third Quarter
and are producing income:

<TABLE>
<CAPTION>
Cost
----
<S> <C>
- 165 Unit Castle Rock Apartment Complex,
Billings, MT $ 5,600,000

- 67 Unit Cottonwood Apartment II,
Bismarck, ND $ 4,000,000

The following properties are under construction:

- 67 Unit Legacy Apartment Complex with
underground parking, Grand Forks, ND $ 4,750,000

- Great Plains Software Home Office Complex,
Fargo, ND $ 15,000,000

29 Page 32 of 183
<PAGE>

- 27 Unit The Meadows Apartments,
Jamestown, ND $ 2,000,000

IRET has entered into purchase agreements for the following properties:

- Rimrock West, Billings, MT, Multifamily
Apartment Complex $ 3,750,000

- Maplewood Square, Rochester, MN, Commercial
Shopping Center $ 11,800,000

- Edgewood Vista Locations in Hermantown, MN,
Belgrade, MT, and Grand Island and Columbus, NE $ 6,060,000

- Corner Express Convenience Store, East Grand
Forks, ND $ 1,200,000

TOTAL $ 22,810,000
</TABLE>

FINANCIAL CONDITION. On January 31, 1998 cash and marketable securities were
$10,477,747, compared to the $6,389,446 on hand at the beginning of the
current fiscal year. Total assets increased to $264,979,779 from
$224,718,514 at the beginning of the current fiscal year. During that same
period, liabilities increased to $172,555,299 compared to $148,276,615. IRET
continues to enjoy a strong inflow of investment funds and is well positioned
to continue the expansion of its investment portfolio.

DIVIDENDS. IRET paid a regular dividend of 12.25 cents per share on April 1,
1999. This was an increase from the 12 cents per share dividend paid on
January 15, 1999, and was the 112th consecutive quarterly dividend paid by
IRET.

FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997.

OVERVIEW. An improvement in occupancy rates for IRET's apartment
communities and good results from newly acquired properties resulted
in a significant increase in Funds From Operations and earnings for
IRET's 28th year, which ended April 30, 1998. Total assets and
shareholder equity also increased materially and IRET Shares of
Beneficial Interest were listed on the NASDAQ Small-Cap in October of
1997.

FUNDS FROM OPERATIONS. Funds From Operations (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 1998 increased to $9,447,425
($.60 per share), compared to $7,144,622 ($.51 per share) received in
Fiscal 1997, and the $5,977,431 ($.49 per share) recognized in Fiscal
1996.

EARNINGS. IRET's net taxable earnings for Fiscal Year 1998 increased
to $5,014,909 from the $3,897,849 earned in Fiscal 1997 and the
$4,611,970 earned in Fiscal 1996. On a per share basis, net taxable
earnings increased to $.32 per share in Fiscal 1998 from $.28 in
Fiscal 1997 (an

30 Page 33 of 183
<PAGE>

increase of 14%), but a decline of $.06 per share from the $.38
earnings in Fiscal 1996. The increase in taxable earnings resulted
from increased rental income which resulted from a higher occupancy
level in apartment communities owned by the Operating Partnership.

REVENUES. Total revenues of the Operating Partnership for Fiscal 1998
were $32,407,545, compared to $23,833,982 in Fiscal 1997 (an increase
of 36%) and $18,659,665 in Fiscal 1996. The increase in revenues
received during Fiscal 1998 in excess of the prior year revenues was
$8,573,564. This increase resulted from:

<TABLE>
<S> <C>
Rent from 7 properties acquired in Fiscal 1998 $ 2,658,085
Rent from 11 properties acquired in Fiscal 1997
In excess of that received in Fiscal 1997 5,310,670
An increase in rental income on existing properties 893,976
An increase in rent on Smith Home Furnishing Building
(bankruptcy of tenant) 54,021
A decrease in rent - properties sold during 1997 (194,534)
A decrease in interest income (148,654)
-----------
$ 8,573,564
-----------
-----------
</TABLE>

This increase in revenue resulted primarily from the addition of new
real estate properties to the portfolio. Rents received on properties
owned prior to the beginning of Fiscal Year 1998 saw an increase in
scheduled rents of 2%, and the occupancy level for those properties
increased from approximately 90% to slightly over 94% resulting in an
increase in rental income from those properties of $893,976. The new
properties acquired during Fiscal Years 1997 and 1998 generated nearly
$8,000,000 of new revenues.

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

Capital gain income for Fiscal 1998 was $465,499 resulting from the
sale of three investment properties. This compares to $398,424 of
capital gain income recognized in Fiscal 1997 and the $994,163
recognized in Fiscal 1996. IRET will continue to seek to market
several of its older and smaller apartment properties.

NET TAXABLE INCOME. The $1,117,060 increase in net taxable income for
Fiscal 1998 over the net income earned in the prior fiscal year
resulted from:

<TABLE>
<S> <C>
An increase in gain from sale of investments $ 67,075
An increase in net rental income (rents, less utilities,
maintenance, taxes, insurance and management) 5,733,442

31 Page 34 of 183
<PAGE>

A decrease in interest income (148,654)
An increase in interest expense (2,840,328)
An increase in depreciation expense (1,207,316)
An increase in operating expenses and advisory trustee
services (299,869)
An increase in amortization expense (45,520)
An increase in Minority interest of Operating Partnership
Income (141,770)
-----------
$ 1,117,060
-----------
-----------
</TABLE>

PROPERTY ACQUISITIONS. The Operating Partnership added nearly
$40,000,000 of real estate investments to its portfolio during Fiscal
1998, including:

<TABLE>
<S> <C> <C>
Commercial:
Edgewood Vista, East Grand Forks, MN $ 892,500
Edgewood Vista, Minot, ND 6,191,410

Apartments:
Units Description
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 - Minot, ND 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 1,362,805
--- ----------------------------------------------- -----------
935 Total $39,014,223
</TABLE>

*PROPERTY NOT PLACED IN SERVICE AT APRIL 30, 1998. ADDITIONAL
COSTS ARE STILL TO BE INCURRED.

**REPRESENTS COSTS TO COMPLETE A PROJECT STARTED IN YEAR ENDED
APRIL 30, 1997.

PROPERTY DISPOSITIONS. During Fiscal 1998, the Operating Partnership
sold three real estate properties - Superpumper Convenience Store in
New Town, ND; Superpumper Convenience Store in Bottineau, ND; and a
48-unit apartment complex in Scottsbluff, NE, realizing a total
capital gain of $465,499.

FISCAL 1998 DIVIDENDS. The following dividends were paid during
Fiscal 1998:

<TABLE>
<CAPTION>
Date Per Share Dividend
---- ------------------
<S> <C>
July 1, 1997 $.10125
October 1, 1997 .10300
January 16, 1998 .10500
April 1, 1998 .10700
-------
$.41625
</TABLE>

32 Page 35 of 183
<PAGE>

The Fiscal 1998 pay-out represented a 6.7% increase over the dividends
paid during the prior Fiscal Year of $.39 per share.

FUNDS FROM OPERATIONS. The funds derived during Fiscal 1998 by IRET
from its operations increased by 20% over the prior year and by 34%
from the Fiscal 1996 level ($9,447,425 in Fiscal 1998, versus
$7,144,604 in 1997 and $5,977,431 in 1996). On a per share basis,
Funds From Operations increased to $.60 per share from $.51 in Fiscal
1997 (an increase of 18%) and the $.49 generated in Fiscal 1996. IRET
uses the definition of "Funds From Operations" recommended by the
National Association of Real Estate Investment Trusts which is "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):

<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal 1995 Fiscal 1994
Item 1998 1997 1996 (Restated) (Restated)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income (GAAP) $ 5,014,909 $ 3,897,849 $ 4,611,970 $ 3,967,830 $ 3,200,388
Adjustments
Gain from
Property Sales (465,499) (398,424) (994,163) (407,512) (64,962)
----------------------------------------------------------------------------------------
Operating Income $ 4,549,410 $ 3,499,425 $ 3,617,807 $ 3,560,318 $ 3,135,426
Plus Depreciation 4,791,907 3,584,591 2,261,724 1,767,294 1,323,474
Plus Amortization 106,108 60,588 97,900 20,659 28,199
----------------------------------------------------------------------------------------
Funds from Operations $ 9,447,425 $ 7,144,604 $ 5,977,431 $ 5,348,271 $ 4,487,099

Dividends Paid $ 6,518,627 $ 5,508,689 $ 4,439,034 $ 3,660,986 $ 3,102,061
----------------------------------------------------------------------------------------
$ 2,928,798 $ 1,635,915 $ 1,538,397 $ 1,687,285 $ 1,385,038
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>

Management expects that the Funds From Operations (as defined above)
will continue to improve during Fiscal 1999 and will continue to
exceed dividends paid in the coming year.

LIQUIDITY AND CAPITAL RESOURCES. Important investment and financing
events in Fiscal 1998 were:

The net proceeds from sale of Shares of Beneficial Interest under
Best Efforts offerings were $8,421,858.

An additional $8,583,519 of equity capital was contributed to the
Operating Partnership in UPREIT transactions.

Seven property loans were refinanced. The new loans totalled
$27,000,000, were at a lower interest rate than the old loans and

33 Page 36 of 183
<PAGE>

generated $3,245,000 of additional cash for investment in new
properties.

Nearly $40,000,000 of new real estate investments were acquired
by the Operating Partnership.

IRET's financial condition at the end of Fiscal 1997 continued at the
very strong level of its prior fiscal year.

IRET's shareholder equity increased to $68,152,626 from
$59,997,619 on April 30, 1997, a gain of $8,155,007 (14%).
Equity capital on April 30, 1996, was $50,711,920. 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
$148,276,615 from $126,995,321 on April 30, 1997. IRET's
liabilities on April 30, 1996, were $80,643,718.

Total assets of the Operating Partnership increased to
$224,718,514 from $186,993,943 on April 30, 1997. IRET's total
assets on April 30, 1996, were $131,355,638.

Cash and marketable securities were $6,389,446 compared to the
year earlier figure of $6,457,182 and $7,127,131 on April 30,
1996.

In addition to its cash and marketable securities, IRET
Properties has an unsecured line of credit agreements with First
International Bank & Trust and First Western Bank & Trust, both
of Minot, ND, of $6,500,000, of which $1,000,000 was in use on
April 30, 1998.

AFFILIATED PARTNERSHIPS. IRET sponsored and served as a general
partner of seven limited partnerships. Because of IRET's position as
a general partner and creditor of these partnerships and because the
partnerships (with the exception of Chateau Properties) did not
produce sufficient cash flow to pay debts due to IRET as scheduled
prior to Fiscal Year 1996, the financial statements of IRET and the
seven partnerships were consolidated for financial reporting purposes
to more properly depict the financial status of IRET. During Fiscal
Year 1996, a new mortgage loan was negotiated by Chateau Properties,
Ltd., on its 64-unit apartment building in Minot, North Dakota. As a
result of this refinancing, the partnership paid the balance that it
owed to IRET on the contract for deed under which the apartment
building had been purchased from IRET. Further, IRET was not required
to guarantee the new mortgage loan made by the partnership.
Accordingly, for Fiscal 1996 and 1997, IRET is accounting for its
partnership interest in Chateau Properties under the equity method of
accounting. Prior financial statements have been restated to reflect
this change. On April 1, 1998, Chateau Properties was merged into the
Operating Partnership.

The six consolidated partnerships are as follows:

34 Page 37 of 183
<PAGE>

<TABLE>
<CAPTION>
Year Property IRET
Name Formed Owned Ownership
---- ------ ----- ---------
<S> <C> <C> <C>
Sweetwater Properties, Ltd. 1981 114 Units Apts. 0%
Bison Properties, Ltd. 1982 125 Units Apts. 20%
First Avenue Building, Ltd. 1981 16,500 Sq. Ft. Office Bldg. 20%
Eastgate Properties, Ltd. 1983 116 Units Apts. 18%
Colton Heights, Ltd. 1984 18 Unit Apt. Bldg. 18.69%
Hill Park Properties, Ltd. 1985 96 Units Apts. 7.14%
</TABLE>

On May 1, 1998, all six partnerships were merged into the Operating
Partnership.

CONSOLIDATED FINANCIAL STATEMENTS. The financial statement included
in this Prospectus consolidates the financial statements of IRET and
the above six limited partnerships. All material inter-company
transactions and balances have been eliminated on the consolidated
statement. The principal impact of this consolidation on the
statement of operations is to reduce reported income as a result of
increased depreciation. On the balance sheet, related mortgage loans
and the investment in partnerships is reduced and real estate owned is
increased. Also, the deferred income account is decreased and the
retained earnings account is also decreased.

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

ECONOMIC CONDITIONS. Fiscal 1998 saw improved economic conditions in
the northern plains states in which IRET operates. Occupancy rates
for residential properties increased to 94% from the year earlier
level of 90.5% and scheduled rent levels for Trust properties improved
slightly in Fiscal 1998 by about 2%. The mild winter of 1997-98 also
impacted earnings by decreasing snow removal cost, utility expenses
and vacancy rates.

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 will be Year 2000 compliant by the end of 1998. IRET
does not anticipate that the Year 2000 problem will have any material
cost to it.

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

35 Page 38 of 183
<PAGE>

FUNDS FROM OPERATIONS. Funds from Operations (taxable income increased
by non-cash deductions of depreciation and amortization, and reduced
by capital gain income and other extraordinary income items) for
Fiscal 1997 increased to $7,144,622 ($.51 per share), compared to
$5,977,431 ($.49 per share) generated by IRET in Fiscal 1996 and the
$5,434,244 ($.52 per share) recognized in Fiscal 1995.

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

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

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

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

<TABLE>
<S> <C>
Rent from 11 properties acquired in
Fiscal 1997 $4,451,266
Rent from 7 properties acquired in
Fiscal 1996 in excess of that
received in Fiscal 1996 1,526,453

A decrease in rental income on
existing properties (-5.4%) (625,949)
An increase in rent on Smith Home
Furnishing Building (bankruptcy of
tenant) 61,892
A decrease in rent - properties sold
during 1996 (76,590)
A decrease in interest income (162,755)
----------
$5,174,317
</TABLE>

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

36 Page 39 of 183
<PAGE>

acquired during Fiscal Years 1996 and 1997 generated nearly $6,000,000
of new revenues.

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

Capital gain income for Fiscal 1997 was $398,424 resulting from the
sale of two older and smaller investment properties. This compares to
$994,163 of capital gain income recognized in Fiscal 1996 and the
$407,512 recognized in Fiscal 1995. IRET will continue to seek to
market several of its older and smaller apartment properties.

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

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

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

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

UNITS APARTMENTS
67 Circle 50, Billings, MT* $ 1,519,855
98 South Pointe II, Minot, ND** 1,024,234
60 Rosewood Court, Sioux Falls,
SD 1,938,245
116 Legacy Apts., Grand Forks, ND** 3,573,057
98 Rocky Meadows, Billings, MT** 2,654,554

37 Page 40 of 183
<PAGE>

210 Miramont Apts., Fort Collins,
CO 14,235,461
192 Neighborhood Apts., Colorado
Springs, CO 10,849,561
108 Woodridge Apts., Rochester, MN 6,398,096
67 Cottonwood Lake, Bismarck, ND* 1,055,862
360 Park Meadows Apts., St. Cloud,
MN 10,242,747
-----------
Total $59,377,674
</TABLE>

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

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

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

GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST

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 10 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.

38 Page 41 of 183
<PAGE>

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

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

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

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

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

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.

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

Thomas A. Wentz, Jr., has served as a Trustee since 1996. He is a partner in
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

39 Page 42 of 183
<PAGE>

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.

STRUCTURE OF IRET

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 91.2% of the Operating Partnership on
January 31, 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
organized three wholly owned subsidiary corporations for the purpose of
holding title to these investment properties in order to comply with the
conditions of the lender. They are: Pine Cone - IRET, INC., a Colorado
corporation, formed to own the 195-unit Pine Cone apartment complex located
in Fort Collins, Colorado; Miramont - IRET, INC., a Colorado corporation,
formed to own the 210-unit Miramont apartment complex located in Fort
Collins, Colorado; and West Stonehill - IRET, INC., a Minnesota corporation,
formed to own the 313-unit West Stonehill apartment complex located in St.
Cloud, Minnesota.

IRET formerly was the general partner and held investment interests in 7
limited partnerships. They were: Eastgate Properties, Ltd.; Bison
Properties, Ltd.; First

40 Page 43 of 183
<PAGE>

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.

POLICY WITH RESPECT TO CERTAIN ACTIVITIES

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 61/2% for 6 months; 7% for
1 year; 71/2% for 3 years and 8% for 5 years). In the event of dissolution
of IRET, the Investment Certificates would be paid in preference to the
shares of Beneficial Interest. As of January 31, 1999, the Investment
Certificates outstanding totaled $12,358,251. 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:

<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cost of Property
Acquired $39,014,223 $59,377,674 $40,660,975
Net Increase in
Mortgages Payable $18,325,028 $44,035,887 $21,702,852

Percent of Acquisition
Price Represented by
Net Increase in
Mortgages Payable 47% 74% 53%
</TABLE>

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:

41 Page 44 of 183
<PAGE>

<TABLE>
<CAPTION>
MORTGAGE LOANS RECEIVABLE:
Real Estate 4/30/98
Location Security Balance Rate
- -------- -------- ------- ----
<S> <C> <C> <C>
Fargo, ND
- ---------
Great Plains Software Office Complex $1,701,308 9.5%

Gilbert, AZ
- -----------
NE1/4-27-2-6 Commercial Land 678,700 8%

Other Mortgages
- ---------------
Over $100,000 $ 938,196 8-9%
$20,000 to $99,999 78,474 8-9%
Less than $20,000 41,630 7-9%
----------
TOTAL $3,438,308
Unearned Discounts (4,818)
Allowance for Losses (120,314)
Deferred Gain (2,000)
----------
$3,311,176
----------
----------
</TABLE>

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 REACQUIRE 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" at page 24.

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 shareholders may only be
changed by a vote of a majority of the

42 Page 45 of 183
<PAGE>

shareholders. IRET has a policy of providing quarterly reports to the
shareholders during January, April, July and October. The quarterly reports
do not contain a financial statement certified by an independent public
accountant. The provision of a quarterly report to the shareholders may be
changed by a majority of the Board without a vote of the shareholders.

INVESTMENT POLICIES OF REGISTRANT

INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE. 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 January 31, 1999,
the ratio of total liabilities ($172,555,300) to total assets ($264,979,779)
was 65%.

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.

43 Page 46 of 183
<PAGE>

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.

DESCRIPTION OF REAL ESTATE

IRET owned the following properties as of January 31, 1999:

<TABLE>
<CAPTION>
COMMERCIAL PROPERTIES

FISCAL 1999
STATE PROPERTY SQ. FEET INVESTMENT OCCUPANCY
<S> <C> <C> <C> <C>
Georgia

- Douglasville

- Wedgewood Retirement Center
- Assisted Living 29,408 $ 3,971,878 100.00%
-------- ----------- -------
GEORGIA TOTALS 29,408 $ 3,971,878 100.00%
-------- ----------- -------
-------- ----------- -------

Idaho
- Boise
- America's Best Furniture
- Retail 139,198 $ 5,792.182 28.75%
-------- ----------- -------

IDAHO TOTALS 139,198 $ 5,792,182 28.75%
-------- ----------- -------
-------- ----------- -------

Michigan

- Kentwood
- COMP USA - Retail 16,000 $ 2,113,574 100.00%
-------- ----------- -------

MICHIGAN TOTALS 16,000 $ 2,113,574 100.00%
-------- ----------- -------
-------- ----------- -------

Minnesota

- East Grand Forks
- Edgewood Vista
- Assisted Living 10,778 $ 899,821 100.00%

44 Page 47 of 183
<PAGE>

- Eden Prairie
- Lindberg Building
- Office/Whse 40,491 $ 1,455.789 100.00%

- Moorhead
- Pioneer Seed Company
- Office/Whse 75,900 $ 653,876 100.00%
-------- ----------- -------

MINNESOTA TOTALS 127,617 $ 3,009,487 100.00%
-------- ----------- -------
-------- ----------- -------

Montana

- Billings
- Creekside Office
Building - Office 37,318 $ 1,678,663 88.63%

- Edgewood Vista - Assisted
Living 11,971 $ 980,218 N/A

- Missoula
- Edgewood Vista - Assisted
Living 10,314 $ 962,428 100.00%
-------- ----------- -------

MONTANA TOTALS 59,603 $ 3,621,310 90.86%
-------- ----------- -------
-------- ----------- -------

Nebraska

- Omaha
- Barnes & Noble - Retail 27,500 $ 3,699,101 100.00%
-------- ----------- -------

NEBRASKA TOTALS 27,500 $ 3,699,101 100.00%
-------- ----------- -------
-------- ----------- -------

North Dakota

- Bismarck
- Lester Chiropractic Clinic
- Office 5,400 $ 268,917 100.00%

- Fargo
- Barnes & Noble - Retail 30,000 $ 3,292,012 100.00%
- Petco - Retail 18,000 $ 1,278,934 100.00%
- Stone Container - Office/Mfg 151,850 $ 4,998,485 100.00%

- Grand Forks
- Carmike Theatre 28,300 $ 2,545,737 100.00%

- Minot
- Walter's (114 South Main
Street) - Retail 3,500 $ 111,940 100.00%
- 1st Ave Building - Office 15,900 $ 838,655 80.03%
- 401 South Main - Office 9,200 $ 606,708 60.65%
- Arrowhead Shopping Center -
Retail/Office 80,000 $ 2,820,002 98.99%
- Corner C Store - Retail 4,674 $ 1,196,342 N/A
- Edgewood Vista - Assisted Living 91,273 $ 6,275,931 100.00%
- Minot Plaza - Retail 10,020 $ 509,079 100.00%
-------- ----------- -------

NORTH DAKOTA TOTALS 448,117 $24,742,741 98.11%
-------- ----------- -------
-------- ----------- -------

45 Page 48 of 183
<PAGE>

South Dakota

- Sioux Falls
- Edgewood Vista
- Assisted Living 11,971 $ 974,739 N/A
- Hutchinson Technology
- Office/Mfg 94,176 $ 4,429,026 100.00%
-------- ----------- -------

SOUTH DAKOTA TOTALS 106,147 $ 5,403,765 100.00%
-------- ----------- -------
-------- ----------- -------

Other Commercial Prop.

Crookston Superpumper - Convenience
Store 6,000 $ 428,777 100.00%

Grand Forks Superpumper - Convenience
Store 7,000 $ 485,007 100.00%

Langdon Superpumper - Convenience
Store 5,500 $ 239,212 100.00%

Sidney Superpumper - Convenience
Store 4,000 $ 120,600 100.00%
-------- ----------- -------

OTHER COMMERCIAL PROP. 22,500 $ 1,273,596 100.00%
-------- ----------- -------
-------- ----------- -------

FISCAL 1999
SQ. FEET INVESTMENT OCCUPANCY

TOTAL COMMERCIAL PROPERTIES 976,092 $53,627,634 95.45%
-------- ----------- -------
-------- ----------- -------
</TABLE>

N/A = PROPERTY HELD LESS THAN 12 MONTHS

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

<TABLE>
<CAPTION>
APARTMENT PROPERTIES

APARTMENT FISCAL 1999
STATE COMMUNITIES BY IRET UNITS INVESTMENT OCCUPANCY
<S> <C> <C> <C> <C>
Colorado

- Colorado Springs
- Neighborhood by IRET 192 $11,070,317 96.51%

- Fort Collins
- MiraMont by IRET 210 $14,282,727 97.55%
- Pine Cone by IRET 195 $13,212,798 95.73%
--- ----------- --------

COLORADO TOTALS 597 $38,565,842 96.50%
--- ----------- --------
--- ----------- --------
Idaho

- Boise
- Clearwater 60 $ 3,821,829 N/A
--- ----------- --------

IDAHO TOTALS 60 $ 3,821,829 N/A
--- ----------- --------
--- ----------- --------

46 Page 49 of 183
<PAGE>

Minnesota

- Moorhead
- Terrace on the Green 116 $ 2,036,388 95.19%

- Rochester
- Woodridge 108 $ 6,527,800 99.77%
- Heritage Manor 182 $ 7,421,015 N/A

- St. Cloud
- West Stonehill 313 $11,469,854 97.85%

- Waite Park
- Park Meadows 360 $11,094,823 93.46%
--- ----------- --------

MINNESOTA TOTALS 897 $38,549,879 96.98%
--- ----------- --------
--- ----------- --------

Montana

- Billings
- Castle Rock 165 $ 5,653,623 N/A
- Country Meadows 67 $ 4,679,349 98.19%
- Rocky Meadows 98 $ 6,671,043 95.39%
--- ----------- --------

MONTANA TOTALS 330 $17,004,014 96.73%
--- ----------- --------
--- ----------- --------

North Dakota

- Bismarck/Mandan
- Cottonwood Lake 134 $ 9,763,096 96.28%
- Crestview 152 $ 4,795,533 92.02%
- Hill Park 92 $ 3,018,033 99.91%
- Kirkwood Manor 108 $ 3,574,298 94.82%
- North Pointe 49 49 $ 2,402,303 95.90%
- Pleasantview (Man) 18 $ 285,776 97.94%
- Westwood Park 67 $ 2,107,386 N/A

- Dickinson
- 41 East 38 $ 426,061 86.27%
- Century 120 $ 2,031,306 91.57%
- Oak Manor 27 $ 347,336 96.99%

- Fargo
- Candlelight 44 $ 984,477 98.08%
- Park East 122 $ 4,945,018 97.66%
- Sunchase 36 $ 1,017,923 95.58%

- Grand Forks
- Forest Park 270 $ 7,077,138 97.02%
- Jenner Properties 121 $ 2,495,137 91.24%
- Legacy 183 $ 7,032,452 99.41%
- Southwinds 164 $ 5,688,201 95.89%

- Minot
- Chateau 64 $ 2,397,004 92.77%
- Colton Heights 18 $ 922,033 88.56%
- Dakota Arms 18 $ 614,484 95.60%
- Magic City 248 $ 5,413,495 91.88%
- South Pointe 196 $10,281,416 95.25%
- Southview 24 $ 711,807 86.53%
- Virginia 15 $ 230,893 81.21%

47 Page 50 of 183
<PAGE>

- Williston
- Century 192 $ 3,895,985 82.90%

- Other Communities
- Beulah Condominiums 26 $ 466,038 55.54%
- Bison Properties -
Carrington
and Cooperstown 35 $ 568,555 89.92%
- Lonetree Manor - Harvey 12 $ 225,556 85.65%
- Parkway - Beulah 36 $ 120,753 99.60%
- Sweetwater Properties
- Devils Lake 114 $ 1,822,569 84.78%
----- ----------- --------

NORTH DAKOTA TOTALS 2,743 $85,572,061 93.23%
----- ----------- --------
----- ----------- --------

South Dakota

- Rapid City
- Pointe West 90 $ 3,931,009 89.54%

- Sioux Falls
- Oakwood Estates 160 $ 3,534,028 91.66%
- Oxbow 120 $ 4,986,518 98.94%
- Prairie Winds 48 $ 1,983,259 94.85%

SOUTH DAKOTA TOTALS 418 $14,434,814 94.19%
----- ----------- --------
----- ----------- --------

Washington

- Vancouver
- Van Mall Woods 100 $ 6,021,312 N/A
----- ----------- --------

WASHINGTON TOTALS 100 $ 6,021,312 N/A
----- ----------- --------
----- ----------- --------

FISCAL 1999
UNITS INVESTMENT OCCUPANCY

TOTAL APARTMENTS 5145 $203,969,751 94.75%
----- ------------ -------
----- ------------ -------
</TABLE>

N/A = PROPERTY HELD LESS THAN 12 MONTHS

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

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

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

CONTRACTS OR OPTIONS TO SELL. As of January 31, 1999, IRET had not entered
into any contracts or options to sell any of the above properties.

OCCUPANCY AND LEASES. Occupancy rates shown above are for the nine months
ended January 31, 1999. In the case of apartment properties, lease
arrangements with

48 Page 51 of 183
<PAGE>

individual tenants vary from month-to-month to one year leases, with the
normal term being six months. Leases on commercial properties vary from one
year to 20 years.

SHARES AVAILABLE FOR FUTURE SALE

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" at page 70.

The shares of Beneficial Interest issued in connection with this offering and
two prior registrations of 5,600,000 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" at page 70.

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 calendar weeks preceding the date on which notice of the sale is filed
with the Securities and Exchange Commission. Sales under Rule 144 also are
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about IRET. If three years have
elapsed since the date of acquisition of restricted shares from IRET or from
any affiliate of IRET and the holder thereof is deemed not to have been an
affiliate of IRET at any time during the three months preceding a sale, such
holder would be entitled to sell such shares in the public market under Rule
144(k) without regard to the volume limitations, manner of sale provisions,
public information requirements or notice requirements.

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

49 Page 52 of 183
<PAGE>

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" at page 21.

OPERATING PARTNERSHIP AGREEMENT

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

MANAGEMENT. The Operating Partnership has been organized as a North Dakota
limited partnership pursuant to the terms of the Agreement of Limited
Partnership of the Operating Partnership (the "Operating Partnership
Agreement"). Pursuant to the Operating Partnership Agreement, the General
Partner, as the sole general partner of the Partnership, has full, exclusive
and complete responsibility and discretion in the management and control of
the Operating Partnership, and the Limited Partners have no authority in
their capacity as Limited Partners to transact business for, or participate
in the management activities or decisions of, the Operating Partnership
except as required by applicable law. However, any amendment to the
Operating Partnership Agreement that would (i) adversely affect the Exchange
Rights (as defined herein), (ii) adversely affect the Limited Partners'
rights to receive cash distributions, (iii) alter the Operating Partnership's
allocations 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 (a "Transaction") unless in connection with the Transaction the
Limited Partners receive or have the right to receive cash or other property
equal to the product of

50 Page 53 of 183
<PAGE>

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.

51 Page 54 of 183
<PAGE>

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.

52 Page 55 of 183
<PAGE>

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 and
obligations of the Operating Partnership, including any partner loans, any
remaining assets of the Operating Partnership will be distributed to all
partners with positive capital accounts in accordance with their respective
positive capital account balances. If IRET has a negative balance in its
capital account following a liquidation of the Operating Partnership, it will
be obligated to contribute cash to the Operating Partnership equal to the
negative balance in its capital account.

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

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

53 Page 56 of 183
<PAGE>

to handle tax audits and to make tax elections under the Code on behalf of
the Operating Partnership.

TAX TREATMENT OF IRET AND ITS SECURITY HOLDERS

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.

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

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

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

54 Page 57 of 183
<PAGE>

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 modification or
interpretation of the Regulations. Provision for such amendment by the
trustees, without the vote or consent of the shareholders, is contained in
the Declaration of Trust.

NORTH DAKOTA INCOME TAX. In the opinion of counsel for 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

55 Page 58 of 183
<PAGE>

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

56 Page 59 of 183
<PAGE>

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.

57 Page 60 of 183
<PAGE>

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

58 Page 61 of 183
<PAGE>

"qualifying income" under Section 7704(d) of the Code, which generally
includes any income that is qualifying income for purposes of the 95% gross
income test applicable to REITs (the "90% Passive-Type Income Exception").
See "Federal Income Tax."

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

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

59 Page 62 of 183
<PAGE>

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 section
704(b) of the Code and the Treasury Regulations promulgated thereunder.

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

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

60 Page 63 of 183
<PAGE>

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

61 Page 64 of 183
<PAGE>

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" at page 41.

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.

ERISA CONSIDERATIONS

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

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

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

62 Page 65 of 183
<PAGE>

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 participants, and its beneficiaries, (ii) diversified in order to
minimize the risk of large losses, unless it is clearly prudent not to do so,
and (iii) authorized under the terms of the ERISA Plan's governing documents
(provided the documents are consistent with ERISA). In determining whether
an investment in the Shares is prudent for purposes of ERISA, the appropriate
fiduciary of a ERISA Plan should consider all of the facts and circumstances,
including whether the investment is reasonably designed, as a part of the
ERISA Plan's portfolio for which the fiduciary has investment responsibility,
to meet the objectives of the ERISA Plan, taking into consideration the risk
of loss and opportunity for gain (or other return) from the investment, the
diversification, cash flow, and funding requirements of the ERISA Plan's
portfolio. A fiduciary also should take into account the nature of IRET's
business, the management of IRET, the length of IRET's operating history, the
fact that certain investment properties may not have been identified yet, and
the possibility of the recognition of UBTI.

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

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

STATUS OF 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

63 Page 66 of 183
<PAGE>

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

64 Page 67 of 183
<PAGE>

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 4975 of the Code through their ownership of Shares will not cause
the assets of the Operating Partnership or the subsidiary Partnerships to be
treated as "plan assets" of such shareholders.

MARKET PRICE OF AND DIVIDENDS ON IRET'S
SHARES OF BENEFICIAL INTEREST

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:

<TABLE>
<CAPTION>
Fiscal Quarter Ended High Low Total Volume Total Trades
- -------------------- ---- --- ------------ ------------
<S> <C> <C> <C> <C>
10-31-97* $7.125 $6.563 35,154 45
1-31-98 7.313 6.625 339,857 204
4-30-98 7.344 7.031 437,487 196
7-31-98 7.250 7.000 359,835 118
10-31-98 7.500 7.000 489,586 232
1-31-99 7.688 7.000 343,128 249
</TABLE>

*FROM 10-20-97 - FIRST TRADING DAY

65 Page 68 of 183
<PAGE>

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 and at $7.85 from December. 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:

<TABLE>
<CAPTION>
Shares Dollars
------ -------
<S> <C> <C>
5-01-97 Beginning Balance 14,940,513 $65,073,951

Quarter Ended 7-31-97
- Shares sold 356,722 $ 2,920,162
- Commissions paid (163,102)
- Shares repurchased (20,393) (386,062)
15,276,842 $67,444,949
Quarter Ended 10-31-97
- Shares sold 630,937 $ 4,422,125
- Commissions paid (243,432)
- Shares repurchased (101,548) (807,573)
15,806,231 $70,816,070
Quarter Ended 1-31-98
- Shares sold 340,640 $ 2,415,531
- Commissions paid (99,850)
- Shares repurchased (108,903) (777,871)
16,037,969 $72,353,880
Quarter Ended 4-30-98
- Shares sold 505,062 $ 3,656,419
- Commissions paid (195,456)
- Shares repurchased (151,618) (1,106,285)
16,391,412 $74,708,559
Quarter Ended 7-31-98
- Shares sold 573,081 $ 4,075,505
- Commissions paid (148,902)
- Shares repurchased (197,124) (1,389,936)
16,767,369 $77,245,225
</TABLE>

As of January 31, 1999, IRET had 4,072 shareholder accounts, compared to
3,568 on the same date in 1998. No shareholder held 5% or more of the
16,391,412 Shares of Beneficial Interest outstanding on 4-30-98. 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 two fiscal years and the current fiscal year to date were as follows:

66 Page 69 of 183
<PAGE>

<TABLE>
<CAPTION>
Fiscal Year
---------------------------------
1997 1998 1999
---------------------------------
<S> <C> <C> <C>
July 1st $.0925 $.10125 $.11
October 1st .0950 .10300 .115
January 5th .0975 .10500 .12
April 1st .1000 .10700 .125
--------------------------------------------------------------
Total $.385 $.41625 $46.75
</TABLE>

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

<TABLE>
<CAPTION>
Dividend/
Date Share Price(1)
-------------------------------------------------------------------
<S> <C> <C>
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

67 Page 70 of 183
<PAGE>

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

68 Page 71 of 183
<PAGE>

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 $ .095 $6.44
1/5/97 $.0975 $6.44
4/1/97 $ .10 $6.62
7/1/97 $.10125 $6.62
10/1/97 $.103 $6.62
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
</TABLE>

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

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

DIVIDEND REINVESTMENT PLAN

IRET will separately register its shares of Beneficial Interest for sale to
its shareholders who elect to participate in its 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

69 Page 72 of 183
<PAGE>

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 IRET'S SECURITIES

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" at page 49.

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

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of 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 owned 8.23% of such shares on May 31, 1998.

70 Page 73 of 183
<PAGE>

<TABLE>
<CAPTION>
Name and Position Principal Occupations Trustee Shares Beneficially
With Trust During Past 5 Years Since Owned As Of 5-31-98
<S> <C> <C> <C>
C. Morris Anderson President of North Hill
Trustee, Age 69 Bowl, Inc.; Director of
Dakota Boys Ranch (25
years); Director of
International Inn, Inc.,
and Norwest Bank - Minot,
N.A. and a Partner in
Magic City Realty, Ltd. 1970 14,209(1)

Ralph A. Christensen Retired Rancher; Former
Trustee and Chairman Director of First Bank
Age 69 - Minot, N.A.; Chairman
of IRET 1970 42,314(2)

John F. Decker Investment Advisor and
Trustee, Age 56 Managing Director, Piper
Jaffray, Inc. 1998 7,210

Mike F. Dolan Investor;
Trustee and Vice Vice-Chairman of IRET 1978 225,559
Chairman, Age 87

J. Norman Ellison, Jr. Businessman; Managing
Trustee, Age 75 Partner of Ellison Realty
Co.; Former Director of
First Bank - Minot, N.A. 1970 18,636(3)

Daniel L. Feist Realtor, Broker, Real Estate
Trustee, Age 66 Developer, Builder, General
Contractor; President-Owner
of Feist Construction &
Realty, Inc.; Investor;
Businessman; Former Director
of First Bank System -
Minot, N.A.; Director N.D.
Holdings, Inc., Minot, ND 1985 501,110(4)

Patrick G. Jones Investor 1986 85,251(5)
Trustee, Age 50

Jeff L. Miller Investor; Businessman;
Trustee and Vice President of M & S
Chairman, Age 54 Concessions, Inc., and
former president of
Coca-Cola Bottling Co.
of Minot; Former Director
of First Bank - Minot 1985 146,095(6)

71 Page 74 of 183
<PAGE>

Roger R. Odell Realtor; President of IRET;
Trustee and Partner in Odell-Wentz &
President, Age 72 Associates (Advisor of IRET);
Director of Investors Manage-
ment & Marketing, Inc. and
Inland Securities, Inc. 1970 135,804(7)

Thomas A. Wentz, Jr. Attorney, Pringle & Herigstad,
Trustee, Age 33 P.C.; Sole General Partner
of WENCO, Ltd. 1996 170,841(8)
</TABLE>

(1) 10,807 shares are owned by Mr. Anderson and his wife as Joint Tenants.
3,402 shares are owned by Mr. Anderson's wife; he disclaims beneficial
ownership of these shares.

(2) Includes shares held in Mr. Christensen's IRA, and also his wife's IRA,
which is comprised of 641 shares; the balance is owned by Mr. Christensen and
his wife as Joint Tenants.

(3) Includes 4,985 shares held by Mr. Ellison's wife. Mr. Ellison disclaims
beneficial ownership of such shares.

(4) Includes 130,409 shares held in Mrs. Feist's name and in her IRA of which
Mr. Feist disclaims beneficial ownership. Also includes shares held in Mr.
Feist's IRA's.

(5) Includes 42,531 shares held by Mrs. Jones and in her IRA. Mr. Jones
disclaims beneficial ownership of such shares. Also includes shares held in
Mr. Jones' IRA.

(6) 48,281 of such shares are owned by Mr. Miller's wife. Mr. Miller
disclaims beneficial ownership of such shares. Also includes shares held in
Mr. Miller's IRA.

(7) Includes 23,133 shares owned by Investors Management & Marketing, Inc.
Also includes 67,897 shares owned by Mr. Odell's wife, as to which shares Mr.
Odell disclaims beneficial ownership.

(8) Includes 168,387 shares owned by WENCO, Ltd., of which Mr. Wentz, Jr., is
Sole General Partner. Also includes 957 shares owned by his minor daughter,
with Mr. Wentz as custodian.

As of May 31, 1998, all of the above trustees as a group owned or held voting
control of 1,347,029 shares of Beneficial Interest of IRET, representing
8.23% of the 16,359,568 shares then outstanding.

During the fiscal year ending April 30, 1998, there were twelve regular
meetings of the Board of Trustees. All of the Trustees attended 75% or more
of the meetings held during said fiscal year.

The Audit Committee consists of Ralph A. Christensen, Mike F. Dolan and Jeff
L. Miller, all of whom are independent trustees and are appointed by the
Board of Trustees.

72 Page 75 of 183
<PAGE>

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

The last shareholder meeting at which Trustees were elected was held on
August 18, 1998, at which meeting shareholders owning 60.8% of the shares of
IRET entitled to vote were present in person, or by proxy. The ten nominees
received 100% of the total shares voted at such meeting.

EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS

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 managements 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:

<TABLE>
<CAPTION>
Fiscal Years Ending April 30
----------------------------
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Advisor's and Trustees'
Compensation $304,898 $336,142 $458,019 $559,149 $ 745,907
Other Administrative
Expenses 46,557 79,974 162,588 158,627 271,738
-------- -------- -------- -------- ----------
TOTAL $351,455 $416,116 $620,607 $717,776 $1,017,645
</TABLE>

The Advisor also received fees from IRET for investigating and recommending
investments. See "Advisory Agreement." These fees are considered as part of
the cost of such investments and are capitalized and added to the cost of the
investment property and, thus, are not included in the above described
administrative expenses.

For the Fiscal Years 1994-1998, the amount of these acquisition fees were
$89,514, $49,836, $117,506, $177,834 and $141,468, respectively.

The following tabulation shows the cash compensation paid by IRET to its
trustees and officers during its fiscal year ending April 30, 1998. IRET has
no retirement, bonus, or deferred compensation plan and no other compensation
will accrue, directly or indirectly, to any of the Trustees except as noted
below.

<TABLE>
<CAPTION>
Cash Compensation
Capacity in for Year Ending
Name Which Served April 30, 1998
- ---- ------------ --------------
<S> <C> <C>
C. Morris Anderson Trustee $ 9,880.50
Ralph A. Christensen Trustee & Chairman 12,349.75
John D. Decker Trustee 9,980.50
Mike F. Dolan Trustee & Vice Chairman 11,166.25
J. Norman Ellison, Jr. Trustee 9,980.50
Daniel L. Feist Trustee 9,980.50

73 Page 76 of 183
<PAGE>

Jeff L. Miller Trustee & Vice Chairman 11,166.25
Patrick G. Jones Trustee 9,880.50
Thomas A. Wentz, Jr. Trustee (2)
Roger R. Odell Trustee & President (1)
Thomas A. Wentz, Sr. Vice President (1 & 2)
Timothy P. Mihalick Vice President
Diane K. Bryantt Secretary
</TABLE>

(1) Mr. Odell and Mr. Wentz, Sr., are members of Odell-Wentz & Associates,
L.L.C., the Advisor to IRET. Mr. Mihalick is Vice-President and Principal
Operating Officer of the Advisor. Diane Bryantt is Secretary to IRET and
Controller of the Advisor. 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 received compensation and reimbursement of
disbursements under said Agreement of $740,393. The terms of said Advisory
Agreement are explained below. Investors Management & Marketing, Inc., a
firm in which Mr. Odell is a minority shareholder also furnishes real estate
management services to IRET and receives as compensation four percent (4%) of
rents received from such real estate. For the fiscal year ending April 30,
1998, Investors Management & Marketing, Inc., received $530,678 as real
estate management commissions. In addition, Inland National Securities,
Inc., a corporation in which Mr. Odell and members of his family are
shareholders, acts as a broker-dealer for the sale of Trust securities.
During the fiscal year ending April 30, 1998, IRET paid Inland National
Securities, Inc. $171,755 as security sales fees.

(2) Mr. Wentz, Jr., is a member of the law firm of Pringle & Herigstad,
P.C., counsel for IRET. During the fiscal year ending April 30, 1998, IRET
paid Pringle & Herigstad, P.C., the sum of $62,293 for legal services
rendered and disbursements made on behalf of IRET. Until August 1, 1998, Mr.
Wentz, Sr., was also a member of the law firm of Pringle & Herigstad, P.C.,
counsel for IRET.

ADVISORY AGREEMENT

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

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

74 Page 77 of 183
<PAGE>

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

75 Page 78 of 183
<PAGE>

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. For the fiscal year ending April 30,
1998, Investors Management & Marketing, Inc., received $530,678 as real
estate management commissions. In addition, Inland National Securities,
Inc., a corporation in which Mr. Odell and members of his family are
shareholders, acts as the broker-dealer for the sale of Trust securities.
During the fiscal year ending April 30, 1998, IRET paid Inland National
Securities, Inc., $171,755 as security sales fees.

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

Mr. Wentz is Vice-President and a member of Odell-Wentz & Associates, L.L.C.,
the Advisor to 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

76 Page 79 of 183
<PAGE>

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.

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,
1998, IRET paid Pringle & Herigstad, P.C., the sum of $62,293 for legal
services rendered and disbursements made on behalf of IRET.

SELECTION, MANAGEMENT AND CUSTODY OF TRUST'S INVESTMENTS

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.

POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS

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.

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

77 Page 80 of 183
<PAGE>

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.

LIMITATIONS OF LIABILITY

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

The governing instrument of IRET provides as follows:

SECTION 12. INDEMNIFICATION.

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.

78 Page 81 of 183
<PAGE>

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.

LEGAL MATTERS

The validity of the Shares of Beneficial Interest offered under the
Prospectus, the federal and state tax aspects of the organization and
operation of IRET and the Operating Partnership and other legal matters will
be passed upon for IRET by Pringle & Herigstad, P.C., Minot, North Dakota.
Thomas A. Wentz, Jr., is a shareholder of said law firm (he also serves as a
Trustee of IRET). See "Conflicts of Interest" at page 22.

79 Page 82 of 183
<PAGE>

EXPERTS

The balance sheets of IRET as of April 30, 1997, and April 30, 1998, the
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended April 30, 1998, 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.

GLOSSARY OF TERMS

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

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

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

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

80 Page 83 of 183
<PAGE>

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

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

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

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

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

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

81 Page 84 of 183
<PAGE>

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 the ADVISOR and AFFILIATES
shall be deemed material per se if it exceeds 5% of the prospective
INDEPENDENT TRUSTEE'S:

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

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

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

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

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

IRET, PROPERTIES: The OPERATING PARTNERSHIP.

IRS: The United States Internal Revenue Service.

82 Page 85 of 183
<PAGE>

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.

83 Page 86 of 183
<PAGE>

ROLL-UP: A transaction involving the acquisition, merger, conversion, or
consolidation either directly or indirectly of the REIT and the issuance of
securities of a ROLL-UP ENTITY. Such term does not include:

a. a transaction involving securities of the REIT that have been for at
least 12 months listd on a national securities exchange or traded
through the National Association of Securities Dealers Automated
Quotation National Market System; or

b. a transaction involving the conversion to corporate, trust, or
association form of only the REIT if, as a consequence of the
transaction there will be no significant adverse change in any of the
following:

i. SHAREHOLDERS' voting rights;

ii. the term of existence of the REIT;

iii. SPONSOR or ADVISOR compensation;

iv. the REIT'S investment objectives.

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

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

84 Page 87 of 183
<PAGE>

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

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

a. The expenses of raising capital such as ORGANIZATION AND OFFERING
EXPENSES, legal, audit, accounting, underwriting, brokerage, listing,
registration and other fees, printing and 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).

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

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.
UNITS: The limited partnership units of the OPERATING PARTNERSHIP.

85 Page 88 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST

AND SUBSIDIARIES

MINOT, NORTH DAKOTA

CONSOLIDATED FINANCIAL STATEMENTS

AS OF

APRIL 30, 1998 AND 1997

AND

INDEPENDENT AUDITOR'S REPORT

F-1 Page 89 of 183
<PAGE>

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying consolidated balance sheets of Investors
Real Estate Trust and Subsidiaries as of April 30, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the years ended April 30, 1998, 1997 and 1996. These consolidated
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Investors Real Estate Trust and Subsidiaries as of April 30, 1998 and
1997, and the consolidated results of its operations and cash flows for the
years ended April 30, 1998, 1997 and 1996, in conformity with generally
accepted accounting principles.

Brady, Martz & Associates, P.C.

May 27, 1998

F-2 Page 90 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Balance Sheets
April 30,1998 and 1997

ASSETS
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
REAL ESTATE INVESTMENTS
Property owned $231,416,322 $191,884,509
Less accumulated depreciation (21,516,129) (16,948,156)
------------ ------------
$209,900,193 $174,936,353

Mortgage loans receivable 3,438,308 3,108,933
Less discounts and allowances (127,132) (154,118)
------------ ------------
Total real estate investments $213,211,369 $177,891,168
------------ ------------

OTHER ASSETS
Cash $ 2,132,220 $ 1,718,257
Marketable securities - held-to-maturity 3,536,538 4,055,459
Marketable securities - available-for-sale 720,688 683,466
Accounts receivable 55,326 332,814
Real estate deposits 2,493,713 100,000
Investment in partnership 6,705 78,469
Prepaid insurance 219,871 248,377
Tax and insurance escrow 1,254,068 1,250,469
Deferred charges 1,088,016 635,464
------------ ------------

TOTAL ASSETS $224,718,514 $186,993,943
------------ ------------
------------ ------------

F-3 Page 91 of 183
<PAGE>

LIABILITIES AND SHAREHOLDERS' EQUITY

1998 1997
---- ----
LIABILITIES
Accounts payable and accrued expenses $ 2,847,080 $ 3,073,071
Notes payable 1,000,000 0
Mortgages payable 134,059,974 115,734,946
Investment certificates issued 10,369,561 8,187,305
------------ ------------
Total liabilities $148,276,615 $126,995,322
------------ ------------

MINORITY INTEREST OF UNITHOLDERS IN
OPERATING PARTNERSHIP $ 8,289,273 $ 1,002
------------ ------------

SHAREHOLDERS' EQUITY

Shares of beneficial interest (unlimited
authorization, no par value, 16,391,412
shares outstanding in 1998 and
14,940,513 shares outstanding in 1997) $ 74,708,559 $ 65,073,951
Accumulated distributions in excess of
net income (6,666,555) (5,162,837)
Unrealized gain on securities
available-for-sale 110,622 86,505
------------ ------------
Total shareholders' equity $ 68,152,626 $ 59,997,619
------------ ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $224,718,514 $186,993,943
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4 Page 92 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Statements of Operations
for the Years Ended April 30, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUE
Real estate rentals $ 31,694,586 $ 22,972,368 $ 17,635,297
Interest, discounts and fees 712,959 861,613 1,024,368
---------------- ------------ --------------
Total revenue $ 32,407,545 $ 23,833,981 $ 18,659,665
---------------- ------------ --------------

EXPENSES
Interest $ 10,479,104 $ 7,638,776 $ 5,547,739
Depreciation 4,791,907 3,584,591 2,261,724
Utilities and maintenance 5,142,459 3,741,877 3,167,560
Taxes and insurance 3,536,147 2,720,495 2,065,017
Property management expenses 2,642,977 1,870,435 1,281,311
Advisory and trustee services 745,907 559,149 458,019
Operating expenses 271,738 158,627 162,588
Amortization 106,108 60,588 97,900
---------------- ------------ --------------
Total expenses $ 27,716,347 $ 20,334,538 $ 15,041,858
---------------- ------------ --------------

OPERATING INCOME $ 4,691,198 $ 3,499,443 $ 3,617,807

GAIN ON SALE OF PROPERTIES 465,499 398,424 994,163
MINORITY INTEREST PORTION OF
OPERATING PARTNERSHIP INCOME (141,788) (18) 0
---------------- ------------ --------------

NET INCOME $ 5,014,909 $ 3,897,849 $ 4,611,970
---------------- ------------ --------------
---------------- ------------ --------------

Net income per share:
Operating income $ 0.29 $ 0.25 $ 0.30
Gain on sale of properties 0.03 0.03 0.08
---------------- ------------ --------------
Net income $0.32 $ 0.28 $ 0.38
---------------- ------------ --------------
---------------- ------------ --------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5 Page 93 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
for the Years Ended April 30, 1998, 1997 and 1996

<TABLE>
<CAPTION>
Unrealized
Accumulated Gain on
Shares of Distributions Securities Total
Number of Beneficial in excess of Available- Shareholders'
Shares Interest Net Income for-Sale Equity
------ -------- ---------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE MAY 1, 1995 11,187,786 $ 41,560,587 $ (3,724,933) $ 0 $ 37,835,654
Net income 0 0 4,611,970 0 4,611,970
Dividends distributed 0 0 (4,439,034) 0 (4,439,034)
Dividends reinvested 502,599 3,100,988 0 0 3,100,988
Sale of shares 1,603,159 9,820,470 0 0 9,820,470
Shares repurchased (34,636) (218,128) 0 0 (218,128)
---------- ------------ ------------ --------- ------------

BALANCE APRIL 30, 1996 13,258,908 $ 54,263,917 $ (3,551,997) $ 0 $ 50,711,920

Net income 0 0 3,897,849 0 3,897,849
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)
Increase in unrealized gain
on securities available-
for-sale 0 0 0 86,505 86,505
---------- ------------ ------------ --------- ------------

BALANCE APRIL 30, 1997 14,940,513 $ 65,073,951 $ (5,162,837) $ 86,505 $ 59,997,619

Net income 0 0 5,014,909 0 5,014,909
Dividends distributed 0 0 (6,518,627) 0 (6,518,627)
Dividends reinvested 636,799 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)
Increase in unrealized gain
on securities available-
for-sale 0 0 0 24,117 24,117
---------- ------------ ------------ --------- ------------

BALANCE APRIL 30, 1998 16,391,412 $ 74,708,559 $ (6,666,555) $ 110,622 $ 68,152,626
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6 Page 94 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the Years Ended April 30, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,014,909 $ 3,897,849 $ 4,611,970
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 4,898,015 3,645,179 2,359,624
Minority interest portion of
operating partnership income 141,788 18 0
Accretion of discount on contracts (5,706) (7,698) (16,570)
Gain on sale of properties (465,499) (398,424) (994,163)
Interest reinvested in investment
certificates 349,791 288,517 161,813
Changes in other assets and liabilities:
Increase in real estate deposits (350,000) (100,000) 0
(Increase) decrease in other assets 377,758 (415,274) (15,645)
Increase in tax and insurance escrow (3,599) (98,942) (834,007)
Increase in deferred charges (558,660) (180,779) (257,991)
Increase (decrease) in accounts payable
and accrued expenses (225,991) (69,119) 1,219,771
------------ ------------ ------------
Net cash provided from operating
activities $ 9,172,806 $ 6,561,327 $ 6,234,802
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held-to-maturity $ 518,921 $ 356,398 $ 417,952
Principal payments on mortgage loans
receivable 565,359 1,706,202 2,642,346
Proceeds from sale of property 1,482,046 0 389,784
Payments for acquisition and improvement
of properties (22,894,602) (38,046,177) (32,462,846)
Purchase of marketable securities
available-for-sale 0 (596,961) 0
Investment in mortgage loans receivable (2,061,179) (2,835,212) (1,784,981)
------------ ------------ ------------
Net cash used for investing activities $(22,389,455) $(39,415,750) $(30,797,745)
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $ 8,421,858 $ 9,025,706 $ 9,820,470
Proceeds from investment certificates
issued 3,283,248 4,225,004 1,695,924
Proceeds from mortgages payable 10,612,652 27,094,270 29,025,001
Proceeds from short-term lines of credit 12,900,000 8,450,000 0
Proceeds from sale of minority interest 0 1,000 0
Repurchase of shares (3,077,791) (1,795,416) (218,128)
Dividends paid (2,228,086) (1,930,439) (1,338,046)
Distributions paid to minority interest
unit holders (179,185) (16) 0
Redemption of investment certificates (1,450,783) (2,128,686) (917,732)

F-7 Page 95 of 183
<PAGE>

Principal payments on mortgage loans (2,751,301) (2,634,017) (15,554,717)
Payments on short-term lines of credit (11,900,000) (8,450,000) 0
------------ ------------ ------------
Net cash provided from financing
activities $ 13,630,612 $ 31,857,406 $ 22,512,772
------------ ------------ ------------

NET INCREASE (DECREASE) IN CASH $ 413,963 $ (997,017) $ (2,050,171)

CASH AT BEGINNING OF YEAR 1,718,257 2,715,274 4,765,445
------------ ------------ ------------

CASH AT END OF YEAR $ 2,132,220 $ 1,718,257 $ 2,715,274
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-8 Page 96 of 183
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Dividends reinvested $ 4,290,541 $ 3,579,744 $ 3,100,988
Real estate investment and mortgage loans
receivable acquired through assumption
of mortgage loans payable and accrual
of costs 10,463,677 19,575,635 8,232,568
Mortgage loan receivable transferred to
property owned 1,161,878 2,810,000 0
Proceeds from sale of properties deposited
directly with escrow agent 2,870,387 455,329 426,352
Properties acquired through the issuance of
minority interest units in the operating
partnership 8,325,652 0 0
Interest reinvested directly in investment
certificates 349,791 288,517 161,813

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $ 9,613,154 $ 6,773,978 $ 4,661,065
Interest paid on investment
certificates 657,966 508,686 292,660
----------- ----------- -----------
$10,271,120 $ 7,282,664 $ 4,953,725
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9 Page 97 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Notes to Consolidated Financing Statements
April 30, 1998, 1997 and 1996

Note 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of operations - Investors Real Estate Trust qualifies under
Section 856 of the Internal Revenue Code as a real estate investment trust.
The Trust has properties located throughout the Upper Midwest, with principal
offices located in Minot, North Dakota. The Company invests in commercial and
residential real estate, real estate contracts, real estate related
governmental backed securities (GNMA), and equity securities in other real
estate investment trusts.

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

The general partner has full and exclusive management responsibility for
the real estate investment portfolio owned by the operating partnership. The
partnership 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 the same
dividends as a Trust shareholder.

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

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

F-10 Page 98 of 183
<PAGE>

Note 1 (CONTINUED)

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

ACCOUNTING POLICIES

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

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

DEPRECIATION is provided to amortize the cost of individual assets over
their estimated useful lives using principally the straight-line method.
Useful lives range from 12 years for furniture and fixtures to 20 - 40 years
for buildings and improvements.

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

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

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

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

F-11 Page 99 of 183
<PAGE>

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 accounted for its investment in
Chateau Properties, Ltd. under the equity method of accounting, wherein the
appropriate portion of the earnings or loss is recognized currently. The
Operating Partnership 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. The remaining balance at April
30, 1998 represents interests in several partnerships.

MINORITY INTEREST - 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 - The Trust adopted Statement of Financial
Accounting Standard No. 128, Earnings Per Share in 1998. Restating the prior
years net income per share to conform to the provisions of this statement
resulted in no changes to previous amounts reported as the number of
outstanding shares used to calculate basic net income per share are
substantially identical to those used in the prior years. Basic net income
per share is computed using the weighted average number of shares
outstanding. The aggregate weighted average shares outstanding used in
computing net income per share was 15,636,214 in 1998, 14,044,467 in 1997 and
12,137,123 in 1996. There is no potential for dilution of net income per
share as no dilutive shares have been authorized. For this reason, a separate
diluted net income per share has not been disclosed.

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

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

REVENUE RECOGNITION - Residential rental properties are leased under
operating leases with terms generally of one year or less. Commercial
properties are leased to tenants for various terms exceeding one year. Lease
terms often include renewal options. In addition, a number of the commercial
leases provide for a base rent plus a percentage rent based on gross sales in
excess of a stipulated amount. Rental income is

F-12 Page 100 of 183
<PAGE>

Note 1 - (CONTINUED)

recognized as it is earned, which is not materially different than on a
straight-line basis.

Profit on sales of real estate shall be recognized in full when real
estate is sold, provided:

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.

The earnings process is virtually complete, that is, the
seller is not obliged to perform significant activities
after the sale to earn the profit.

Based on the economic climate and the terms of many contracts, the
collectibility of the sales price was not reasonably assured as required by
generally accepted accounting principles. Consequently, the Trust uses the
installment method of accounting for profits on several property sales as it
more fairly reflects earned revenue.

Interest on mortgage loans receivable is recognized in income as it
accrues during the period the loan is outstanding. In the case of
non-performing loans, income is recognized as discussed in Note 4.

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

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

Note 2 - OFF-BALANCE-SHEET RISK

The Trust had deposits at Norwest Bank, North Dakota, N.A., and First
American Bank which exceeded Federal Deposit Insurance Corporation limits by
$349,802 and $449,907, respectively, at April 30, 1998.

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:

<TABLE>
<CAPTION>
April 30, 1998 April 30, 1997
-------------- --------------
<S> <C> <C>
Residential $ 180,986,906 $ 149,643,413
Less accumulated depreciation (15,449,736) (11,845,692)
-------------- --------------
$ 165,537,170 $ 137,797,721
-------------- --------------

Commercial $ 50,429,416 $ 42,241,096
Less accumulated depreciation (6,066,393) (5,102,464)
-------------- --------------
$ 44,363,023 $ 37,138,632
-------------- --------------

Remaining cost $ 209,900,193 $ 174,936,353
-------------- --------------
-------------- --------------
</TABLE>

F-10 Page 101 of 183
<PAGE>

Note 3 - (CONTINUED)

There were no repossessions during the years ended April 30, 1998 and 1997.

The above cost of residential real estate owned included construction in
progress of $753,680 and $2,482,849 as of April 30, 1998 and 1997,
respectively.

Construction period interest of $220,573, $269,513, and $690,665 has
been capitalized for the years ended April 30, 1998, 1997 and 1996,
respectively.

Residential apartment units are rented to individual tenants with lease
terms up to one year. Gross revenues from residential rentals totaled
$27,231,714, $18,935,111, and $12,286,492 for the years ended April 30, 1998,
1997 and 1996, respectively.

Gross revenues from commercial property rentals totaled $4,462,872,
$4,037,258, and $5,348,805 for the years ended April 30, 1998, 1997 and 1996,
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 $28,316,
$16,517, and $25,054 for the years ended April 30, 1998, 1997 and 1996,
respectively.

The future minimum lease payments to be received under these operating
leases for the commercial properties as of April 30, 1998, are as follows:

<TABLE>
<S> <C>
Year ending April 30,
1999 $ 6,667,483
2000 6,658,627
2001 6,570,453
2002 5,724,100
2003 5,662,960
Thereafter 54,585,504
--------------
$ 85,869,127
--------------
--------------
</TABLE>

Note 4 - MORTGAGE LOANS RECEIVABLE

Mortgage loans receivable consists of fourteen contracts which are
collateralized by real estate. Contract terms call for monthly payments of
principal 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.

F-14 Page 102 of 183
<PAGE>

Note 4 - (CONTINUED)

Future principal payments due under the mortgage loan contracts as of
April 30, 1998 are as follows:

<TABLE>
<S> <C>
Year ending April 30,
1999 $ 2,088,754
2000 88,858
2001 85,035
2002 92,040
2003 203,390
Later years 880,231
--------------
$ 3,438,308
--------------
--------------
</TABLE>

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

Non-performing mortgage loans receivable were $0 at April 30, 1998 and
$174,911 at April 30, 1997. These loans are recognized as impaired in
conformity with FASB Statement No. 114, Accounting by Creditors for
Impairment of a Loan. The total allowance for credit losses related to those
loans was approximately $0 and $30,000, respectively. The average balance of
impaired loans for the year ended April 30, 1998 was approximately $50,000.
For impairment recognized in conformity with FASB Statement No. 114, the
entire change in present value of expected cash flows is reported as bad debt
expense in the same manner in which impairment initially was recognized or as
a reduction in the amount of bad debt expense that otherwise would be
reported. Additional interest income that have been earned on these loans if
they had not been non-performing amounted to approximately $6,000 in 1998 and
$33,000 in 1997. There was no interest income on non-performing loans
recognized on a cash basis for 1998 or 1997.

Note 5 - MARKETABLE SECURITIES

The amortized cost and estimated market values of marketable securities
held-to-maturity at April 30, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 Gross Gross
---- Amortized Unrealized Unrealized Fair
Issuer Cost Gains Losses Value
------ ---- ----- ------ -----
<S> <C> <C> <C> <C>
GNMA $3,536,538 $ 22,757 $ - $3,559,295
---------- -------- -------- ----------
---------- -------- -------- ----------
1997
----
GNMA $4,055,459 $ - $166,031 $3,889,428
---------- -------- -------- ----------
---------- -------- -------- ----------
</TABLE>

F-15 Page 103 of 183
<PAGE>

Note 5 - (CONTINUED)

The amortized cost and estimated market values of marketable securities
available-for-sale at April 30, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 Gross
---- Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Equity Shares in
other REIT's $610,066 $110,622 $ - $720,688
-------- -------- ---------- --------
-------- -------- ---------- --------

1997
----
Equity Shares in
other REIT's $596,961 $ 90,015 $ 3,510 $683,466
-------- -------- ---------- --------
-------- -------- ---------- --------
</TABLE>

There were no realized gains or losses on sales of securities for the
years ended April 30, 1998, 1997 and 1996.

Marketable securities held-to-maturity consist of Governmental National
Mortgage Association (GNMA) securities bearing interest from 6.5% to 9.5%
with maturity dates ranging from May 15, 2016 to June 15, 2023. The following
is a summary of the maturities of securities held-to-maturity at April 30,
1998 and 1997:

<TABLE>
<CAPTION>
1998 1997
---- ----
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due after 10 years $3,536,538 $3,559,295 $4,055,459 $3,889,428
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

Note 6 - NOTES PAYABLE

As of April 30, 1998, the Trust had lines of credit available from two
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 December 1, 1998. 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
12, 1998. Interest payments are due monthly on both notes. 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. As of April 30, 1997, the Trust had no unpaid
balances on either line of credit.

F-16 Page 104 of 183
<PAGE>

Note 7 - MORTGAGES PAYABLE

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.

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

Monthly installments are due on the mortgages with interest rates
ranging from 6.80% to 9.75% and with varying maturity dates through November
30, 2034.

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

<TABLE>
<S> <C>
Years ending April 30,
1999 $ 3,319,048
2000 6,533,758
2001 3,671,496
2002 3,954,021
2003 4,221,911
Later years 112,359,740
------------
Total payments $134,059,974
------------
------------
</TABLE>

Note 8 - INVESTMENT CERTIFICATES ISSUED

The Trust has placed investment certificates with the public. The interest
rates vary from 6.5% 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.

<TABLE>
<S> <C>
Due in years ending April 30,
1999 $ 6,444,209
2000 2,322,910
2001 690,822
2002 305,273
2003 567,747
Thereafter 38,600
--------------
$ 10,369,561
--------------
--------------
</TABLE>

F-17 Page 105 of 183
<PAGE>

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 $16,713,
$146,361, and $476,913 for the years ended April 30, 1998, 1997 and 1996,
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, 1998,
Odell-Wentz & Associates received total fees under said agreement of
$740,393. The fees for April 30, 1997 were $667,367, and for April 30, 1996
were $484,086.

For the years ended April 30, 1998, 1997 and 1996, the Trust has
capitalized $141,468, $177,834, and $115,993, respectively, of these fees,
with the remainder of $598,925, $489,533, and $368,093, 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
$530,678, $408,904, and $281,717 for services rendered for years ended April
30, 1998, 1997 and 1996, 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
$171,755 for the year ended April 30, 1998, $291,143 for the year ended April
30, 1997, and $269,656 for the year ended April 30, 1996.

The Trust paid fees and expense reimbursements to the law firm in which
Thomas A. Wentz, Sr. is a partner totaling $62,293, $36,045, and $23,488 for
the years ended April 30, 1998, 1997 and 1996, respectively.

Investment certificates issued by the Trust to officers and trustees
totaled $1,219,457 and $519,528, at April 30, 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. Mr. Odell and Mr. Anderson owned all of Magic City
Realty. Mr. Anderson is also a trustee of the Trust.

F-18 Page 106 of 183
<PAGE>

Note 11 - MARKET PRICE RANGE OF SHARES

Since October 17, 1997, Investors Real Estate Trust traded shares on the
NASDAQ Small Capital Market. During the period October 17, 1997 through April
30, 1998, a total of 812,498 shares were traded in 445 separate trades. The
high trade price during the period was 7.406, low was 6.563, and the closing
price on April 30, 1998 was 7.1888.

Prior to October 17, 1998, Investors Real Estate Trust shares were
traded on the Over-the-Counter Market. The price range is as follows:

Note 12 - SUBSEQUENT EVENT

The owners of the six limited partnerships, that are consolidated in the
financial statements (as described in Note 1), exchanged properties for limited
partnership units in the operating partnership, effective May 1, 1998. The
following summarizes the units exchanged and the dollar amount attributed to
each partnership's property:

<TABLE>
<CAPTION>
Number of
Limited Partnership Dollar Amount
Units Issued of Units Issued
------------------- ---------------
<S> <C> <C>
Eastgate Properties, Ltd. 12,450 $ 92,753
Bison Properties, Ltd. 11,400 84,930
First Avenue Building, Ltd. 4,200 31,290
Sweetwater Properties, Ltd. 10,500 78,225
Hill Park Properties, Ltd. 19,200 143,040
Colton Heights, Ltd. 6,750 50,288
</TABLE>

Note 13 - 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.

F-19 Page 107 of 183
<PAGE>

Note 13 - (CONTINUED)

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

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

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

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

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

<TABLE>
<CAPTION>
1998 1997
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial Assets
Mortgage loan receivable $ 3,438,308 $ 3,438,308 $ 3,108,933 $ 3,108,938
Cash 2,132,220 2,132,220 1,718,257 1,718,257
Marketable securities
held-to-maturity 3,536,538 3,559,295 4,055,459 3,889,428
Marketable securities
available-for-sale 720,688 720,688 683,466 683,466

Financial Liabilities
Notes payable $ 1,000,000 $ 1,000,000 $ 0 $ 0
Mortgages payable 135,059,974 129,354,699 115,734,946 113,007,861
Investment certificates
issued 10,369,561 10,202,603 8,187,305 8,136,971
Accrued interest payable 1,220,177 1,220,177 1,012,193 1,012,193
</TABLE>

F-20 Page 108 of 183
<PAGE>

ADDITIONAL INFORMATION

F-21 Page 109 of 183
<PAGE>

INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION

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

Our report on our audit of the basic consolidated financial statements of
Investors Real Estate Trust and Subsidiaries for the years ended April 30,
1998, 1997 and 1996, 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 20 through 35 related to the 1998, 1997
and 1996 consolidated financial statements is presented for purposes of
additional anaylsis and is not a required part of the basic consolidated
financial statements. Such information, except for information on page 35
that is marked "unaudited" on which we express no opinion, has been subjected
to the auditing procedures applied in the audits of the basic consolidated
financial statements, and, in our opinion, the information is fairly stated
in all material respects in relation to the basic consolidated financial
statements for the years ended April 30, 1998, 1997 and 1996, taken as a
whole.

We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets of Investors Real Estate
Trust and Subsidiaries as of April 30, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for each of the two years ended April 30, 1995 and 1994, none of which is
presented herein, and we expressed unqualified opinions on those consolidated
financial statements. In our opinion, the information on page 30 relating to
the 1995 and 1994 consolidated financial statements is fairly stated in all
material respects in relation to the basic consolidated financial statements
from which it has been derived.

BRADY, MARTZ & ASSOCIATES, P.C.

May 27, 1998

F-22 Page 110 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998 and 1997

Schedule I
MARKETABLE SECURITIES

<TABLE>
<CAPTION>
April 30, 1998 April 30, 1997
-------------- --------------
Principal Principal
Amount Market Amount Market
------ ------ ------ ------
<S> <C> <C> <C> <C>
GNMA Pools $ 3,536,538 $ 3,559,295 $ 4,055,459 $ 3,889,428
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------

Cost Market Cost Market
---- ------ ---- ------
Equity shares in
other REIT's $ 610,066 $ 720,688 $ 596,961 $ 683,466
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------
</TABLE>

F-23 Page 111 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
For the Years Ended April 30, 1998, 1997 and 1996

Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION

<TABLE>
<CAPTION>
Charged to Costs and Expenses
-----------------------------
1998 1997 1996
---- ---- ----
Item
- ----
<S> <C> <C> <C>
Maintenance and repairs $ 2,832,772 $ 1,812,496 $ 1,702,365
Taxes, other than payroll and
income taxes
Property taxes 3,162,656 2,515,631 1,873,720
Royalties * * *
Advertising costs * * *
</TABLE>

* Less than 1 percent of total revenues

F-24 Page 112 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS

SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION

<TABLE>
<CAPTION>
COST CAPITALIZATION
INITIAL COST TO TRUST SUBSEQUENT TO ACQUISITION
--------------------- --------------------------
BUILDINGS & CARRYING
APARTMENTS ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
- ---------- ------------ ---- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
1112 32ND AVE SW MINOT $ 376,788 $ 50,000 $ 543,147 $ 8,691 -
177 10TH AVE E DICKINSON 226,229 40,000 318,109 27,669 -
405 GRANT AVE HARVEY ND - 13,584 157,211 52,551 -
4301-4313 9TH AVE SW ND 463,021 52,870 908,727 49,404 -
BEULAH CONDOS ND - 6,360 336,589 122,830 -
BISON PROPERTIES ND 71,327 100,210 1,348,127 179,024 -
CANDLELIGHT APTS, FARGO, ND 498,299 80,040 757,977 22,767 -
CENTURY APTS DICKINSON 1,522,794 100,000 1,564,598 212,192 -
CENTURY APTS WILLISTON ND 2,577,896 200,000 3,166,750 407,084 -
CHATEAU APTS, MINOT, ND 1,670,895 122,000 2,242,090 654 -
COUNTRY MEADOWS, BILLINGS, MT 2,647,777 491,247 3,701,540 184,284 120,821
COLUMBIA PARK, GRAND FORKS, ND - 725,277 - - -
COLTON HEIGHTS PROPERTIES 338,464 80,000 734,286 50,514 -
COTTONWOOD LAKE, BISMARCK - 1,055,862 5,077,785 0 114,353
CRESTVIEW APTS, BISMARCK 2,609,063 235,000 4,290,031 235,518 -
EASTGATE PROPERTIES - 23,917 1,490,181 264,530 -
FAIRFIELD APTS, MARSHALL MN 96,292 35,000 275,000 111,052 -
FOREST PARK ESTS, G FORKS 3,990,430 810,000 5,579,164 564,335 -
HILL PARK PROPERTIES, ND 1,403,790 224,750 2,562,296 63,376 -
JENNER PROPERTIES ND 1,357,209 220,000 2,077,500 125,696 -
KIRKWOOD APTS, BISMARCK ND 2,270,000 449,290 2,729,745 80,916 -
LEGACY APTS GRAND FORKS 3,927,506 700,000 5,843,203 46,922 177,986
LEGACY PHASE II, GRAND FORKS, ND - 661,855 3,015,222 - 46,194
MAGIC CITY APTS, MINOT, ND 2,728,417 532,000 4,738,000 77,982 -
MANDAN APTS, MANDAN ND 16,566 20,000 236,750 19,758 -
MIRAMONT APT, FT COLLINS CO 11,525,814 1,470,000 12,765,460 35,501 -
NEIGHBORHOOD APT, CO SPRINGS 7,400,220 1,033,592 9,811,600 134,270 -
NORTH POINTE, BISMARCK 1,695,893 143,500 2,120,413 13,628 123,687
OAK MANOR APTS, DICKINSON 232,111 25,000 225,000 50,812 -
OAKWOOD ESTATES, S FALLS, SD 2,148,247 342,800 2,783,950 355,918 -
OXBOW, SIOUX FALLS 3,403,778 404,072 4,494,441 67,504 -
PARK EAST APTS, FARGO ND 3,500,000 83,000 4,082,665 752,546 -
PARK MEADOWS, WAITE PARK, MN 7,894,811 1,143,450 9,099,297 466,750 -
PARK PLACE, WASECA, MN - 40,000 634,737 174,640 -
PARKWAY APTS, BEULAH, ND - 7,000 40,738 70,364 -
PINE CONE APTS, FT COLLINS 10,534,209 904,545 12,167,093 98,812 -
POINTE WEST APTS, MINOT 2,170,254 240,000 3,537,775 82,951 -
PRAIRIE WINDS APTS, S FALLS 1,336,552 144,097 1,816,011 13,726 -
ROCKY MEADOWS 96, BILLINGS 2,876,562 655,985 5,588,113 293,640 103,378
ROSEWOOD/OAKWOOD, SIOUX FALLS 1,276,702 200,000 1,738,245 2,190 -
SCOTTSBLUFF, NE - - - - -
SOUTH POINTE, MINOT 6,484,298 550,000 9,150,975 154,007 402,872
SOUTHVIEW APTS, MINOT - 185,000 468,585 37,308 -
SOUTHWIND APTS, GRAND FORKS 4,090,096 400,000 5,033,683 161,977 -
SWEETWATER PROPERTIES, ND 194,812 90,767 1,208,847 363,241 -
VIRGINIA APARTMENTS, MINOT - 37,600 163,036 23,460 -
WEST STONEHILL, ST CLOUD, MN 7,912,344 939,000 10,167,355 250,110 -
WOODRIDGE APTS, ROCHESTER, MN 4,282,154 370,000 6,028,096 82,155 -
------------ ------------ ------------ ------------ ------------
$107,751,620 $ 16,438,670 $151,742,358 $ 11,381,483 $ 1,089,291
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>

F-25 Page 113 of 183
<PAGE>

<TABLE>
<CAPTION>
LIFE ON WHICH
BUILDINGS LATEST INCOME
AND ACCUMULATE DATE STATEMENT
APARTMENTS LAND IMPROVEMENTS TOTAL DEPRECIATI ACQUIRED IS COMPUTED
- ---------- ---- ------------ ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
1112 32ND AVE SW, Minot $ 50,000 $ 551,838 $ 601,838 $ 34,521 1996 24-40 years
177 10TH AVE E, DICKINSON 40,278 345,501 385,778 69,977 1989 24-40 years
405 GRANT AVE, HARVEY ND 14,674 208,672 223,346 31,467 1991 24-40 years
4301-4313 9TH AVE SW, FARGO 68,868 942,133 1,011,001 227,730 1988 5-40 years
BEULAH CONDOS, ND 78,339 387,441 465,780 313,947 1983 15-40 years
BISON PROPERTIES, ND 100,210 1,527,151 1,627,361 1,124,807 1972 25-40 years
CANDLELIGHT APTS, FARGO ND 80,040 780,744 860,800 106,039 1993 24-40 years
CENTURY APTS DICKINSON 126,738 1,750,052 1,876,790 548,710 1986 35-40 years
CENTURY APTS, WILLISTON ND 274,971 3,498,864 3,773,834 1,158,993 1986 35-40 years
CHATEAU APTS, MINOT ND 122,000 2,242,744 2,364,744 2,368 1997 12-40 years
COLTON HEIGHTS PROPERTIES 80,095 784,705 864,800 341,639 1984 33-40 years
COLUMBIA PARK PHASE II,
GRAND FORKS 725,277 0 725,277 - 1996 40 years
COUNTRY MEADOWS, BILLINGS,MT 491,247 4,006,646 4,497,893 35,249 1996 40 years
COTTONWOOD LAKE, BISMARCK 1,055,862 5,192,134 6,247,996 12,850 1997 40 years
CRESTVIEW APTS, BISMARCK 235,000 4,525,549 4,760,549 492,494 1994 24-40 years
EASTGATE PROPERTIES 28,639 1,749,989 1,778,628 1,317,117 1970 33-40 years
FAIRFIELD APTS, MARSHALL, MN 35,360 385,692 421,052 77,315 1988 24-40 years
FOREST PARK ESTS, G FORKS 811,954 6,141,545 6,953,499 800,318 1993 24-40 years
HILL PARK PROPERTIES, ND 245,653 2,604,769 2,850,422 1,129,069 1985 33-40 years
JENNER PROP. - UPREIT 1,357,209 1,065,987 2,423,196 38,925 1996 40 years
KIRKWOOD APTS, BISMARCK,ND 449,290 2,810,661 3,259,951 50,263 1997 12-40 years
LEGACY APTS, GRAND FORKS 700,000 6,068,111 6,768,111 236,404 1996 24-40 years
LEGACY PHASE II, GRAND FORKS 661,855 3,061,416 3,723,271 17,767 1997 12-40 years
MAGIC CITY APTS, MINOT ND 532,000 4,815,982 5,347,982 57,746 1997 12-40 years
MANDAN APTS, MANDAN, ND 20,000 256,508 276,508 51,204 1989 24-40 years
MIRAMONT APTS, FT COLLINS,
CO 1,470,000 12,800,961 14,270,961 479,779 1996 40 years
NEIGHBORHOOD APT, CO
SPRINGS 1,033,592 9,945,870 10,979,462 375,371 1996 40 years
NORTH POINTE 49, BISMARCK 143,500 2,257,728 2,401,228 139,188 1995 24-40 years
OAK MANOR APTS, DICKINSON 29,012 271,800 300,812 54,642 1989 24-40 years
OAKWOOD ESTATES, S FALLS SD 342,800 3,139,868 3,482,668 410,452 1993 24-40 years
OXBOW, SIOUX FALLS SD 404,073 4,561,944 4,966,017 397,138 1994 24-40 years
PARK EAST APTS, FARGO ND 83,000 4,835,211 4,918,211 38,327 1997 12-40 years
PARK MEADOWS,WAITE PARK MN 1,143,450 9,566,047 10,709,497 362,425 1997 40 years
PARK PLACE, WASECA MN 40,000 809,377 849,377 297,433 1988 5-40 years
PARKWAY APTS, BEULAH ND 11,816 106,286 118,102 13,845 1988 5-40 years
PINE CONE APTS, FT COLLINS 904,545 12,265,905 13,170,450 915,217 1994 40 years
POINTE WEST APTS, MINOT 240,000 3,620,726 3,860,726 401,904 1994 24-40 years
PRAIRIE WINDS APTS, S FALLS 144,097 1,829,737 1,973,834 250,359 1993 24-40 years
ROCKY MEADOWS 96, BILLINGS 655,985 5,985,131 6,641,116 222,118 1996 40 years
ROSEWOOD/OAKWOOD, S FALLS 200,000 1,740,435 1,940,435 65,223 1996 40 years
SOUTH POINTE, MINOT ND 275,000 9,982,854 10,257,854 473,332 1995 24-40 years
SOUTHVIEW APTS, MINOT 185,000 505,893 690,893 45,301 1994 24-40 years
SOUTHWIND APTS, GRAND FORKS 409,892 5,185,768 5,595,660 321,280 1996 24-40 years
SWEETWATER PROPERTIES 94,270 1,568,585 1,662,855 969,529 1972 5-40 years
VIRGINIA APARTMENTS, MINOT 37,600 186,496 224,096 63,017 1987 27 1/2-40 years
WEST STONEHILL, ST CLOUD MN 939,000 10,417,465 11,356,465 646,889 1995 40 years
WOODRIDGE APTS, ROCHESTER 370,000 6,110,251 6,480,251 230,048 1996 40 years
------------ ------------ ------------ ------------
$ 17,542,191 $163,399,172 $180,941,363 $ 15,449,736
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

F-26 Page 114 of 183
<PAGE>

<TABLE>
<CAPTION>
COST CAPITALIZATION
INITIAL COST TO TRUST SUBSEQUENT TO ACQUISITION
------------------------- --------------------------
BUILDING & CARRYING
OFFICE BUILDINGS ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
- ---------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
1ST AVENUE BUILDING $ - $ 30,000 $ 219,496 $ 552,126 $ -
401 SOUTH MAIN, MINOT - 70,600 334,308 188,767 -
408 1ST STREET SE, MINOT - 10,000 34,836 2,071 -
CREEKSIDE OFF BLD, BILLINGS 876,346 311,310 1,088,149 257,377 -
LESTER CHIROPRACTIC CLINIC - 25,000 243,916 1 -
WALTERS 214 S MAIN, MINOT 773 27,055 76,076 8,784 -
------------ ----------- ------------ ----------- ----------
$ 877,119 $ 473,965 $ 1,996,781 $ 1,009,126 $ -
------------ ----------- ------------ ----------- ----------

COMMERCIAL
- ----------
ARROWHEAD SHOPPING CENTER $ - $ 100,359 $ 1,063,925 $ 1,528,268 $ -
BARNES & NOBLE, FARGO 2,135,006 540,000 2,752,012 0 -
BARNES & NOBLE OMAHA, NE 2,312,924 600,000 3,099,101 - 0
CARMICKE THEATRE, GRAND FORKS 1,989,425 183,515 2,292,653 2,501 67,068
COMPUTER CITY, KENTWOOD MI 1,497,191 225,000 1,888,574 - 0
EDGWOOD VISTA, EAST GRAND FORKS 630,608 25,000 874,821 - -
EDGEWOOD VISTA, MINOT ND 3,617,668 260,000 1,835,335 4,180,596 -
EDGEWOOD VISTA, MISSOULA MT 629,178 108,900 853,528 0 -
HUTCHINSON TECH, S FALLS SD 2,221,843 244,800 4,029,426 154,800 -
LINDBERG BLDG, EDEN PRAIRIE 1,195,951 198,000 1,154,404 103,385 -
MINOT PLAZA, MINOT ND - 50,000 452,898 5,898 -
PET FOOD WAREHOUSE, FARGO 770,318 324,148 900,325 27,216 27,245
PIONEER SEED MOORHEAD, MN 303,622 56,925 548,075 48,876 -
RETAIL WAREHOUSE BOISE ID 3,518,783 765,000 4,874,576 6,909 -
STONE CONTAINER FARGO 3,024,316 440,251 4,409,079 59,999 89,156
SUPERPUMPER CROOKSTON MN - 13,125 214,153 201,499 -
SUPERPUMPER EMERADO ND - 25,000 225,564 46,500 -
SUPERPUMPER GRAND FORKS, ND - 80,000 405,007 - -
SUPERPUMPER, LANGDON ND - 59,674 151,500 28,038 -
SUPERPUMPER, SIDNEY MT - 12,000 108,600 - -
WEDGEWOOD, SWEETWATER GA 1,536,479 334,346 3,637,534 - -
------------ ----------- ------------ ----------- ----------
25,383,312 4,646,043 35,771,090 6,394,485 183,469
------------ ----------- ------------ ----------- ----------
$134,012,051 $21,558,678 $194,588,014 $13,996,870 $1,272,760
------------ ----------- ------------ ----------- ----------
------------ ----------- ------------ ----------- ----------
</TABLE>

F-27 Page 115 of 183
<PAGE>

<TABLE>
<CAPTION>
LIFE ON WHICH
BUILDINGS LATEST INCOME
AND ACCUMULATED DATE STATEMENT
OFFICE BUILDINGS LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
- ---------------- ---- ------------ ----- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
1ST AVENUE BUILDING, Minot $ 67,710 $ 733,912 $ 801,622 $ 318,171 1981 33-40 years
401 SOUTH MAIN MINOT 70,722 522,953 593,675 125,147 1987 24-40 years
408 1ST STREET SE MINOT 10,016 36,892 46,907 22,030 1986 19-40 years
CREEKSIDE OFF BLD, BILLINGS 311,310 1,345,526 1,656,836 196,251 1992 40 years
LESTER CHIROPRACTIC CLINIC 25,000 243,917 268,917 58,108 1988 40 years
WALTERS 214 SO MAIN, MINOT 27,829 84,086 111,915 76,233 1978 20-40 years
----------- ------------ ------------ -----------
$ 512,587 $ 2,967,285 $ 3,479,872 $ 795,940
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------

COMMERCIAL
- ----------
ARROWHEAD SHOPPING CENTER $ 100,411 $ 2,592,141 $ 2,692,552 $ 2,118,570 1973 15 1/2-40 yrs
BARNES & NOBLE, FARGO 540,000 2,752,012 3,292,012 240,801 1994 40 years
BARNES & NOBLE, OMAHA NE 600,000 3,099,101 3,699,101 193,694 1995 40 years
CARMICKE THEATRE,GRAND FORKS 183,516 2,362,221 2,545,737 206,632 1994 40 years
COMPUTER CITY, KENTWOOD MI 225,000 1,888,574 2,113,574 70,822 1996 40 years
EDGWOOD VISTA, EAST GRAND
FORKS, MN 630,608 269,213 899,821 17,305 1997 40 years
EDGWOOD VISTA, MINOT, ND 260,000 6,015,931 6,275,931 77,509 1997 40 years
EDGEWOOD VISTA MISSOULA MT 108,900 853,528 962,428 32,007 1997 40 years
HUTCHINSON TECH, S FALLS SD 244,800 4,184,226 4,429,026 567,618 1993 40 years
LINDBERG BLDG, EDEN PRAIRIE 198,000 1,257,789 1,455,789 195,003 1992 40 years
MINOT PLAZA, MINOT ND 50,000 458,796 508,796 62,494 1993 40 years
PET FOOD WAREHOUSE FARGO 324,148 954,786 1,278,934 82,809 1994 40 years
PIONEER SEED, MOORHEAD MN 56,925 596,951 653,876 92,183 1992 40 years
RETAIL WAREHOUSE, BOISE ID 765,000 4,881,485 5,646,485 548,445 1994 40 years
STONE CONTAINER, FARGO 440,251 4,558,235 4,998,485 282,275 1995 40 years
SUPERPUMPER, CROOKSTON MN 13,125 415,652 428,777 79,856 1988 40 years
SUPERPUMPER, EMERADO ND 25,000 272,064 297,064 147,396 1986 19-40 years
SUPERPUMPER GRAND FORKS ND 80,000 405,007 485,007 75,939 1991 40 years
SUPERPUMPER, LANGDON ND 59,674 179,538 239,212 56,553 1987 31 1/2-40 yrs
SUPERPUMPER, SIDNEY MT 12,000 108,600 120,600 14,933 1993 40 years
WEDGEWOOD, SWEETWATER GA 334,346 3,637,533 3,971,878 108,571 1996 40 years
----------- ------------ ------------ -----------
$ 5,251,704 $ 41,743,382 $ 46,995,087 $ 5,270,453
----------- ------------ ------------ -----------
$23,258,039 $207,868,722 $231,126,761 $21,516,129
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
</TABLE>

F-28 Page 116 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES

Schedule XI (Continued)

Reconciliations of total real estate carrying value for the three years ended
April 30, 1998, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- ------------
<S> <C> <C> <C>
Balance at beginning of year $ 191,884,509 $ 131,447,734 $ 90,892,662
Additions during year
- acquisitions 39,014,223 59,377,674 40,660,975
- improvements 1,788,339 1,463,878 635,791
------------- -------------- ------------
$ 232,687,071 $ 192,289,286 $132,189,428
Deductions during year
- cost of real estate sold (1,270,749) (404,777) (741,694)
------------- -------------- ------------
Balance at close of year $ 231,416,322 $ 191,884,509 $131,447,734
------------- -------------- ------------
------------- -------------- ------------
</TABLE>

Reconciliations of accumulated depreciation for the three years ended April 30,
1998, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at beginning of year $ 16,948,156 $ 13,551,571 $ 11,732,655
Additions during year
- provisions for depreciation 4,791,907 3,584,591 2,261,724
Deduction during year
- accumulated depreciation
on real estate sold (223,934) (188,006) (442,808)
--------------- --------------- ---------------
Balance at close of year $ 21,516,129 $ 16,948,156 $ 13,551,571
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

F-29 Page 117 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998

Schedule XII
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE

<TABLE>
<CAPTION>
Final Face Carrying of Loans
Interest Maturity Payment Prior Amounts of Amounts of Delinquent
Rate Date Terms Liens Mortgages Mortgages or Interest
---- ---- ----- ----- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Residential
Higley Heights, Phoenix, AZ 8% 3-31-04 Quarterly - $ 809,786 $ 678,700 $ 678,700
Great Plains Software, Fargo,
ND 9.50% 1-1-99 Balloon Pmt - 15,000,000 1,701,308 -
Melanie Bentsinger 8% 6-1-25 Monthly - 217,761 210,298 -
Rolland Hausman 9% 2-1-16 Monthly - 315,659 302,147 -
Other - over $100,000 7-9% 5-1-03 to
2-1-16 Monthly - 517,325 425,751 -
- from $20,000-49,999 8-9% 9-1-98 to
1-1-00 Monthly - 1,610,983 78,474 -
- less than $20,000 7-9% 2-1-99 to
1-1-02 Monthly - 1,481,559 41,630 -
----------- ---------- ----------
Total $19,953,073 $3,438,308 $ 678,700
----------- ---------- ----------
----------- ---------- ----------
Less - Unearned discounts (4,818)
- Deferred gain from property dispositions (2,000)
- Allowance for loan losses (120,314)
--------
$3,311,176
</TABLE>

F-30 Page 118 of 183
<PAGE>

Schedule XII (Continued)

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
MORTGAGE LOANS RECEIVABLE,
BEGINNING OF YEAR $ 3,108,933 $ 4,932,138

New participations in and advances
on mortgage loans 2,061,179 2,835,212
----------------- ---------------
$ 5,170,112 $ 7,767,350
Collections (1,727,237) (4,516,202)
Write-off through allowance (4,567) (142,215)
----------------- ---------------
MORTGAGE LOANS RECEIVABLE,
END OF YEAR $ 3,438,308 $ 3,108,933
----------------- ---------------
----------------- ---------------
</TABLE>

F-31 Page 119 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Selected Financial Data

<TABLE>
<CAPTION>
Year Ended April 30
-------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data
Revenue $ 32,407,545 $ 23,833,981 $ 18,659,665 $ 13,801,123 $ 11,583,008
Operating income 4,691,198 3,499,443 3,617,807 3,560,318 3,135,426
Gain on repossession/sale of
properties 465,499 398,424 994,163 407,512 64,962
Minority interest of portion of
operating partnership income (141,788) (18) - - -
Net income 5,014,909 3,897,849 4,611,970 3,967,830 3,200,388

Consolidated Balance Sheet Data
Total real estate investments $213,211,369 $177,891,168 $122,377,909 $ 84,005,635 $ 63,972,042
Total assets 224,718,514 186,993,943 131,355,638 94,616,744 72,391,548
Shareholders' equity 68,152,626 59,997,619 50,711,920 37,835,654 29,997,189

Consolidated Per Share Data
Operating income $ .29 $ .25 $ .30 $ .34 $ .35
Gain on sale of properties .03 .03 .08 .04 .01
Dividends .42 .39 .37 .34 .33
Tax status of dividend
Capital gain 2.9% 21.0% 1.6% 11.0% 7.4%
Ordinary income 97.1% 79.0% 98.4% 89.0% 92.6%
Return of capital 0.0% 0.0% 0.0% 0.0% 0.0%

</TABLE>

F-32 Page 120 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
April 30, 1998, 1997 and 1996

GAIN FROM PROPERTY DISPOSITIONS

Total
Original Unrealized Realized Realized Realized
Property Gain 4/30/98 4/30/98 4/30/97 4/30/96
-------- --------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Brooklyn Addition * $ 25,000 $ 2,000 $ 1,000 $ 1,000 $ 1,000
1411 South 20th * 34,696 - - - 1,177
1302 South 19 1/2 * 87,669 - 15,713 6,732 6,215
600 Maple * 60,025 - - - 41,253
406 17th Street - Mandan * 233,522 - - 138,629 5,143
Chateau * 684,914 - - - 422,125
108 4th Avenue SE - Minot 173,244 - - - 173,244
Mobridge, SD 293,035 - - - 293,035
Lantern Court 50,971 - - - 50,971
Scottsbluff Estates 326,138 - 326,138
Superpumper - Bottineau 83,579 - 83,579
Superpumper - New Town 25,417 - 25,417
Other gains 13,652 - 13,652
Hutchinson, MN 252,063 - - 252,063 -
--------- --------- --------- ---------
$ 2,000 $ 465,499 $ 398,424 $ 994,163
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

The gain from the sale of these properties is being realized based on the
Installment method. The amount of deferred gain realized was $16,713,
$146,361, and $476,913 for the years ended April 30, 1998, 1997 and
1996, respectively.

F-33 Page 121 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998

MORTGAGE LOANS PAYABLE

<TABLE>
<CAPTION>
Final Periodic Carrying Delinquent
Interest Maturity Payment Face Amount Amount of Principal or
Rate Date Terms of Mortgage Mortgage Interest
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1112 32nd Ave SW Minot 8.50% 7/20/10 Monthly $ 425,000 $ 376,788 $0
177 10th Ave E, Dickinson ND 8.50% 11/1/18 Monthly 250,963 226,229 0
214 South Main 9.00% 5/1/98 Monthly 45,000 773 0
4301 9th Ave Sunchase I 9.04% 9/1/02 Monthly 364,765 153,085 0
4313 9th Ave Sunchase II 9.04% 2/1/14 Monthly 370,000 309,936 0
Barnes & Noble Stores 7.98% 11/1/10 Monthly 4,900,000 4,447,930 0
Candelight Apts 8.50% 12/1/99 Monthly 578,000 498,299 0
Carmike -Grand Forks 7.75% 6/5/14 Monthly 1,750,000 1,989,425 0
Century Apts - Dickinson 8.00625% 3/1/06 Monthly 1,595,000 1,522,794 0
Century Apts - Williston 8.00625% 3/1/06 Monthly 2,700,000 2,577,896 0
Chateau - Minot 8.00625% 3/1/06 Monthly 1,674,350 1,670,895 0
Country Meadows - Billings 7.51000% 1/1/08 Monthly 2,660,000 2,647,777 0
Creekside - Billings 8.35% 5/1/13 Monthly 1,023,750 876,346 0
Crestview Apts. - Bismarck 8.69% 1/1/04 Monthly 3,150,000 2,609,063 0
Computer City 7.75% 2/1/01 Monthly 1,565,361 1,497,191 0
Edgewood Vista - East Grand Forks 8.35% 7/5/12 Monthly 650,000 630,608 0
Edgewood Vista - Minot 8.27% 9/20/12 Monthly 3,710,000 3,617,668 0
Edgewood Vista - Missoula 9.75% 4/15/12 Monthly 647,500 629,178 0
Fairfield - Marshall 9.00% 1/1/98 Monthly 275,000 96,292 0
Forest Park Estates IDS 7.625% 5/1/03 Monthly 4,500,000 3,990,430 0
Hutchinson Technology 8.75% 8/1/08 Monthly 2,800,000 2,221,843 0
Jenner Properties, ND 9.50% 11/1/99 Monthly 1,391,585 1,357,209 0
Kirkwood Manor - Bismarck 7.07% 10/01/98 Bond -semiannual 2,330,000 2,270,000 0
Legacy Apts - Grand Forks 7.070% 1/1/04 Monthly 4,000,000 3,927,506 0
Lindberg Bldg, Eden Prairie 7.63% 12/1/08 Monthly 950,000 1,195,951 0
Magic City Apts, Minot 8.50% 10/10/10 Monthly 2,794,192 2,728,417 0
Mandan Apts - 312 12th 8.75% 8/1/99 Monthly 134,767 16,566 0
Miramont Apts, 8.25% 8/1/36 Monthly 11,582,472 11,525,814 0
Neighborhood Apts - Roch 7.98% 12/20/06 Monthly 7,525,000 7,400,220 0
North Pointe - Bismarck 7.12% 8/1/15 Monthly 1,400,000 1,695,893 0
Oak Manor Apts 27 Plex-
Dickinson 8.75% 2/1/99 Monthly 250,000 232,111 0
Oakwood Estates Sioux Falls 8.00625% 3/1/06 Monthly 2,250,000 2,148,247 0
Oxbow Sioux Falls 8.00625% 3/1/06 Monthly 3,565,000 3,403,778 0
Park East, Fargo 6.82000% 4/6/08 Monthly 3,500,000 3,500,000 0
Park Meadows Phase I 8.50% 01/10/07 Monthly 2,600,000 2,529,016 0
Park Meadows Phase II 7.8990% 01/10/07 Monthly 2,214,851 2,170,795 0
Park Meadows Phase III 3.84% 30 yr bond Monthly 3,235,000 3,195,000 0
Pet Food Warehouse 8.50% 12/1/10 Monthly 840,000 770,318 0
Pinecone, Ft Collins 7.125% 12/1/34 Monthly 10,685,215 10,534,209 0
Pioneer Building - Fargo 8.375% 12/1/06 Monthly 425,000 303,622 0
Pointe West Apts 8.97% 1/1/04 Monthly 2,625,000 2,170,254 0
Prairie Winds Apts - Sioux
Falls 7.67% 5/1/18 Monthly 1,470,000 1,336,552 0
Retail Warehouse, Boise ID 9.75% 3/29/03 Monthly 3,750,000 3,518,783 0
Rocky Meadows- Billings 7.75% 8/1/16 Monthly 3,000,000 2,876,562 0
RoseWood Ct - Sioux Falls 7.975% 9/1/96 Monthly 1,323,000 1,276,702 0
South Pointe, Minot ND 7.12% 6/5/16 Monthly 6,500,000 6,484,298 0
Southwind Apts 7.12% 4/28/10 Monthly 3,780,000 4,090,096 0
Stone Container 8.25% 12/1/10 Monthly 3,300,000 3,024,316 0
Wedgewood Retirement 7.975% 4/23/17 Monthly 1,566,720 1,536,479 0
West Stonehill 7.93% 2/1/98 Monthly 8,232,569 7,912,344 0
Woodridge- Rochester 7.85% 12/1/16 Monthly 4,410,000 4,282,154 0
Colton Heights 8.75% 6/1/07 Monthly 730,000 338,464 0

F-34 Page 122 of 183
<PAGE>

Grafton 24 Plex 9.75% 3/20/03 Monthly 270,000 82,412 0
Grafton 18 Plex 9.75% 3/20/03 Monthly 198,000 112,399 0
Hill Park Properties 8.00625% 3/1/06 Monthly 1,470,000 1,403,790 0
Jamestown 610 10.00% 6/1/99 Monthly 250,000 30,856 0
Jamestown 611 10.00% 1/1/00 Monthly 230,000 40,471 0
Melton/Olson/Thompson 8.50% 12/1/98 Monthly 400,000 22,196 0
1516 N Bismarck 8.00% 8/1/99 Monthly 246,000 25,728 0
------------ ------------ ------
TOTALS $141,059,060 $134,059,974 0
------------ ------------ ------
------------ ------------ ------
</TABLE>

F-35 Page 123 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998

SIGNIFICANT PROPERTY ACQUISITIONS

Acquisition for cash and assumptions of mortgages

<TABLE>
<S> <C>
Commercial:
Edgewood Vista, East Grand Forks, MN $ 892,500
Edgewood Vista, Minot, ND 4,900,000
Edgewood Vista Alzheimers, Minot, ND 491,410
Edgewood Vista Phase II, Minot, ND 800,000
--------------
$ 7,083,910
--------------
Apartments:
Jenner Properties, ND $ 2,350,000
Kirkwood Manor, Bismarck, ND 3,175,000
Magic City Apartments, Minot, ND 5,270,000
Country Meadows, Billings, MT*** 4,496,134
Park East Apartments, Fargo, ND 4,900,000
Legacy Phase II, Grand Forks, ND* 3,489,937
Cottonwood Phase I, Bismarck, ND*** 4,522,347
Chateau Apartments, Minot, ND 2,364,090
Cottonwood Phase II, Bismarck, ND** 1,362,805
--------------
$ 31,930,313
--------------
TOTAL $ 39,014,223
--------------
--------------
</TABLE>

* Property is placed in service at April 30, 1998. Additional costs are
still to be incurred.

** Property not placed in service at April 30, 1998. Additional costs are
still to be incurred.

*** Represents costs to complete a project started in year ending April 30,
1997.

F-36 Page 124 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Quarterly Results of Consolidated Operations (Unaudited)

<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------
7-31-97 10-31-97 1-31-98 4-30-98
------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 7,183,761 $ 7,996,262 $ 8,440,393 $ 8,787,129
Income before gains on sale
of properties 894,045 1,233,451 1,358,752 1,204,950
Net gain on sale of properties 39,069 83,579 326,138 16,713
Minority interest of unit
holders in operating partnership (9) (9,423) (64,006) (68,350)
Net income 933,105 1,307,607 1,620,884 1,153,313

Per share
Income before gains on sale
of properties .06 .08 .08 .07
Net gain on sale of properties - .01 .02 -

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

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

<CAPTION>
Quarter Ended
---------------------------------------------------------------------
7-31-95 10-31-95 1-31-96 4-30-96
------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 3,782,061 $ 4,715,186 $ 5,104,409 $ 5,058,009
Income before gains on sale
of properties 1,009,468 1,058,136 1,082,506 467,697
Net gain on sale of properties - - 522,001 472,162
Net income 1,009,468 1,058,136 1,604,507 939,859

Per share
Income before gains on sale
of properties .09 .09 .09 .04
Net gain on sale of properties - - .04 .04

</TABLE>

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

F-37 Page 125 of 183
<PAGE>

INVESTORS REAL ESTATE TRUST

UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIOD

ENDED JANUARY 31, 1999

The following financial statements have been prepared from the records
of Investors Real Estate Trust and its six affiliated limited
partnerships and have not been audited or reviewed by the Trust's
independent certified public accountants. Accordingly, these
statements are subject to adjustments upon audit, which audit will be
conducted for the Fiscal Year ending April 30, 1999. Reference is made
to the footnotes to the Statements prepared by the Trust's auditors
for the Fiscal Year ended April 30, 1998, contained in the Annual
Report for Fiscal 1998. In the opinion of the Trust, there have been
no developments requiring footnote disclosure for the periods covered
by the Financial Statements set forth below that are not adequately
disclosed in the footnotes to the April 30, 1998, statements.

The accompanying condensed consolidated financial statements of
Investors Real Estate Trust, and its subsidiaries (collectively, the
"Company"), included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments
necessary (of a normal recurring nature only) to present fairly the
financial position of the Company as of January 31, 1999 and results
of operations and cash flows for the stated periods have been
included. The Condensed Consolidated Balance Sheet at April 30, 1998,
contained herein, was derived from audited financial statements, but
does not include all disclosures included in the 1998 Annual Report
and applicable under generally accepted accounting principles. Certain
information and footnote disclosures normally included in interim
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The results of operations for
the three and nine months ended January 31, 1999, are not necessarily
indicative of operating results for the entire year.

BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>

ASSETS: 01-31-99 04-30-98
-------- --------
<S> <C> <C>
Cash $ 6,585,779 $ 2,132,220
Marketable Securities
- GNMA's 3,169,508 3,536,538
- Other REIT's 722,461 720,688
Accounts Receivable 30,452 55,326
Tax & Insurance Escrow 2,573,915 1,254,068
Deferred Charges 1,315,927 1,088,016
Prepaid Insurance 348,819 219,871
Real Estate Deposits 694,963 2,493,713
General Partnerships 0 6,705
------------------------------------------------------------------------------------------
$ 15,441,824 $ 11,507,145
------------------------------------------------------------------------------------------

F-38 Page 126 of 183
<PAGE>

Real Estate Investments
Real Estate Owned $ 272,827,784 $ 231,416,322
Less Accumulated Depreciation (24,639,537) (21,516,129)
---------------------------------------------------------------------------------
Net Real Estate Owned 248,188,248 209,900,193
---------------------------------------------------------------------------------
Real Estate Mortgages 1,474,587 3,438,308
Less Unearned Discounts & Allowances (124,879) (127,132)
---------------------------------------------------------------------------------
Net Mortgages & Contracts 1,349,708 3,311,176
---------------------------------------------------------------------------------
Total Real Estate Investments $ 249,537,955 $ 213,211,369
------------------------------------------------------------------------------------------
TOTAL ASSETS $ 264,979,779 $ 224,718,514
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------

<CAPTION>
LIABILITIES: 01-31-99 04-30-98
-------- --------
<S> <C> <C>
Accounts Payable & Other Liabilities $ 4,254,406 $ 2,847,080
Mortgages Payable 155,942,643 134,059,974
Investment Certificates Payable 12,358,251 10,369,561
Due on Credit Line 0 1,000,000
------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 172,555,300 $ 148,276,615
------------------------------------------------------------------------------------------

MINORITY INTERESTS IN OPERATING
PARTNERSHIP: $ 12,619,372 $ 8,289,273
------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
<CAPTION>
Shares of Beneficial Interest
Outstanding Shares of: 01-31-99 04-30-98
-------- --------
<S> <C> <C>
18,134,700 on 01/31/99
16,391,412 on 04/30/98 $ 86,426,032 $ 74,708,559

Accumulated Distributions in Excess
of Net Income (6,552,068) (6,666,555)
Unrealized Gain(Loss) on Securities Held for Sale (68,857) $ 110,622
---------------------------------------------------------------------------------------
Total Shareholders' Equity $ 79,805,107 $ 68,152,626
---------------------------------------------------------------------------------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 264,979,779 $ 224,718,514
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</TABLE>

(The balance of this page is left blank intentionally.)

F-39 Page 127 of 183
<PAGE>

STATEMENT OF OPERATIONS
For the Three- and Nine-Month Periods Ended January 31, 1999 & 1998
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
January 31, 1999 January 31, 1999
---------------- -----------------
OPERATING INCOME: 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Real Estate Rentals $ 9,930,345 $ 8,286,064 $ 28,359,059 $ 23,121,047
Interest Income 305,785 136,893 754,133 447,214
Mortgage Discount & Fees 667 17,435 62,253 52,156
- ---------------------------------------------------------------------------------------------------------------------------
$ 10,236,797 $ 8,440,634 $ 29,175,445 $ 23,620,417
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Interest $ 3,095,853 $ 2,681,092 $ 8,847,570 $ 7,653,429
Utilities & Maintenance 1,528,599 1,307,348 4,494,113 3,668,313
Property Management 828,598 667,387 2,382,422 1,962,352
Taxes & Insurance 1,154,956 917,211 3,271,700 2,586,960
Advisory & Trustees Fees 170,980 172,552 613,245 485,929
Operating Expenses 166,722 52,755 296,492 167,925
- ---------------------------------------------------------------------------------------------------------------------------
$ 6,945,708 $ 5,798,345 $ 19,905,542 $ 16,524,908
- ---------------------------------------------------------------------------------------------------------------------------

OPERATING INCOME:
(before reserves) $ 3,291,089 $ 2,642,289 $ 9,269,903 $ 7,095,509
- ---------------------------------------------------------------------------------------------------------------------------
DEPRECIATION/AMORTIZATION (1,558,161) (1,283,345) (4,449,057) (3,609,434)
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (after reserves) $ 1,732,928 $ 1,358,944 $ 4,820,846 $ 3,486,075
GAIN ON SALE OF INVESTMENTS 80,121 326,138 1,788,038 448,786
MINORITY INTEREST PORTION OF
OPERATING PARTNERSHIP NET INCOME (158,821) (48,438) (580,263) (61,585)
NET INCOME $ 1,654,228 $ 1,636,644 $ 6,028,621 $ 3,873,276
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE:
Operating Income
(after depreciation) .09 .08 .25 .22
Gain on Sale of Investments .00 .02 .10 .03
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Income/Share .09 .10 .35 .25
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PAID PER SHARE .12 .105 .345 .30925
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Average Number of Shares Outstanding 17,772,327 15,878,436 17,263,056 15,552,844

FUNDS FROM OPERATIONS: *
Operating Income $ 1,732,928 $ 1,358,944 $ 4,820,846 $ 3,486,075
Plus Depreciation and Amortization 1,558,161 1,283,345 4,449,057
3,609,434
Minus Minority Interest - Operating
Partnership (158,821) (48,438) (580,263) (61,585)

FUNDS FROM OPERATIONS * $ 3,132,268 $ 2,593,851 $ 8,689,640 $ 7,033,924
per share .18 .16 .50 .45
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Funds from Operations is defined as income before gains (losses) on
sales of investments, minority interests of unitholders in operating
partnership and extraordinary items, plus depreciation and
amortization.

F-40 Page 128 of 183
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED JANUARY 31, 1999 AND 1998

(unaudited)

<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
---- ----
<S> <C> <C>
Net Income $ 6,028,621 $ 3,873,276
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,336,034 3,364,663
Minority interest portion of operating
partnership income 580,263 61,585
Accretion of discount on contracts (2,253) (4,280)
Gain on Sale of Properties (1,788,038) (448,786)
Interest reinvested in investment certificates 291,804 244,124
Changes in other assets and liabilities:
(Increase) decrease in real estate deposits 1,494,087 (73,000)
(Increase) decrease in other assets (104,074) (178,038)
(Increase) decrease in tax and insurance escrow (1,319,847) (342,948)
(Increase) decrease in deferred charges (227,911) (109,348)
Increase (decrease) in accounts payable and
accrued expenses 1,686,559 689,215
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 10,975,245 $ 7,076,463
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from maturity of marketable
securities held to maturity $ 367,030 $ 360,758
Principle payments on mortgage loans
receivable 321,484 1,696,188
Proceeds from sale of property 3,045,454 1,345,058
Payments for acquisition and improvements
of properties (36,099,964) (34,552,590)
Purchase of marketable securities available
for sale (181,250) 0
Investment in mortgage loans receivable (46,500) (294,669)
- --------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES $(32,593,746) $(31,445,255)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from sale of shares $ 10,866,530 $ 9,236,005
Proceeds from investment certificates issued 3,064,421 2,430,709
Proceeds from mortgages payable 18,670,909 18,444,138
Proceeds from short-term lines of credit 8,250,000 8,650,000
Proceeds from sale of minority interest 4,245,197 585,334
Repurchase of shares (3,053,729) (1,971,506)
Dividends Paid (2,730,164) (1,738,751)

F-41 Page 129 of 183
<PAGE>

Redemption of investment certificates (1,403,881) (940,883)
Principal payments on mortgage loans (2,587,223) (2,032,557)
Payments on short-term lines of credit (9,250,000) (8,150,000)
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES $ 26,072,060 $ 24,512,489
- --------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH $ 4,453,559 $ 143,697

CASH AT APRIL 30 $ 2,132,220 $ 1,718,257

- --------------------------------------------------------------------------------------------------------
CASH AT JANUARY 31 $ 6,585,779 $ 1,861,954
- --------------------------------------------------------------------------------------------------------

SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Dividends reinvested $ 3,925,118 $ 3,149,841
Real estate investment and mortgage loans
receivable acquired through assumption
of mortgage loans payable and accrual
of costs 5,366,292 10,609,107
Mortgage loan receivable transferred to
property owned 1,701,308 1,161,878
Proceeds from sale of properties deposited
directly with escrow agent 2,569,292 0
Properties acquired through the issuance of minority
Interest units in the operating partnership 1,055,525 5,455,265
Mortgages paid directly by owner of contract 0 0
Interest reinvested directly in investment
certificates 291,804 244,124

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION

Cash paid during the year for:
Interest paid on mortgages $ 7,952,416 $ 6,739,919
Interest paid on margin account and other 41,452 39,045
Interest paid on investment certificates 285,562 224,529
- --------------------------------------------------------------------------------------------------------
$ 8,279,430 $ 7,003,493
- --------------------------------------------------------------------------------------------------------
</TABLE>

(The balance of this page is left blank intentionally.)

F-42 Page 130 of 183
<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemization of the anticipated cost to the Trust in
connection with the issuance and distribution of the securities to be
registered.

Commission $487,500
Legal: $15,000
Advertising, Printing & Promotion Expenses: 15,000 to 136,500
Accounting: 1,000
Registration Fees: 10,000
--------
$41,000 to 650,000

ITEM 31. SALES TO SPECIAL PARTIES

There is no person or class of persons to whom any securities have been sold
within the past six months, or are to be sold, by the registrant or any security
holder for whose account any of the securities being registered are to be
offered, at a price varying from that at which securities of the same class are
to be offered to the general public pursuant to this registration, except as
follows:

The Trust has a policy allowing its Trustees and employees of its Advisor -
Odell-Wentz & Associates, L.L.C. - and their spouses to purchase its shares of
beneficial interest at a price equal to the net price then received by IRET for
its shares, after payment of the brokerage commission, when sold to the public.
During the three-year period ended July 31, 1998, 485,072 shares were purchased
by eligible individuals. No commissions or other discounts were paid or given
in connection with such sales. The Trust claims exemption from the registration
of said shares under Section 4(2) of the Securities Act of 1933.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES

Until July 9, 1996, the shares of Beneficial Interest of IRET were sold in the
over-the-counter market only within the State of North Dakota by Inland National
Securities, Inc., 21 South Main, Minot, ND 58701, and Financial Advantage
Brokerage Services, Inc., 17 South Main, Minot, ND 58701. Set forth below, by
quarter-year, are the total number of IRET shares sold and repurchased and the
high and low reported sales prices for the period beginning July 1, 1995:

<TABLE>
<CAPTION>
Shares Repurchased New Shares Sold
Calendar No. of From Shareholders by IRET
Year Months Shares Sold Low High Low High
---- ------ ----------- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
1995 July -September 452,665 5.89 6.03 6.40 6.55
1995 October-December 466,447 5.89 6.16 6.40 6.70
1996 January-March 516,179 5.89 6.30 6.40 6.85
1996 April-July 9 394,234 6.30 6.30 6.85 6.85
</TABLE>

II-1 Page 131 of 183
<PAGE>

During said period, IRET shares were sold on the primary market only for cash to
bona-fide residents of the State of North Dakota by Inland National Securities,
Inc., and Financial Advantage Brokerage Services, Inc., which were securities
dealers registered with the State of North Dakota. IRET claims exemption from
the registration of its shares of Beneficial Interest under the Securities Act
of 1933 under Section 3(a)(11) of said Act. All of said securities were offered
and sold only to persons resident within the State of North Dakota.

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The governing provisions of the Trust provide nonliability of and
indemnification to the Board of Trustees and officers except for willful
misfeasance, bad faith, gross negligence, or any liability imposed by the
Securities Act of 1933. The Trust currently provides no insurance coverage for
the errors or omissions of Board members, officers or the Advisor.

The Advisor currently maintains no insurance coverage for its errors or
omissions as Advisor to the Trust.

ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED

No portion of the consideration to be received by the registrant for such shares
is to be credited to an account other than the appropriate capital share
account.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS

a) List of all financial statements filed as part of this
registration statement

<TABLE>
<CAPTION>
Financial Statement Filed Included in Prospectus
------------------------- ----------------------
<S> <C>
Financial Statement by Investors Real See F-1 through F-37
Estate Trust for the period ended
April 30, 1998, prepared by Brady
Martz & Associates, P.C., Certified
Public Accountants

Interim Financial Statement by
Investors Real Estate Trust for the
three-month period ended July 31,
1998 (unaudited) See F-38 through F-42
</TABLE>

b) Exhibit Index

<TABLE>
<CAPTION>
Description of Exhibit Location in Form S-11 Filing
---------------------- ----------------------------
<S> <C>
(1) Security Sales Agreement Ex-1(i), Pages 138 - 139

(2) Plan of acquisition, Not Applicable
reorganization, arrangement,
liquidation or succession

II-2 Page 132 of 183
<PAGE>

(3) (i) Second Restated Ex-3(i), Pages 140 - 175
Declaration of Trust
Dated February 10, 1999

(ii) IRET Properties IRET Properties Partnership
Partnership Agreement Agreement dated January 31,
1997, filed as Ex-3(ii) to Form
S-11 filed by the Registrant on
November 28, 1997, (File No.
0-14851) and Incorporated
herein by reference

(4) Instruments defining the See #3
rights of security holders,
including indentures

(5) Opinion re legality Ex-5, Pages 176 - 177

(6) Opinion re discount on Not Applicable
capital shares

(7) Opinion re liquidation Not Applicable
preference

(8) Opinion re tax matters Ex-8, Page 178

(9) Voting trust agreement Not Applicable

(10) Material Contracts Advisory Agreement with
the Registrant and
Odell-Wentz &
Associates, filed as
Exhibit 10 to said Form
S-11 and incorporated
herein by reference
(File No. 0-14851)

(11) Statement re computation Not Applicable
of per share earnings

(12) Statement re computation Not Applicable
of ratios

(15) Letter re unaudited Not Applicable
interim financial information

(16) Letter re change in Not Applicable
certifying accountant

(21) Subsidiaries of the List of affiliated
Registrant partnerships filed as
Item 7 of Form S-11 filed
for the Registrant
(File No. 0-14851) and

II-3 Page 133 of 183
<PAGE>

incorporated herein by
reference

(23) Consent of experts and counsel
(i) Pringle & Herigstad, P.C. Ex-23(i), Page 179
(ii) Brady Martz & Associates, Ex-23(ii), Page 180
P.C.

(24) Power of Attorney Not Applicable

(25) Statement of eligibility Not Applicable
of trustee

(27) Financial Data Schedule Ex-27, Page 181

(99) Additional Exhibits (i) Ex-99, Page 182

(ii) Marketing Agreement dated
October 1, 1997, between
IRET and Roger Domres filed
as Exhibit 99 to Form S-11
for the Registrant on November
28, 1997 (File No. 0-14851)
and incorporated herein by
reference
</TABLE>
UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(2) That for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-4 Page 134 of 183
<PAGE>

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) of (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certified that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this registration to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minot, State of North Dakota.

INVESTORS REAL ESTATE TRUST

May 7, 1999

BY /s/ Roger R. Odell
------------------------------
Roger R. Odell
Its President

II-5 Page 135 of 183
<PAGE>

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dated indicated.

Signature Title Date
--------- ----- ----

/s/ Ralph A. Christensen
- ------------------------------ Trustee and Chairman May 7, 1999
Ralph A. Christensen

/s/ Mike F. Dolan
- ------------------------------ Trustee and Vice Chairman May 7, 1999
Mike F. Dolan

/s/ Jeffrey L. Miller
- ------------------------------ Trustee and Vice-Chairman May 7, 1999
Jeffrey L. Miller

/s/ John F. Decker
- ------------------------------ Trustee May 7, 1999
John F. Decker

/s/ Patrick G. Jones
- ------------------------------ Trustee May 7, 1999
Patrick G. Jones

/s/ J. Norman Ellison
- ------------------------------ Trustee May 7, 1999
J. Norman Ellison

/s/ Daniel L. Feist
- ------------------------------ Trustee May 7, 1999
Daniel L. Feist

/s/ Thomas A. Wentz, Jr.
- ------------------------------ Trustee May 7, 1999
Thomas A. Wentz, Jr.

/s/ C. Morris Anderson
- ------------------------------ Trustee May 7, 1999
C. Morris Anderson

/s/ Roger R. Odell
- ------------------------------ President and Trustee May 7, 1999
Roger R. Odell

/s/ Thomas A. Wentz
- ------------------------------ Vice-President May 7, 1999
Thomas A. Wentz

/s/ Timothy P. Mihalick
- ------------------------------ Vice-President May 7, 1999
Timothy P. Mihalick

/s/ Diane K. Bryantt
- ------------------------------ Secretary May 7, 1999
Diane K. Bryantt

II-6 Page 136 of 183
<PAGE>

INDEX OF EXHIBITS

Description of Exhibit Location in Form S-11 Filing
- ---------------------- ----------------------------
<S> <C>
(1) Security Sales Agreements Ex-1(i), Pages 139 - 140

(2) Plan of acquisition, Not Applicable
reorganization, arrangement,
liquidation or succession

(3) (i) Second Restated Declaration Ex-3(i), Pages 141 - 176
of Trust dated February 10, 1999

(ii) IRET Properties Partnership IRET Properties Partnership
Agreement Agreement dated January 31,
1997, filed as Ex-3 (ii) to
Form S-11 filed by the
Registrant on November 28, 1997,
(File No. 0-14851) and Incorporated
herein by reference

(4) Instruments defining the See #3
rights of security holders,
including indentures

(5) Opinion re legality Ex-5, Pages 177 - 178

(6) Opinion re discount on Not Applicable
capital shares

(7) Opinion re liquidation Not Applicable
preference

(8) Opinion re tax matters Ex-8, Page 179

(9) Voting trust agreement Not Applicable

(10) Material Contracts Advisory Agreement with
the Registrant and Odell-
Wentz & Associates, filed
as Exhibit 10 to said Form
S-11 and incorporated herein
by reference
(File No. 0-14851)

(11) Statement re computation Not Applicable
of per share earnings

(12) Statement re computation Not Applicable

(15) Letter re unaudited Not Applicable
interim financial information

II-7 Page 137 of 183
<PAGE>

(16) Letter re change in Not Applicable
certifying accountant

(21) Subsidiaries of the List of affiliated partnerships
Registrant filed as Item 7 of Form S-11
filed for the Registrant
(File No. 0-14851) and
incorporated herein by
reference

(23) Consent of experts and counsel
(i) Pringle & Herigstad, P.C. Ex-23 (i), Page 180
(ii) Brady Martz & Associates, Ex-23 (ii), Page 181
P.C.

(24) Power of Attorney Not Applicable

(25) Statement of eligibility Not Applicable
of trustee

(27) Financial Data Schedule Ex-27, Page 182

(99) Additional Exhibits (i) Ex-99, Page 183

(iii) Marketing Agreement
dated October 1, 1997, between
IRET and Roger Domres filed as
Exhibit 99 to Form S-11
for the Registrant on November
28, 1997 (File No. 0-14851)
and incorporated herein by
reference
</TABLE>

THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.

II-8 Page 138 of 183

<PAGE>

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

SECURITY SALES AGREEMENT

THIS AGREEMENT, made this _____ day of May, 1999, between INVESTORS REAL
ESTATE TRUST, A North Dakota Business Trust, 12 South Main, Minot, North
Dakota 58701 (hereinafter ("IRET"), and NAME AND ADDRESS OF
BROKER,(hereinafter "BROKER").

WHEREAS, IRET intends to file a Form S-11 with the Securities and Exchange
Commission to register for sale to the public 750,000 shares of its shares of
Beneficial Interest; and,

WHEREAS, BROKER is a broker registered with the National Association of
Securities Dealers and is also registered in states in which said shares of
Beneficial Interest will also be registered for sale by IRET;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, it
is agreed as follows:

1. IRET hereby employs BROKER as a Broker to offer said shares of
Beneficial Interest for sale for $8.10 per share with a minimum purchase of
100 shares. BROKER agrees to use its best efforts to conduct the sales
effort necessary to market said securities subject to the terms and
conditions of this agreement. This agreement shall become effective only
upon the effectiveness of the registration of said securities by the
Securities and Exchange Commission and the applicable state Securities
Commissioners and shall terminate contemporaneously with the termination or
completion of said registration.

2. IRET shall be responsible for paying all costs and expenses relating
to the registration of said securities, including the preparation, printing
and filing of the Prospectus and Registration Statements and all amendments
and exhibits, all filing and registration fees and costs, and all legal,
accounting, printing and filing fee expenses in connection therewith.

3. All solicitation expenses including travel, telephone and other
expenses incurred by BROKER and its salesmen shall be the responsibility of
BROKER and its salesmen. In the event the offering is terminated, BROKER
will NOT be reimbursed for any out-of-pocket expenses.

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

5. IRET represents and warrants to BROKER as follows:

- IRET is a North Dakota Business Trust duly organized and in good
standing under the laws of the State of North Dakota

II-9 Page 139 of 183
<PAGE>

and duly authorized to conduct its business in the states in which
it operates.

- The shares of Beneficial Interest described in the Prospectus filed in
connection with the above described Offering have the characteristics
set forth in said Prospectus and IRET is authorized to issue an
unlimited number of its shares of Beneficial Interest under its trust
powers.

- The Financial Statements contained in the Prospectus and by reference
incorporated herein are true, correct and complete, and no material,
adverse changes have occurred since the issuance of such statement.

IRET hereby indemnifies and will hold BROKER harmless from all claims,
demands, liabilities and expenses (including legal expenses) arising out of
or based on any of the representations or warranties made by IRET herein.

This agreement shall be binding upon and shall inure to the benefit of the
parties, their successors and assigns.

INVESTORS REAL ESTATE TRUST

BY /s/ Thomas A. Wentz, Sr.
----------------------------
Thomas A. Wentz, Sr., Vice
President

BROKER

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

II-10 Page 140 of 183

<PAGE>

EX-3(i) FORM S-11 INVESTORS REAL ESTATE TRUST

SECOND RESTATED DECLARATION OF TRUST
INVESTORS REAL ESTATE TRUST

WHEREAS, Under the DECLARATION OF TRUST made on the 31st day of July,
1970, and the Restated DECLARATION OF TRUST made on October 22, 1996 by the
undersigned as trustees of Investors Real Estate Trust (hereinafter referred
to as IRET), there was granted to the undersigned under Article 1, Section 5
of said Declaration of Trust, the power to amend said Declaration without
prior approval of the Shareholders in order to conform said Trust Agreement
to the requirements of the regulatory authority with jurisdiction over the
issuance of the Trust securities, and

WHEREAS, Said governmental authority has requested certain amendments to
said DECLARATION OF TRUST,

NOW, THEREFORE, Pursuant to said reserved power to them granted under
said DECLARATION OF TRUST, the undersigned do hereby amend and restate said
DECLARATION OF TRUST as follows:

SECOND RESTATED DECLARATION OF TRUST made as of this 10th day of
February, 1999, by the trustees of Investors Real Estate Trust, creating a
trust to invest directly or through an operating partnership in real estate,
interests in real estate, leasehold interests, mortgages, and interests in
mortgages secured by real estate using funds invested in the trust by
individuals in exchange for a beneficial interest in the trust (hereinafter
called Shareholders).

The trustees agree to hold and manage the assets of this Trust; and

The Trustees for the purpose of defining the respective interests of the
Shareholders in the Trust, have agreed to issue to each Shareholder
negotiable certificates of beneficial interest or shares (hereinafter called
Shares) in the respective amounts and with the designations and form as
hereinafter provided:

Now, therefore, the trustees hereby declare that they assume the duties
of trustees hereunder and will hold all assets of the Trust, including those
to be received as hereinafter provided, and all rents, income, profits, and
gains therefrom, from whatever source derived, in trust for the Shareholders
in accordance with the terms and conditions hereinafter in this instrument
provided and all amendments thereto called the Second Restated DECLARATION OF
TRUST to wit:

II-11 Page 141 of 183

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
ARTICLE 1 - THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Location. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Nature of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Particular Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Conflicts of Interest and Investment Restrictions . . . . . . . . . . . . 21
Sales and Leases to IRET . . . . . . . . . . . . . . . . . . . . . . 21
Sales and Leases to SPONSOR, ADVISOR, TRUSTEES or any AFFILIATE. . . 21
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . 22
Multiple PROGRAMS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 22
Appraisal of Real Property . . . . . . . . . . . . . . . . . . . . . 22
Roll-Up Transaction. . . . . . . . . . . . . . . . . . . . . . . . . 23
Borrowing Limitations. . . . . . . . . . . . . . . . . . . . . . . . 24
Other Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . 24
Fees, Compensation and Expenses. . . . . . . . . . . . . . . . . . . 26
TRUSTEE'S Review . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ACQUISITION FEES and ACQUISITION EXPENSES. . . . . . . . . . . . . . 26
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . 26
Real Estate Commissions on Resale of Property. . . . . . . . . . . . 27
Incentive Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ADVISOR Compensation . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE 2 - SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SHARES: Certificates of Beneficial Interest . . . . . . . . . . . . . . . 29
Sale of SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Offering of SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SHARES Purchased by IRET. . . . . . . . . . . . . . . . . . . . . . . . . 29
Transferability of SHARES . . . . . . . . . . . . . . . . . . . . . . . . 30
Effect of Transfer of SHARES or Death, Insolvency, or Incapacity of
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Redemption and Prohibition on Transfer. . . . . . . . . . . . . . . . . . 30
ARTICLE 3 - SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Rights and Obligations of SHAREHOLDERS. . . . . . . . . . . . . . . . . . 30
Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Voting Rights of SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . 31
Liability of SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . 32
Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Access to Records. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Distribution Reinvestment Plans. . . . . . . . . . . . . . . . . . . 34
Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Election of TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 35

II-12 Page 142 of 183

<PAGE>

ARTICLE 4 - THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Number, Term of Office, Qualification, and Compensation of TRUSTEES . . 35
Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Successor TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Actions by TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Title and Authority of TRUSTEES . . . . . . . . . . . . . . . . . . . . 37
The ADVISOR and Independent Contractor. . . . . . . . . . . . . . . . . 37
Written Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Powers of TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
TRUSTEES' Right to Own SHARES in Trust. . . . . . . . . . . . . . . . . 41
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Indemnification of TRUSTEES. . . . . . . . . . . . . . . . . . . . 41
PERSONS Dealing with TRUSTEES . . . . . . . . . . . . . . . . . . . . . 43
Administrative Powers of TRUSTEES . . . . . . . . . . . . . . . . . . . 43

ARTICLE 5 - DURATION AND TERMINATION OF IRET . . . . . . . . . . . . . . . . 43
Termination of IRET . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Organization as a Corporation . . . . . . . . . . . . . . . . . . . . . 44

ARTICLE 6 - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
When No SHARES are outstanding. . . . . . . . . . . . . . . . . . . . . 44
When SHARES are Outstanding . . . . . . . . . . . . . . . . . . . . . . 45

ARTICLE 7 - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Headings for Reference Only . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>

II-13 Page 143 of 183

<PAGE>

ARTICLE 1 - THE TRUST

SECTION 1. DEFINITIONS. Unless a term contained in this document is
defined immediately following its use, the following definition shall apply:

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

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

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

4. ADVISOR: The PERSON responsible for directing or performing the
day-to-day business affairs of IRET, including a PERSON to which an
ADVISOR subcontracts substantially all such functions.

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

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

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

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

D. any executive officer, director, TRUSTEE or general partner of
such other PERSON.

II-14 Page 144 of 183

<PAGE>

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

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

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

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

9. CONSTRUCTION FEE: A fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements,
supervise and coordinate projects or to provide Major Repairs or
Rehabilitation on IRET's property.

10. DECLARATION OF TRUST: The DECLARATION OF TRUST, by-laws, certificate,
articles of incorporation or other governing instrument pursuant to
which IRET is organized.

11. DEVELOPMENT FEE: A fee for the packaging of IRET'S property, including
negotiating and approving plans, and assisting in obtaining necessary
zoning, variances, and financing for the specific property, either
initially or at a later date.

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

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

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

i. owns an interest in the SPONSOR, ADVISOR, or any of their
AFFILIATES; or

II-15 Page 145 of 183

<PAGE>

ii. is employed by the SPONSOR, ADVISOR or any of their
AFFILIATES; or

iii. is an officer or director of the SPONSOR, ADVISOR, or any
of their AFFILIATES; or

iv. performs services, other than as a TRUSTEE, for IRET; or

v. is a TRUSTEE for more than three REITS organized by the
SPONSOR or advised the ADVISOR; or

vi. has any material business or professional relationship with
the SPONSOR, ADVISOR, or any of their AFFILIATES.

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

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

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

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

14. INITIAL INVESTMENT: That portion of the initial capitalization of IRET
contributed by the SPONSOR, or its AFFILIATES.

15. IRET: Investors Real Estate Trust.

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

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

18. NET INCOME: For any period total revenues applicable to such period,
less the expenses applicable to such period other than additions to
reserves for depreciation or bad debts or other similar non-cash
reserves. If the ADVISOR receives an incentive fee, NET INCOME, for
purposes of

II-16 Page 146 of 183

<PAGE>

calculating TOTAL OPERATING EXPENSES shall exclude the gain from the
sale of IRET'S assets.

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

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

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

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

23. ROLL-UP: A transaction involving the acquisition, merger, conversion,
or consolidation either directly or indirectly of the REIT and the
issuance of securities of a ROLL-UP ENTITY. Such term does not
include:

A. a transaction involving securities of REIT that have been for at
least 12 months listed on a national securities exchange or traded
through the National Association of Securities Dealers Automated
Quotation National Market System; or

B. a transaction involving the conversion to corporate, trust, or
association form of only the REIT if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following:

II-17 Page 147 of 183

<PAGE>

i. SHAREHOLDERS' voting rights;

ii. the term of existence of the REIT;

iii. SPONSOR or ADVISOR compensation;

iv. the REIT'S investment objectives.

24. ROLL-UP ENTITY: A partnership, REIT, corporation, trust, or other
entity that would be created or would survive after the successful
completion of a proposed ROLL-UP transaction.

25. SHARES: SHARES of beneficial interest or of common stock of a REIT of
the class that has the right to elect the TRUSTEES of such REIT.

26. SHAREHOLDERS: The registered holders of IRET'S SHARES.

27. SPECIFIED ASSET REIT: A Program where, at the time a securities
registration is ordered effective, at least 75% of the net proceeds
from the sale of SHARES are allocable to the purchase, construction,
renovation, or improvement of individually identified assets. Reserves
shall not be included in the 75%.

28. SPONSOR: Any PERSON directly or indirectly instrumental in organizing,
wholly or in part, a REIT, or any PERSON who will control, manage or
participate in the management of a REIT, and any AFFILIATE of such
PERSON. Not included is any PERSON whose only relationship with the
REIT is as that of an independent property manager of REIT assets, and
whose only compensation is as such. SPONSOR does not include wholly
independent third parties such as attorneys, accountants and
underwriters whose only compensation is for professional services. A
PERSON may also be deemed a SPONSOR of the REIT by:

A. taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the REIT, either alone or in
conjunction with one or more other PERSONS;

B. receiving a material participation in the REIT in connection with
the founding or organizing of the business of the REIT, in
consideration of services or property, or both services and property;

C. having a substantial number of relationships and contacts with the
REIT;

D. possessing significant rights to control REIT properties;

II-18 Page 148 of 183

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E. receiving fees for providing services to the REIT which are paid
on a basis that is not customary in the industry;

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

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

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

B. interest payments;

C. taxes;

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

E. incentive fees;

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

30. TRUSTEE(S): The members of the board of trustees or directors or other
body which manages IRET.

31. UNIMPROVED REAL PROPERTY: The real property of a REIT which has the
following three characteristics:

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

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

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

SECTION 2. NAME. The Trust shall be known as "Investors Real Estate
Trust," in which name the TRUSTEES may conduct business, sue and be sued and
otherwise do all things and take all action deemed by them

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appropriate to carry out the business and preserve the assets of the Trust.

SECTION 3. LOCATION. The principal office of the Trust shall be at 12
South Main Street, Minot, North Dakota 58701, or at such other address, city,
or locality as the TRUSTEES shall from time to time determine. The Trust may
have such other offices or places of business as the TRUSTEES may from time
to time determine.

SECTION 4. NATURE OF TRUST. The Trust shall be of the type commonly
termed a business trust and shall not be a general partnership, limited
partnership, partnership association or corporation. The SHAREHOLDERS are
beneficial owners hereunder. Neither the TRUSTEES nor the SHAREHOLDERS nor
any of them shall ever be deemed or treated in any way whatsoever to be
liable or responsible hereunder as partners. This Trust is intended to have
the status of a "REAL ESTATE INVESTMENT TRUST" as that term is defined in
Section 856-858 of the Internal Revenue Code of 1986, as now enacted and as
it may be hereafter amended, and the DECLARATION OF TRUST and all actions of
the TRUSTEES shall be construed in accordance with such intent.

SECTION 5. PURPOSES. IRET will be primarily engaged in the investment
and reinvestment of its funds and other assets in real property, interests in
real property, mortgages secured by real property, leasehold interests in
real property, and interests in mortgages on real property, except that if
the TRUSTEES are of the opinion that investment in real estate assets at any
particular time is not prudent because of market or economic conditions,
IRET's assets may be maintained in cash or government securities, or both.
IRET shall not be primarily engaged in investing, reinvesting, or trading in
securities. It is the express purpose and objective of IRET to have invested
from time to time such percentages of the value of its total assets in real
property, leaseholds thereof, mortgages on real property, or interests
therein, cash, cash items, government securities and securities of other
REITs, and to follow such investment policies, as may be required in order
that IRET qualify (so long as such qualification, in the opinion of the
TRUSTEES, is advantageous to its SHAREHOLDERS) as said "REAL ESTATE
INVESTMENT TRUST."

SECTION 6. PARTICULAR POLICIES. IRET will follow such policies as are
required to maintain its qualification as a REIT. In the event that IRET
shall desire to issue or sell SHARES or other securities in any state or
jurisdiction in which there shall be in force and effect a law, rule, or
regulation of the ADMINISTRATOR requiring that this DECLARATION OF TRUST
contain one or more particular limitations or restrictions on the policies or
operations of IRET, then anything else in this DECLARATION OF TRUST contained
to the contrary notwithstanding, the TRUSTEES may, without the prior approval
of the SHAREHOLDERS, amend this DECLARATION OF TRUST to incorporate herein
any such limitations or restrictions, including, without affecting the
generality of the foregoing, limitations or restrictions on the issuance of
senior securities, borrowing money, requiring appraisals in particular
circumstances, making loans, underwriting securities of others, investing in
unimproved real estate, investing in mortgages, investing

II-20 Page 150 of 183

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in securities of other real estate companies, investing in real estate
contracts of sale and commodities, issuing different classes of SHARES or
options or redeemable securities, and on the amount of operating expenses
that may be incurred. The TRUSTEES shall also have the power to provide that
no further amendments of this DECLARATION OF TRUST may be made without the
consent of SHAREHOLDERS.

SECTION 7. CONFLICTS OF INTEREST AND INVESTMENT RESTRICTIONS.

A. SALES AND LEASES TO IRET.

IRET shall not purchase property from the SPONSOR, ADVISOR, TRUSTEE, or any
AFFILIATE thereof, unless a majority of TRUSTEES (including a majority of
INDEPENDENT TRUSTEES) not otherwise interested in such transaction approve
the transaction as being fair and reasonable to IRET and at a price to IRET
no greater than the cost of the asset to such SPONSOR, ADVISOR, TRUSTEE or
any AFFILIATE thereof, or if the price to IRET is in excess of such cost,
that substantial justification for such excess exists and such excess is
reasonable. In no event shall the cost of such asset to IRET exceed its
current appraised value.

B. SALES AND LEASES TO SPONSOR, ADVISOR, TRUSTEES OR ANY AFFILIATE.

1. A SPONSOR, ADVISOR, TRUSTEE, or an AFFILIATE thereof, shall not
acquire assets from IRET unless approved by a majority of
TRUSTEES (including a majority of INDEPENDENT TRUSTEES), not
otherwise interested in such transaction, as being fair and
reasonable to IRET.

2. IRET may lease assets to a SPONSOR, ADVISOR, TRUSTEE, or any
AFFILIATE thereof, only if approved by a majority of TRUSTEES
(including a majority of INDEPENDENT TRUSTEES), not otherwise
interested in such transaction, as being fair and reasonable to
IRET.

C. LOANS.

1. No loans may be made by IRET to the SPONSOR, ADVISOR, TRUSTEE,
or any AFFILIATE thereof, except as provided under Article I,
Section 7(K)(3).

2. IRET may not borrow money from the SPONSOR, ADVISOR, TRUSTEE, or
any AFFILIATE thereof, unless a majority of TRUSTEES (including a
majority of INDEPENDENT TRUSTEES) not otherwise interested in
such transaction approve the transaction as being fair,
competitive, and commercially reasonable and no less favorable to
IRET than loans between unaffiliated parties under the same
circumstances.

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<PAGE>

D. INVESTMENTS.

1. IRET shall not invest in joint ventures with the SPONSOR,
ADVISOR, TRUSTEE, or any AFFILIATE thereof, unless a majority of
TRUSTEES (including a majority of INDEPENDENT TRUSTEES) not
otherwise interested in such transactions, approve the
transaction as being fair and reasonable to IRET and on
substantially the same terms and conditions as those received by
the other joint venturers.

2. IRET shall not invest in equity securities unless a majority of
TRUSTEES (including a majority of INDEPENDENT TRUSTEES) not
otherwise interested in such transaction approve the transaction
as being fair, competitive, and commercially reasonable.

E. INVESTMENT POLICIES.

1 . The primary investment objectives of IRET are to obtain current
income and capital appreciation for its SHARE HOLDERS.

2. The INDEPENDENT TRUSTEES shall review the investment policies of
IRET with sufficient frequency and at least annually to determine
that the policies being followed by IRET at any time are in the
best interests of its SHAREHOLDERS. Each such determination and
the basis therefore shall be set forth in the minutes of the
TRUSTEES.

F. MULTIPLE PROGRAMS.

The method for the allocation of the acquisition of properties by two or
more Programs of the same SPONSOR or ADVISOR seeking to acquire similar
types of assets shall be reasonable. It shall be the duty of the TRUSTEES
(including the INDEPENDENT TRUSTEES) to ensure such method is applied
fairly to IRET.

G. OTHER TRANSACTIONS.

All other transactions between IRET and the SPONSOR, ADVISOR, TRUSTEE, or
any AFFILIATE thereof, shall require approval by a majority of the TRUSTEES
(including a majority of INDEPENDENT TRUSTEES) not otherwise interested in
such transactions as being fair and reasonable to IRET and on terms and
conditions not less favorable to IRET than those available from
unaffiliated third parties.

H. APPRAISAL OF REAL PROPERTY.

The consideration paid for real property acquired by IRET shall ordinarily
be based on the fair market value of the property as determined by a
majority of the TRUSTEES. In cases in which a

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majority of the INDEPENDENT TRUSTEES so determine, and in all cases in
which assets are acquired from the ADVISORS, TRUSTEES, SPONSORS, or
AFFILIATES thereof, such fair market value shall be as determined by an
INDEPENDENT EXPERT selected by the INDEPENDENT TRUSTEES.

I. ROLL-UP TRANSACTION.

1. In connection with a proposed ROLL-UP, an appraisal of all IRET's
assets shall be obtained from a competent, INDEPENDENT EXPERT.
IRET assets shall be appraised on a consistent basis. The
appraisal shall be based on an evaluation of all relevant
information, and shall indicate the value of IRET'S assets as of
a date immediately prior to the announcement of the proposed
ROLL-UP transaction. The appraisal shall assume an orderly
liquidation of IRET assets over a 12 month period. The terms of
the engagement of the INDEPENDENT EXPERT shall clearly state that
the engagement is for the benefit of IRET and its investors. A
summary of the independent appraisal, indicating all material
assumptions underlying the appraisal, shall be included in a
report to the investors in connection with a proposed ROLL-UP.

2. In connection with a proposed ROLL-UP, the PERSON sponsoring the
ROLL-UP shall offer to SHAREHOLDERS who vote "no" on the proposal
the choice of:

a. accepting the securities of the ROLL-UP ENTITY offered in the
proposed ROLL-UP; or

b. one of the following:

i. remaining as SHAREHOLDERS of IRET and preserving their
interests therein on the same terms and conditions as
existed previously; or

ii. receiving cash in an amount equal to the SHAREHOLDERS'
pro-rata share of the appraised value of the NET ASSETS of
IRET.

3. IRET shall not participate in any proposed ROLL-UP which would
result in SHAREHOLDERS having democracy rights in the ROLL-UP
ENTITY that are less than those provided for in this document
unless approved by a majority of the SHAREHOLDERS.

4. IRET shall not participate in any proposed ROLL-UP which includes
provisions which would operate to materially impede or frustrate
the accumulation of SHARES by any purchaser of the securities of
the ROLL-UP ENTITY (except to the minimum extent

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<PAGE>

necessary to preserve the tax status of the ROLL-UP ENTITY).
IRET shall not participate in any proposed ROLL-UP which would
limit the ability of an investor to exercise the voting rights
of its securities of the ROLL-UP ENTITY on the basis of the
number of IRET SHARES held by that investor.

5. IRET shall not participate in any proposed ROLL-UP in which
investors' rights of access to the records of the ROLL-UP ENTITY
will be less than those provided for by this document.

6. IRET shall not participate in any proposed ROLL-UP in which any
of the costs of the transaction would be borne by IRET if the
ROLL-UP is not approved by the SHAREHOLDERS.

J. BORROWING LIMITATIONS.

The aggregate borrowings of IRET, secured and unsecured, shall be
reasonable in relation to the NET ASSETS of IRET, and shall be reviewed by
the TRUSTEES at least quarterly. The maximum amount of such borrowings in
relation to the NET ASSETS shall, in the absence of a satisfactory showing
that a higher level of borrowing is appropriate, not exceed 300%. Any
excess in borrowing over such 300% level shall be approved by a majority of
the INDEPENDENT TRUSTEES and disclosed to SHAREHOLDERS in the next
quarterly report of IRET, along with justification for such excess.

K. OTHER LIMITATIONS.

IRET may not:

1. Invest more than 10% of its total assets in UNIMPROVED REAL
PROPERTY or mortgage loans on UNIMPROVED REAL PROPERTY.

2. Invest in commodities or commodity future contracts. Such
limitation is not intended to apply to future contracts, when
used solely for hedging purposed in connection with IRET's
ordinary business of investing in real estate assets and
mortgages.

3. Invest in or make mortgage loans unless an appraisal is obtained
concerning the underlying property, except for those loans
insured or guaranteed by a government or government agency. In
cases in which a majority of the INDEPENDENT TRUSTEES so
determine, and in all cases in which the transaction is with the
ADVISOR, TRUSTEES, SPONSOR, or AFFILIATES thereof, such an
appraisal must be obtained from an INDEPENDENT EXPERT concerning
the underlying property. This appraisal shall be maintained in
IRET's records for at least five years, and shall be

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available for inspection and duplication by any SHAREHOLDER. In
addition to the appraisal, a mortgagee's or owner's title
insurance policy or commitment as to the priority of the mortgage
or the condition of the title must be obtained. Further, the
ADVISOR and TRUSTEES shall observe the following policies in
connection with investing in or making mortgage loans:

a. IRET shall not invest in real estate contracts of sale,
otherwise known as land sale contracts, unless such contracts of
sale are in recordable form and appropriately recorded in the
chain of title.

b. IRET shall not make or invest in mortgage loans, including
construction loans, on any one property if the aggregate amount
of all mortgage loans outstanding on the property, including the
loans of IRET, would exceed an amount equal to 85% of the
appraised value of the property as determined by appraisal unless
substantial justification exists because of the presence of other
underwriting criteria. For purposes of this subsection, the
"aggregate amount of all mortgage loans outstanding on the
property, including the loans of IRET," shall include all
interest (excluding contingent participation in income and/or
appreciation in value of the mortgaged property), the current
payment of which may be deferred pursuant to the terms of such
loans, to the extent that deferred interest on each loan exceeds
5% per annum of the principal balance of the loan.

c. IRET shall not make or invest in any mortgage loans that are
subordinate to any mortgage or equity interest of the ADVISOR,
TRUSTEES, SPONSORS or any AFFILIATE of IRET.

d. The policies outlined in a-c above may be exceeded or avoided
for a particular transaction provided a commercially reasonable
justification exists and is approved by a majority of the
TRUSTEES (including a majority of the INDEPENDENT TRUSTEES) not
otherwise interested in the transaction.

4. Issue redeemable equity securities.

5. Issue debt securities unless the historical debt service coverage
(in the most recently completed fiscal year) as adjusted for
known changes is sufficient to properly service that higher level
of debt.

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<PAGE>

6. Issue options or warrants to purchase its SHARES to the ADVISOR,
TRUSTEES, SPONSORS, or any AFFILIATE thereof, except on the same
terms as such options or warrants are sold to the general public.
IRET may issue options or warrants to PERSONS not so connected
with IRET but not at exercise prices less than the fair market
value of such securities on the date of grant and for
consideration (which may include services) that in the judgment
of the INDEPENDENT TRUSTEES has a market value less than the
value of such option on the date of grant. Options or warrants
issuable to the ADVISOR, TRUSTEES, SPONSORS, or any AFFILIATE
thereof, shall not exceed an amount equal to 10% of the
outstanding SHARES of IRET on the date of grant of any options or
warrants.

7. Issue its SHARES on a deferred payment basis or other similar
arrangement.

SECTION 8. FEES, COMPENSATION AND EXPENSES.

A. TRUSTEE'S REVIEW.

1. The INDEPENDENT TRUSTEES will determine, from time to time but at
least annually, that the total fees and expenses of IRET are
reasonable in light of the investment performance of IRET, its
NET ASSETS, its NET INCOME, and the fees and expenses of other
comparable unaffiliated REITS. Each such determination shall be
reflected in the minutes of the meeting of the TRUSTEES.

B. ACQUISITION FEES AND ACQUISITION EXPENSES.

1. The total of ACQUISITION FEES and ACQUISITION EXPENSES shall be
reasonable, and shall not exceed an amount equal to 6% of the
contract price of the property, or in the case of a mortgage
loan, 6% of the funds advanced.

2. Notwithstanding the above, a majority of the TRUSTEES (including
a majority of the INDEPENDENT TRUSTEES) not otherwise interested
in the transaction may approve fees in excess of these limits if
they determine the transaction to be commercially competitive,
fair and reasonable to IRET.

C. TOTAL OPERATING EXPENSES.

1. The TOTAL OPERATING EXPENSES of IRET shall (in the absence of a
satisfactory showing to the contrary) be deemed to be excessive
if they exceed in any fiscal year the greater of 2% of its
AVERAGE INVESTED ASSETS or 25% of its NET INCOME for such year.
The

II-26 Page 156 of 183

<PAGE>

INDEPENDENT TRUSTEES shall have the fiduciary responsibility
of limiting such expenses to amounts that do not exceed such
limitations unless such INDEPENDENT TRUSTEES shall have made a
finding that, based on such unusual and non-recurring factors
which they deem sufficient, a higher level of expenses is
justified for such year. Any such finding and the reasons in
support thereof shall be reflected in the minutes of the meeting
the TRUSTEES.

2. Within 60 days after the end of any fiscal quarter of IRET for
which TOTAL OPERATING EXPENSES (for the twelve (12) months then
ended) exceeded 2% of AVERAGE INVESTED ASSETS or 25% of NET
INCOME, whichever is greater, there shall be sent to the
SHAREHOLDERS of IRET a written disclosure of such fact, together
with an explanation of the factors the INDEPENDENT TRUSTEES
considered in arriving at the conclusion that such higher
operating expenses were justified.

3. In the event the INDEPENDENT TRUSTEES do not determine such
excess expenses are justified, the ADVISOR shall reimburse IRET
at the end of the twelve month period the amount by which the
aggregate annual expenses paid or incurred by IRET exceed the
limitations herein provided.

D. REAL ESTATE COMMISSIONS ON RESALE OF PROPERTY.

If an ADVISOR, TRUSTEE, SPONSOR, or any AFFILIATE, provides a substantial
amount of the services in the effort to sell the property of IRET, then
that PERSON may receive up to one-half of the brokerage commission paid but
in no event to exceed an amount equal to 3% of the contracted for sales
price. In addition, the amount paid when added to the sums paid to
unaffiliated parties in such a capacity shall not exceed the lesser of the
COMPETITIVE REAL ESTATE COMMISSION or an amount equal to 6% of the
contracted for sales price, unless a majority of the TRUSTEES, including a
majority of the INDEPENDENT TRUSTEES, not otherwise interested in the
transaction, approve fees in excess of these limits upon a determination
that such deviation is commercially competitive, fair and reasonable to
IRET.

E. INCENTIVE FEES.

1. An interest in the gain from the sale of assets of IRET, for
which full consideration is not paid in cash or property of
equivalent value, shall be allowed provided the amount or
percentage of such interest is reasonable. Such an interest in
gain from the sale of IRET assets shall be considered
presumptively reasonable if it does not exceed 15% of the balance
of such net proceeds remaining after payment to SHAREHOLDERS, in
the aggregate, of an

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amount equal to 100% of the original issue price of IRET SHARES,
plus an amount equal to 6% of the original issue price of the
REIT SHARES per annum cumulative. For purposes of this Section,
the original issue price of IRET SHARES may be reduce by prior
cash distributions to SHAREHOLDERS of net proceeds from the
sale of IRET assets.

2. In the case of multiple ADVISORS, ADVISORS and any AFFILIATE
shall be allowed incentive fees provided such fees are
distributed by a proportional method reasonably designed to
reflect the value added to IRET assets by each respective ADVISOR
or any AFFILIATE. Distribution of incentive fees to ADVISORS or
AFFILIATES, in proportion to the length of time served as ADVISOR
while such property was held by IRET or in ratio to the fair
market value of the asset at the time of the ADVISOR's
termination, and the fair market value of the asset upon its
disposition by IRET shall be considered reasonable methods by
which to apportion incentive fees.

F. ADVISOR COMPENSATION.

INDEPENDENT TRUSTEES shall determine from time to time and at least
annually that the compensation which IRET contracts to pay to the ADVISOR
is reasonable in relation to the nature and quality of services performed.
The INDEPENDENT TRUSTEES shall also supervise the performance of the
ADVISOR and the compensation paid to it by IRET to determine that the
provisions of such contract are being carried out. Each such determination
shall be based on the factors set forth below and all other factors such
INDEPENDENT TRUSTEES may deem relevant and the findings of such TRUSTEES on
each of such factors shall be recorded in the minutes of the TRUSTEES:

1. The size of the advisory fee in relation to the size, composition
and profitability of the portfolio of IRET.

2. The success of the ADVISOR in generating opportunities that meet
the investment objectives of IRET.

3. The rates charged to other REIT's and to investors other than
REIT'S by ADVISORS performing similar services.

4. Additional revenues realized by the ADVISOR and any AFFILIATE
through their relationship with the IRET, including loan
administration, underwriting or broker commissions, servicing,
engineering, inspection and other fees, whether paid by IRET or
by others with whom IRET does business.

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5. The quality and extent of service and advice furnished by the
ADVISOR.

6. The performance of the investment portfolio of IRET, including
income, conservation or appreciation of capital, frequency of
problem investments and competence in dealing with distress
situations.

7. The quality of the portfolio of IRET in relationship to the
investments generated by the ADVISOR for its own accounts.

ARTICLE 2 - SHARES

SECTION 1. SHARES: CERTIFICATES OF BENEFICIAL INTEREST.

The units into which the beneficial interest in IRET will be divided shall
be designated as SHARES. The certificates evidencing ownership of SHARES in
IRET will be designated as Certificates of Beneficial Interest or SHARES
and shall be in such form as the TRUSTEES may from time to time prescribe.
The registered holders thereof shall be designated as SHAREHOLDERS. The
number of SHARES authorized or issued hereunder shall be unlimited. All
SHARES shall be without par value, shall be of the same class, shall have
equal voting, distribution, liquidation, and other rights, and shall be
fully paid and non assessable. The SHAREHOLDERS shall have no legal title
or interest in the property of IRET and no right to a partition thereof or
to an accounting during the continuance of IRET but only the rights
expressly provided in this DECLARATION OF TRUST.

SECTION 2. SALE OF SHARES.

SECTION 3. OFFERING OF SHARES.

The TRUSTEES are authorized to cause to be made from time to time offerings
of the SHARES of IRET to the public at public offering prices deemed
appropriate. For this purpose, the TRUSTEES are authorized to enter into a
contract with an underwriter upon such terms and with such commissions for
its services as may be agreed upon by the parties, provided that the total
expenses associated with the offering of any particular issue of SHARES
does not exceed 15% of the gross offering amount.

SECTION 4. SHARES PURCHASED BY IRET.

IRET may repurchase or otherwise acquire its own SHARES on such terms and
conditions as the TRUSTEES deem appropriate, and for

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this purpose IRET may create and maintain such reserves as are deemed
necessary and proper. SHARES issued hereunder and purchased or otherwise
acquired for the account of IRET shall not, so long as they belong to IRET,
either receive distributions (except that they shall be entitled to receive
distributions payable in SHARES of IRET) or be voted at any meeting of the
SHAREHOLDERS. Such SHARES may, in the discretion of the TRUSTEES, be
canceled and the number of SHARES authorized thereby reduced or such
SHARES may, in the discretion of the TRUSTEES, be held in the treasury and
be disposed of by the TRUSTEES at such time or times, to such party or
parties, and for such consideration, as the TRUSTEES may deem appropriate.
The SPONSOR, ADVISOR, TRUSTEES, or AFFILIATES thereof, are prohibited from
receiving a fee on the repurchase of the SHARES by IRET.

SECTION 5. TRANSFERABILITY OF SHARES.

SHARES in IRET shall be transferable in accordance with the procedure
prescribed from time to time in the TRUSTEES' Regulations. The PERSONS in
whose names the SHARES are registered on the books of IRET shall be deemed
the absolute owners thereof and, until a transfer is effected on the books
of IRET, the TRUSTEES shall not be affected by any notice, actual or
constructive, of any transfer.

SECTION 6. EFFECT OF TRANSFER OF SHARES OR DEATH, INSOLVENCY, OR
INCAPACITY OF SHAREHOLDERS.

Neither the transfer of SHARES nor the death, insolvency or incapacity of
any SHAREHOLDERS shall operate to dissolve or terminate IRET, nor shall it
entitle any transferee, legal representative or other PERSON to a partition
of the property of IRET or to an accounting.

SECTION 7. REDEMPTION AND PROHIBITION ON TRANSFER.

To insure compliance with the Internal Revenue Code provision that no more
than 50% of the outstanding SHARES may be owned by five or fewer
individuals, the TRUSTEES may at any time redeem SHARES from any
SHAREHOLDER at the fair market value thereof (as determined in good faith
by the TRUSTEES based on an independent appraisal of Trust assets made
within six months of the redemption date). Also, the TRUSTEE may refuse to
transfer SHARES to any PERSON whose acquisition of additional SHARES might,
in the opinion of the TRUSTEES, violate the above requirement.

ARTICLE 3 - SHAREHOLDERS

SECTION 1. RIGHTS AND OBLIGATIONS OF SHAREHOLDERS.

A. MEETINGS.

1. There shall be an annual meeting of the SHAREHOLDERS of IRET upon
reasonable notice and within a

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reasonable period (not less than 30 days) following delivery of
the annual report. The TRUSTEES, including the INDEPENDENT
TRUSTEES, shall be required to take reasonable steps to ensure
that this requirement is met. The holders of a majority of
SHARES in IRET, present in PERSON or by proxy, shall
constitute a quorum at any meeting.

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

B. VOTING RIGHTS OF SHAREHOLDERS.

1. The voting rights per share of equity securities of IRET (other
than the publicly held equity securities of IRET) sold in a
private offering shall not exceed voting rights which bear the
same relationship to the voting rights of the publicly held
SHARES of IRET as the consideration paid to IRET for each
privately offered IRET share bears to the book value of each
outstanding publicly held share.

2. The majority of the outstanding SHARES may, without the necessity
of concurrence by the TRUSTEES, vote to:

a. amend the DECLARATION OF TRUST;

b. terminate IRET;

c. remove the TRUSTEES.

3. The majority of SHAREHOLDERS present in PERSON or by proxy at an
Annual Meeting at which a quorum is present, may, without the
necessity of concurrence by

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the TRUSTEES, vote to elect the TRUSTEES. A quorum shall be 50%
of the then outstanding SHARES.

5. Without concurrence of a majority of the outstanding SHARES, the
TRUSTEES may not:

a. amend the DECLARATION OF TRUST, except for amendments which
do not adversely affect the rights, preferences and privileges of
SHAREHOLDERS including amendments to provisions relating to,
TRUSTEE qualifications, fiduciary duty, liability and
indemnification, conflicts of interest, investment policies or
investment restrictions;

b. sell all or substantially all of the IRET's assets other than
in the ordinary course of the IRET's business or in connection
with liquidation and dissolution;

c. cause the merger or other reorganization of IRET; or

d. dissolve or liquidate IRET, other than before the INITIAL
INVESTMENT in property. A sale of all or substantially all of
IRET's assets shall mean the sale of two-thirds or more of IRET's
assets based on the total number of properties and mortgages, or
the current fair market value of these assets.

6. With respect to SHARES owned by the ADVISOR, the TRUSTEES, or any
AFFILIATE, neither the ADVISOR, nor the TRUSTEES, nor any
AFFILIATE may vote or consent on matters submitted to the
SHAREHOLDERS regarding the removal of the ADVISOR, TRUSTEES, or
any transaction between IRET and any of them. In determining the
requisite percentage in interest of SHARES necessary to approve a
matter on which the ADVISOR, TRUSTEES, and any AFFILIATE may not
vote or consent, any SHARES owned by any of them shall not be
included.

C. LIABILITY OF SHAREHOLDERS.

1. The SHARES of IRET shall be non-assessable by IRET whether a
trust, corporation or other entity. The SHAREHOLDERS of IRET
shall not be personally liable on account of any of the
contractual obligations undertaken by IRET. All written contracts
to which IRET is a party shall include a provision that the
SHAREHOLDER shall not be personally liable thereon.

II-32 Page 162 of 183

<PAGE>

D. REPORTS.

IRET shall cause to be prepared and mailed or delivered to each SHAREHOLDER
as of a record date after the end of the fiscal year and each holder of
other publicly held securities of IRET within 120 days after the end of the
fiscal year to which it relates an annual report for each fiscal year which
shall include:

a. financial statements prepared in accordance with generally accepted
accounting principles which are audited and reported on by independent
certified public accountants;

b. the ratio of the costs of raising capital during the period to the
capital raised;

c. the aggregate amount of advisory fees and the aggregate amount of
other fees paid to the ADVISOR and any AFFILIATE of the ADVISOR by
IRET and including fees or charges paid to the ADVISOR and any
AFFILIATE of the ADVISOR by third parties doing business with IRET;

d. the TOTAL OPERATING EXPENSES of IRET, stated as a percentage of
AVERAGE INVESTED ASSETS and as a percentage of its NET INCOME;

e. a report from the INDEPENDENT TRUSTEES that the policies being
followed by IRET are in the best interests of its SHAREHOLDERS and the
basis for such determination; and

f. separately stated, full disclosure of all material terms, factors,
and circumstances surrounding any and all transactions involving IRET,
TRUSTEES, ADVISORS, SPONSORS, and any AFFILIATE thereof, occurring in
the year for which the annual report is made. INDEPENDENT TRUSTEES
shall be specifically charged with a duty to examine and comment in
the report on the fairness of such transactions;

E. ACCESS TO RECORDS.

Any SHAREHOLDER and any designated representative thereof shall be
permitted access to all records of IRET at all reasonable times, and may
inspect and copy any of them. Inspection of IRET's books and records by the
ADMINISTRATOR shall be provided upon reasonable notice and during normal
business hours. Access shall include the following as it pertains to
SHAREHOLDERS:

1. An alphabetical list of the names, addresses, and telephone
numbers of the SHAREHOLDERS of IRET along with the number of
SHARES held by each of them (the "SHAREHOLDER List") shall be
maintained as part of the books and records of IRET and shall be
available for inspection by any SHAREHOLDERS or the

II-33 Page 163 of 183

<PAGE>

SHAREHOLDERS' designated agent at the home of IRET upon the
request of the SHAREHOLDER;

2. The SHAREHOLDER List shall be updated at least quarterly to
reflect changes in the information contained therein.

3. A copy of the SHAREHOLDER List shall be mailed to any SHAREHOLDER
requesting the SHAREHOLDER List within ten days of the request.
The copy of the SHAREHOLDER List shall be printed in alphabetical
order, on white paper, and in a readily readable type size (in no
event smaller than 10-point type). A reasonable charge for copy
work may be charged by IRET.

4. The purposes for which a SHAREHOLDER may request a copy of the
SHAREHOLDER List include, without limitation, matters relating to
SHAREHOLDERS' voting rights under the IRET DECLARATION OF TRUST,
and the exercise of SHAREHOLDERS' rights under federal proxy
laws; and

5. If the ADVISOR or TRUSTEES of IRET neglects or refuses to
exhibit, produce, or mail a copy of the SHAREHOLDERS' List as
requested, the ADVISOR, and the TRUSTEES shall be liable to any
SHAREHOLDER requesting the list for the costs, including
attorneys' fees, incurred by that SHAREHOLDER for compelling the
production of the SHAREHOLDER List, and for actual damages
suffered by any SHAREHOLDER by reason of such refusal or neglect.
It shall be a defense that the actual purpose and reason for the
requests for inspection or for a copy of the SHAREHOLDER List is
to secure such list of SHAREHOLDERS or other information for the
purpose of selling such list or copies thereof, or of using the
same for a commercial purpose other than in the interest of the
applicant as a SHAREHOLDER relative to the affairs of IRET. IRET
may require the SHAREHOLDER requesting the SHAREHOLDER List to
represent that the list is not requested for a commercial purpose
unrelated to the SHAREHOLDER'S interest in IRET. The remedies
provided hereunder to SHAREHOLDERS requesting copies of the
SHAREHOLDER List are in addition to, and shall not in any way
limit, other remedies available to SHAREHOLDERS under federal
law, or the laws of any state.

F. DISTRIBUTION REINVESTMENT PLANS.

The IRET Distribution Reinvestment Plan shall provide for the following:

II-34 Page 164 of 183

<PAGE>

1. All material information regarding the distribution to the
SHAREHOLDER and the effect of reinvesting such distribution,
including the tax consequences thereof, shall be provided to the
SHAREHOLDER at least annually.

2. Each SHAREHOLDER participating in the plan shall have a
reasonable opportunity to withdraw from the plan at least
annually after receipt of the information required in
subparagraph (1) above.

G. DISTRIBUTIONS.

Distribution shall be determined as follows:

1. DISTRIBUTIONS IN KIND. Distributions in kind shall not be
permitted, except for:

a. distributions of readily marketable securities;

b. distributions of beneficial interests in a liquidating trust
established for the dissolution of IRET and the liquidation of
its assets in accordance with the terms of the DECLARATION OF
TRUST; or

2. distributions of in-kind property which meet all of the following
conditions:

a. The TRUSTEES advise each SHAREHOLDER of the risks associated
with direct ownership of the property.

b. The TRUSTEES offer each SHAREHOLDER the election of receiving
like-kind property distributions.

c. The TRUSTEES distribute in-kind property only to those
SHAREHOLDERS who accept the TRUSTEE'S offer.

SECTION 3. ELECTION OF TRUSTEES.

ARTICLE 4 - THE TRUSTEES

SECTION 1. NUMBER, TERM OF OFFICE, QUALIFICATION, AND COMPENSATION OF
TRUSTEES.

There shall be not less than five nor more than eleven TRUSTEES, as fixed
in the TRUSTEES' Regulations, a majority of whom shall be independent and
not affiliated with the manager or ADVISOR (or any

II-35 Page 165 of 183

<PAGE>

AFFILIATE of the manager or ADVISOR) of IRET. The term of office of each
TRUSTEE shall be for one year and shall extend from the date of his
election or appointment until the election and qualification of his
successor by the SHAREHOLDERS. The TRUSTEES shall be individuals of at
least 18 years of age with no less than three years of relevant real estate
experience, and no PERSON shall qualify as a TRUSTEE until he shall have
either signed the DECLARATION OF TRUST or agreed in writing to be bound in
all respects by the DECLARATION OF TRUST. The TRUSTEES shall be entitled
to receive reasonable compensation for their services as TRUSTEES.

SECTION 2. RESIGNATION.

A TRUSTEE may resign at any time by giving notice in writing to the
TRUSTEES at the principal office of IRET. Such resignation shall take
effect on the date it is received or any later time specified therein.
Unless otherwise specified therein, the acceptance of a resignation shall
not be necessary to make it effective.

SECTION 3. VACANCIES.

The resignation, incompetency, or death of any or all of the TRUSTEES shall
not terminate IRET or affect its continuity. During a vacancy, the
remaining TRUSTEE or TRUSTEES may exercise the powers of the TRUSTEES
hereunder. Vacancies among the TRUSTEES may be filled by a written
designation signed by a majority of the remaining TRUSTEES, provided a
vacancy among the INDEPENDENT TRUSTEES shall be filled by action of a
majority of only the INDEPENDENT TRUSTEES, and lodged among the records of
IRET. The determination of a vacancy among the TRUSTEES by reason of
resignation, incompetency, or death, or for any other reason, when made by
a majority of the remaining TRUSTEES and stated in the instrument filling
such vacancy, shall be final and conclusive for all purposes. If at any
time, by reason of resignations, incompetency, or deaths, there shall be no
remaining TRUSTEES, a meeting of the SHAREHOLDERS shall be forthwith called
for the election of successor TRUSTEES. Any SHAREHOLDER or SHAREHOLDERS
owning of record an aggregate of 10% of the issued and outstanding SHARES
of IRET shall be entitled to call such meeting and to nominate candidates
for election as successor TRUSTEES at any such election.

SECTION 4. SUCCESSOR TRUSTEES.

Title to the property of IRET shall vest in successor TRUSTEES, upon
written acceptance of their election or appointment without any further
act. They shall thereupon have the same powers, duties and exemptions as
though originally named as TRUSTEES in this DECLARATION OF TRUST. Such
written acceptance shall be filed with the records of IRET, and a
certificate signed by a majority of the TRUSTEES as to who are or were
TRUSTEES at any time shall be conclusive and binding for all purposes.

II-36 Page 166 of 183

<PAGE>

SECTION 5. ACTIONS BY TRUSTEES.

The TRUSTEES may act with or without a meeting. Any action of a majority of
TRUSTEES in office shall be conclusive and binding as an action of the
TRUSTEES. All agreements, deeds, and other instruments executed by a
majority of the TRUSTEES or executed by one TRUSTEE pursuant to
authorization of a majority of the TRUSTEES given either at a meeting or in
writing shall be effective and binding as if executed by all the TRUSTEES.
The TRUSTEES may establish such committees they deem appropriate (provided
the majority of the members of each committee are INDEPENDENT TRUSTEES).

SECTION 6. TITLE AND AUTHORITY OF TRUSTEES.

The TRUSTEES, as joint tenants, shall hold the legal title to all property
belonging to IRET in the name of IRET, or in the name of one or more of the
TRUSTEES, as TRUSTEES for IRET, or in the name of one or more nominees for
IRET provided that each such nominee shall execute an instrument in
recordable form recognizing the interest of IRET in the property so held.
The TRUSTEES shall have absolute and exclusive control, management, and
disposition thereof, and absolute and exclusive control over the management
and conduct of the business affairs of IRET.

SECTION 7. THE ADVISOR AND INDEPENDENT CONTRACTOR.

In their exercise of the absolute control and management of all the assets
of IRET, the TRUSTEES may contract for the services of an advisory firm or
corporation (hereinafter referred to as the ADVISOR) to advise them in
respect of investing and reinvesting the funds of IRET in real property
assets, interests in real property, mortgages secured by real property,
leasehold interests in real property, interests in mortgages, or other
assets. Such contract may provide that the ADVISOR shall act as agent of
IRET in the purchase and sale of real estate, leaseholds, or real estate
mortgages, or any interest therein. Such contract may also provide that the
ADVISOR shall act as agent of IRET in the management of real estate,
leaseholds or real estate mortgages, or any interest therein, and receive
commissions or other compensation for such management services at rates not
in excess of those prescribed by real estate boards or similar
organizations in the area in which the real estate is located, or the
TRUSTEES may employ a different firm or corporation to perform these
functions for all or some of IRET's properties and to receive such
commissions and compensations. Such contracts shall provide that they shall
not be assignable without the written consent of IRET and shall be for a
term of one year or less. Each advisory contact shall be terminable by a
majority of the INDEPENDENT TRUSTEES, or the ADVISOR or the holders of a
majority of the outstanding SHARES on sixty (60) days written notice
without cause or penalty.

It shall be the duty of the TRUSTEES to evaluate the performance of the
ADVISOR before entering into or renewing an advisory

II-37 Page 167 of 183

<PAGE>

contract. The criteria used in such evaluation shall be reflected in the
minutes of such meeting.

SECTION 8. WRITTEN POLICIES.

The TRUSTEES shall establish written policies on investments and borrowing
and shall monitor the administrative procedures, investment operations and
performance of the IRET and the ADVISOR to assure that such policies are
carried out.

SECTION 9. FIDUCIARY DUTY.

The TRUSTEES and ADVISOR of IRET shall be deemed to be in a fiduciary
relationship to IRET and the SHAREHOLDERS. The TRUSTEES of IRET shall also
have a fiduciary duty to the SHAREHOLDERS to supervise the relationship of
IRET with the ADVISOR.

SECTION 10. POWERS OF TRUSTEES.

The TRUSTEES shall have all the powers necessary, convenient, or
appropriate to effectuate the purposes of IRET and may take any action
which they deem necessary or desirable and proper to carry out such
purposes. Any determination of the purposes of IRET made by the TRUSTEES in
good faith shall be conclusive. In construing the provisions of the
DECLARATION OF TRUST, the presumption shall be in favor of the grant of
powers to the TRUSTEES.

Subject to the limitations contained in Article 1 hereof, the TRUSTEES'
powers shall include the following:

1. To purchase, acquire through the issuance of SHARES in IRET,
obligations of IRET, or otherwise, and to mortgage, sell, acquire
on lease, hold, manage, improve, lease to others (without
limitation as to the term of such lease, which may extend beyond
the termination of IRET), option, exchange for real or personal
property, release, and partition interests in personal property
and real estate interests of every nature, including freehold,
leasehold, mortgage, ground rent, and other interests therein,
and to erect, construct, alter, repair, demolish, or otherwise
change buildings and structures of every nature.

2. To purchase, acquire through the issuance of SHARES in IRET,
obligations of IRET, or otherwise, option, sell, and exchange
stocks, bonds, notes, certificates of indebtedness, and
securities of every nature.

3. To purchase, acquire through the issuance of SHARES in IRET,
obligations of IRET, or otherwise, grant security interests in,
sell, acquire on lease, hold, manage, improve, lease to others,
option, and exchange personal property of every nature.

II-38 Page 168 of 183

<PAGE>

4. To hold title to the property of IRET as is provided in this
DECLARATION OF TRUST.

5. To borrow money for the purposes of IRET and to give notes,
debentures, including debentures convertible into SHARES, bonds,
and other negotiable or nonnegotiable instruments of IRET
therefore; to enter into other obligations on behalf of and for
the purposes of IRET; and to mortgage, grant security interests
in, or pledge or cause to be mortgaged, granted security
interests in, or pledged real and personal property of IRET to
secure such notes, debentures, bonds, instruments, or other
obligations; and to subordinate the interests of IRET in real and
personal property, or interests therein to such other PERSONS and
on such conditions as is deemed desirable.

6. To lend money on behalf of IRET and to invest the funds of IRET.

7. To create reserve funds for such purposes as they deem advisable.

8. To deposit funds of IRET in banks and other depositories without
regard to whether such accounts will draw interest.

9. To pay taxes and assessments imposed upon or chargeable against
IRET or the TRUSTEES by virtue of or arising out of the
existence, property, business, or activities of IRET.

10. To purchase, issue, sell, or exchange SHARES of IRET as provided
by this DECLARATION OF TRUST. The good faith determination of
the value of the consideration received by IRET shall be within
the absolute discretion of the TRUSTEES.

11. To adopt and, from time to time, amend TRUSTEES' Regulations
which may include but shall not be limited to provisions relating
to the time, place, and notice of meetings of the TRUSTEES and of
the SHAREHOLDERS; record dates and other matters relating to
voting and the use of proxies designation, appointment and
compensation of representatives and agents and their number,
duties, powers, authorities, and qualifications; the conditions
for replacing lost, mutilated, or stolen SHARES; and the
procedure for amendment of the TRUSTEES' Regulations.

12. To exercise with respect to property of IRET all options,
privileges and rights, whether to vote, assent, subscribe, or
convert, or of any other

II-39 Page 169 of 183

<PAGE>

nature; to grant proxies; and to participate in and accept
securities issued under any voting trust agreement.

13. To participate in any reorganization, readjustment,
consolidation, merger, dissolution, sale or purchase of assets,
lease, or similar proceedings of any corporation, partnership or
other organization in which IRET shall have an interest and in
connection therewith to delegate discretionary powers to any
reorganization, protective, or similar committee and to pay
assessments and other expenses in connection therewith.

14. To engage or employ agents, representatives, and employees of any
nature, or independent contractors, including, without limiting
the generality of the foregoing, transfer agents for the transfer
of SHARES in IRET, registrars, underwriters for the sale of
SHARES in IRET, independent certified public accountants,
attorneys at law, appraisers, and real estate agents and brokers;
and to delegate to one or more TRUSTEES, agents, representatives,
employees, independent contractors, or other PERSONS such powers
and duties as the TRUSTEES deem appropriate. The same PERSONS may
he employed in multiple capacities and may receive compensation
from IRET in as many capacities as they may be engaged or
employed by IRET, and if TRUSTEES serve in such capacities they
may receive compensation in addition to that provided in Article
4, Section 1 hereof.

15. To determine conclusively the allocation between capital and
income of the receipts, holdings, expenses, and disbursements of
IRET, regardless of the allocation which might be considered
appropriate in the absence of this provision.

16. To determine conclusively the value from time to time and to
revalue the real estate, securities, and other property of IRET,
in accordance with such appraisals or other information as they
deem satisfactory.

17. To compromise or settle claims, questions, disputes, and
controversies by, against, or affecting IRET.

18. To solicit proxies of the SHAREHOLDERS.

19. To adopt a fiscal year for IRET and change such fiscal year.

20. To adopt and use a seal.

II-40 Page 170 of 183

<PAGE>

21. To merge or consolidate or otherwise amalgamate IRET or any
successor thereto with or into any other trust or corporation
engaged or to be engaged in business activities substantially
similar to those engaged in by IRET, subject to the provisions in
this DECLARATION OF TRUST.

22. To deal with IRET property in every way, including the entering
into joint ventures, partnerships, and any other combinations or
associations, that it would be lawful for an individual to deal
with the same, whether similar to or different from the way
herein and hereinabove specified.

SECTION 11. TRUSTEES' RIGHT TO OWN SHARES IN TRUST.

A TRUSTEE may acquire, hold, and dispose of SHARES in IRET for his
individual account and may exercise all rights of a Shareholder to the same
extent and in the same manner as if he were not a TRUSTEE. After the
commencement of any public offering of the SHARES of IRET, TRUSTEES may
purchase SHARES only at the current offer price then prevailing in
connection with such public offering, less all or any part of the selling
or other commission as may be agreed with the distributor.

SECTION 12. INDEMNIFICATION.

A. INDEMNIFICATION OF TRUSTEES.

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

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

II-41 Page 171 of 183

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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.

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.

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.

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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.

SECTION 13. PERSONS DEALING WITH TRUSTEES.

Any act of the TRUSTEES purporting to be done in their capacity as such, or
by agents or representatives of the TRUSTEES under authority from the
TRUSTEES shall, as to other PERSONS dealing with such TRUSTEES, agents, or
representatives, be conclusively deemed to be within the purposes of IRET
and within the powers of the TRUSTEES. No PERSON dealing with the TRUSTEES
or any of them, or with their authorized agents or representatives, shall
be bound to see to the application of any funds or property passing into
their hands or control.

The receipt of the TRUSTEES or any of them, or of their authorized agents
or representatives, for monies or other consideration paid or delivered to
any of them shall be effectual discharges to PERSONS paying or delivering
the same.

SECTION 14. ADMINISTRATIVE POWERS OF TRUSTEES.

The TRUSTEES shall have power to pay the expenses of organization and
administration of IRET, including all legal and other expenses in
connection with the preparation and carrying out of the plan for the
formation of IRET, the acquisition of properties thereunder and the
issuance of SHARES thereunder; and to employ such officers, experts,
counsel, managers, salesmen, agents, workmen, clerks and other PERSONS as
they think best, and fix their compensation and define their duties. Any
TRUSTEE so employed may receive special or additional compensation
therefore.

ARTICLE 5 - DURATION AND TERMINATION OF IRET

SECTION 1. TERMINATION OF IRET.

IRET shall, unless sooner terminated as provided hereinafter, continue in
existence until such time as all of its assets have been liquidated and
distributed to the SHAREHOLDERS. IRET may be terminated at any time by the
TRUSTEES or, if the TRUSTEES have not so terminated IRET, by the
affirmative vote of the holders of a majority of the issued and outstanding
SHARES.

In any event, unless this Trust shall be earlier terminated as provided in
this DECLARATION OF TRUST, it shall continue only until the expiration of
20 years after the death of the last survivor of the following named
PERSONS: C. Morris Anderson, Ralph A. Christensen, John D. Decker, J.
Norman Ellison, Jr., Magner J. Muus, Roger R. Odell and Thomas A. Wentz.

II-43 Page 173 of 183

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In connection with any termination of IRET, the TRUSTEES, upon receipt of
such releases or indemnity as they deem necessary for their protection, may

1. sell and convert into cash the property of IRET and distribute the
net proceeds among the SHAREHOLDERS ratably; or

2. convey the property of IRET to one or more PERSONS, entities,
trusts, or corporations for consideration consisting in whole or in
part of cash, SHARES of stock, or other property of any kind, and
distribute the net proceeds among the SHAREHOLDERS ratably, at
valuations fixed by the TRUSTEES, in cash or in kind, or partly in
cash and partly in kind; provided that the proposal to proceed as
described in this clause (2) shall have been set forth in the written
approval of the SHAREHOLDERS holding a majority of the SHARES issued
and outstanding.

Upon termination of IRET and distribution to the SHAREHOLDERS as herein
provided, a majority of the TRUSTEES shall execute and lodge among the
records of IRET an instrument in writing setting forth the fact of such
termination, and the TRUSTEES shall thereupon be discharged from all
further liabilities and duties hereunder, and the right, title, and
interest of all SHAREHOLDERS shall cease and be canceled and discharged.

SECTION 2. ORGANIZATION AS A CORPORATION.

Whenever the TRUSTEES deem it for the best interests of the SHAREHOLDERS
that IRET be organized as a corporation, the TRUSTEES shall have full power
to organize such corporation, under the laws of such state as they may
consider appropriate, in the place and stead of IRET without procuring the
further consent of any of the SHAREHOLDERS, in which event the capital
stock of such corporation shall be and remain the same as fixed under this
Agreement and DECLARATION OF TRUST and the SHAREHOLDERS shall receive and
accept stock in such corporation on the same basis as they hold SHARES in
IRET.

ARTICLE 6 - AMENDMENTS

SECTION 1. WHEN NO SHARES ARE OUTSTANDING.

At any time when no SHARES in IRET are outstanding, the TRUSTEES may amend
any provision of the DECLARATION OF TRUST. A certificate signed by a
majority of the TRUSTEES, setting forth such amendment and reciting that it
was duly adopted by the TRUSTEES, shall be lodged among the records of IRET
and shall be conclusive evidence of such amendment.

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SECTION 2. WHEN SHARES ARE OUTSTANDING.

At any time when SHARES in IRET are outstanding, except as provided in
Article 1, Section 6, the DECLARATION OF TRUST may be amended by the
TRUSTEES then in office only with the consent of SHAREHOLDERS owning a
majority of the issued and outstanding SHARES. A certificate signed by a
majority of the TRUSTEES setting forth an amendment and reciting that it
was duly adopted shall be lodged among the records of IRET and recorded or
filed in each public office or registry in which the DECLARATION OF TRUST
shall be recorded or filed and shall be conclusive evidence of such
amendment, and any restatement of any provision of the DECLARATION OF TRUST
purported to be contained therein.

ARTICLE 7 - MISCELLANEOUS

SECTION 1. APPLICABLE LAW.

The DECLARATION OF TRUST is executed and delivered in Minot, North Dakota,
and the laws of the State of North Dakota shall govern the construction,
validity, and effect of the DECLARATION OF TRUST and the administration of
the entity hereby created, provided, however, that causes of action for
violations of federal or state securities laws shall not be governed by
this Section 1.

SECTION 2. HEADINGS FOR REFERENCE ONLY.

Headings preceding the text, articles, and sections hereof have been
inserted solely for convenience and reference, and shall not be construed
to affect the meaning, construction, or effect of the DECLARATION OF TRUST.

In approval of the foregoing RESTATED DECLARATION OF TRUST for Investors
Real Estate Trust, the undersigned TRUSTEES constituting a majority hereby
approve this document.

Signature Title Date
--------- ----- ----

/s/ Ralph A. Christensen
- --------------------- Trustee and Chairman February 10, 1999
Ralph A. Christensen

/s/ Mike F. Dolan
- --------------------- Trustee and Vice Chairman February 10, 1999
Mike F. Dolan

/s/ Jeffrey Miller
- --------------------- Trustee and Vice Chairman February 10, 1999
Jeffrey Miller

/s/ Patrick G. Jones
- --------------------- Trustee February 10, 1999
Patrick G. Jones

/s/ J. Norman Ellison
- --------------------- Trustee February 10, 1999
J. Norman Ellison

II-45 Page 175 of 183

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/s/ Daniel L. Feist
- --------------------- Trustee February 10, 1999
Daniel L. Feist

/s/ C. Morris Anderson
- --------------------- Trustee February 10, 1999
C. Morris Anderson

/s/ Thomas A. Wentz, Jr.
- --------------------- Trustee February 10, 1999
Thomas A. Wentz, Jr.

/s/ John F. Decker
- --------------------- Trustee February 10, 1999
John F. Decker

II-46 Page 176 of 183

<PAGE>

November 12, 1998

EXHIBIT EX-5
OPINION RE LEGALITY

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11 DATED MAY 7th, 1999

In connection with the filing of Form S-11 by Investors Real Estate Trust, we
advise you that we have examined and are familiar with the originals of all
documents, trust records and other instruments relating to the organization
of Investors Real Estate Trust, the authorization and issuance of the shares
of Beneficial Interest described in said application, including the following:

1. Second Restated Declaration of Trust of Investors Real Estate Trust
dated February 10, 1999.

2. Registration Statement (Form S-11).

From our examination of said documents and records, it is our opinion:

1. Investors Real Estate Trust has been duly organized and is a validly
existing business trust under the laws of the State of North Dakota.

2. Investors Real Estate Trust has the power under North Dakota law to
conduct the business activities described in the Trust Agreement and
said Prospectus.

3. Investors Real Estate Trust is authorized to issue an unlimited number
of its shares of Beneficial Interest as set forth in its Trust
Agreement and such shares conform to the statements made about them in
said Form S-11 and Prospectus.

4. Said shares of Beneficial Interest have been duly and validly
authorized and issued.

II-47 Page 177 of 183

<PAGE>

5. We are not aware, and Investors Real Estate Trust has advised us that
it is not aware of any legal or governmental proceedings pending or
threatened to which Investors Real Estate Trust is a party or which
the property thereof is the subject; and it and we do not know of any
contracts of a character to be disclosed on said application or
prospectus which are not disclosed, filed and properly summarized
therein.

6. Said Form S-11 and the Prospectus and other exhibits attached thereto
are in the form required and have been examined by us; we have no
reason to believe that any of said documents contain any untrue
statement of material fact or omits to state any material fact the
statements therein not misleading. We have reviewed said documents
and to the best of our knowledge, information and belief, the
statements contained therein are correct.

PRINGLE & HERIGSTAD, P.C.

By /s/ Thomas A. Wentz, Jr.
--------------------------------
Thomas A. Wentz, Jr.

kak

II-48 Page 178 of 183

<PAGE>

EXHIBIT EX-8
OPINION RE TAX MATTERS

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11 DATED MAY 7th, 1999 - TAX MATTERS

In connection with the filing of the above described Form S-11 by Investors
Real Estate Trust, we advise you that we have prepared the section of the
Prospectus entitled "Tax Treatments of the Trust and Its Security Holders",
including the following subcategories: Federal Income Tax, North Dakota
Income Tax, Taxation of the Trust's Shareholders, Taxation of Tex-Exempt
Shareholders, Tax Considerations for Foreign Investors, Backup Withholding,
State and Local Taxes, Other Tax Considerations, Tax Aspects of the Operating
Partnership, Classification as a Partnership and Income Taxation of the
operating Partnership and Its Partners.

In connection with the preparation of said portion of the filing, we have
examined and are familiar with the originals of all documents, trust records
and other instruments relating to the organization and operation of Investors
Real Estate Trust, IRET Properties, a North Dakota Limited Partnership, and
all other related entities described in the filing.

In addition, we have reviewed all applicable provisions of the Internal
Revenue Code, the regulations issued thereunder and, where appropriate,
revenue rulings, federal and state court decisions and such other materials
as we deemed necessary and relevant to the matters being opined upon.

The conclusions and statements made in the above described portions of the
S-11 filing represent our opinions on such matters and have been set forth
with our knowledge and consent. The above portions of the Prospectus are
hereby incorporated by reference.

PRINGLE & HERIGSTAD, P.C.

By /s/ Thomas A. Wentz, Jr.
-------------------------------
Thomas A. Wentz, Jr.

kak

II-49 Page 179 of 183

<PAGE>

EX-23(i)

______________________

UNITED STATES SECURITIES AND
EXCHANGE COMMISSIONER
WASHINGTON DC 20549

FORM S-11 REGISTRATION STATEMENT
INVESTORS REAL ESTATE TRUST CIK0000798359

May 7, 1999

TO WHOM IT MAY CONCERN:

We consent to the incorporation directly or by reference in this Registration
Statement of Investors Real Estate Trust, on Form S-11 of our opinion letter
dated May 7th, 1999, concerning the opinion of legality. We also consent to
the reference to us under the heading "Experts" in the Prospectus, which is
also part of this Registration Statement.

PRINGLE & HERIGSTAD, P.C.

/s/ Thomas A. Wentz, Jr.
Thomas A. Wentz, Jr.

kak

II-50 Page 180 of 183

<PAGE>

EX-23(ii)

BRADY
MARTZ
- ----------------------------
CERTIFIED PUBLIC ACCOUNTANTS

UNITED STATES SECURITIES AND
EXCHANGE COMMISSIONER
WASHINGTON DC 20549

RE: FORM S-11 REGISTRATION STATEMENT
INVESTORS REAL ESTATE TRUST CIK0000798359

May 5, 1999

TO WHOM IT MAY CONCERN:

We hereby consent to the incorporation directly or by reference in the
Registration Statement of Investors Real Estate Trust on Form S-11, of the
consolidated financial statements and additional information of Investors
Real Estate Trust and Affiliated Partnerships as of April 30, 1998, as well
as our Independent Auditor's Report dated May 27, 1998. We also consent to
the reference to us under the heading "Experts" in the Prospectus, which is
part of the Registration Statement.

We also acknowledge that we are aware that said Form S-11 Filing includes the
unaudited consolidated financial report of the Registrant for the nine-month
period ended January 31, 1999.

BRADY MARTZ & ASSOCIATES, P.C.

/s/ BRADY MARTZ & ASSOCIATES, P.C.
- ------------------------------------

BRADY, MARTZ & ASSOCIATES, P.C.
24 West Central P.O. Box 848
Minot, ND 58702-0848 (701) 852-0196 Fax (701) 839-5452

II-51 Page 181 of 183

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENT ATTACHED HERETO AS EXHIBIT F FOR THE 9-MONTH PERIOD ENDED
JANUARY 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH EXHIBIT
F.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 3,086,972
<SECURITIES> 4,100,590
<RECEIVABLES> 1,709,669
<ALLOWANCES> 126,212
<INVENTORY> 0
<CURRENT-ASSETS> 12,932,502
<PP&E> 240,046,889
<DEPRECIATION> 22,575,451
<TOTAL-ASSETS> 217,471,438
<CURRENT-LIABILITIES> 2,822,462
<BONDS> 137,324,811
10,869,391
0
<COMMON> 74,708,559
<OTHER-SE> 6,555,933
<TOTAL-LIABILITY-AND-EQUITY> 224,718,514
<SALES> 0
<TOTAL-REVENUES> 9,102,278
<CGS> 0
<TOTAL-COSTS> 6,152,307
<OTHER-EXPENSES> 133,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,816,108
<INCOME-PRETAX> 1,193,988
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,193,988
<DISCONTINUED> 0
<EXTRAORDINARY> 366,017
<CHANGES> 0
<NET-INCOME> 1,560,005
<EPS-PRIMARY> .10
<EPS-DILUTED> .10

</TABLE>

<PAGE>

EX-99

Investors Real Estate Trust
SUBSCRIPTION AGREEMENT

AMOUNT $__________________ NUMBER OF COMMON SHARES ________________

OWNERSHIP Name(s)_________________________________________________________
REGISTRATION: Address ________________________________________________________
City ____________________________ State _______ Zip ____________

Social Security Number ____-____-____ or Tax I.D.# ___-_______
Date of Birth ____/____/____

Under penalties of perjury, the undersigned certified (1) that the number
shown as his taxpayer identification number is his correct taxpayer
identification number and (2) that he is not subject to back up withholding
either because he has not been notified that he is subject to backup
withholding as a result of a failure to report all interest and dividends or
because the Internal Revenue Service has notified him that he is no longer
subject to backup withholding.

- -------------------------------------------------------------------------------
MAILING ADDRESS FOR CORRESPONDENCE AND CASH DISTRIBUTIONS
Name(s)_______________________________________________________________________
Address_______________________________________________________________________
City ____________________________________ State __________ Zip ____
(If different from above)
______________________________________________________________________________
TITLE TO _____Individual _____Tenants in Common _____IRA ___Partnership
BE HELD: _____Joint Tenants/ _____Corporation _____Trust ___Pension Plan
Rights of Survivorship _____Marital Property _____Custodian ____Profit Sharing

- -------------------------------------------------------------------------------
SIGNATURES: I hereby certify as follows: That a copy of the Prospectus,
including the Subscription Agreement attached thereto, as amended
and/or supplemented to date, has been delivered to me, and I
acknowledge that such Prospectus was received.

Executed this ___ day of _______, 199__, at ___________(city) ___ (state).

Signature (investor's, otherwise Trustee of IRA, Pension Plan, etc.) ______

Additional Signature (if joint tenant)

- -------------------------------------------------------------------------------
The undersigned hereby represents that it has reasonable grounds to believe
on the basis of information obtained from the above-named investor concerning
his-her investment objectives, other investments, financial situation and
needs, and any other information known by it that:

A. The above-named investor is or will be in a financial position appropriate
to enable him-her to realize, to a significant extent, the benefits
discussed in the Prospectus;
B. The above-named investor has a fair market net worth sufficient to sustain
the risks inherent in the Shares, including loss of investment and lack of
liquidity; and
C. The Shares are otherwise suitable for the above-named investor. I further
represent that prior to executing this purchase transaction, I informed the
above-named investor of all pertinent facts relating to the liquidity of
the Shares.

- -------------------------------------------------------------------------------
SOLICITING DEALER ENDORSEMENT:
Firm _________________________________________________________
Registered Representative _______________________ Phone ______
Address ______________________________________________________
Dealer Authorized Signature __________________________________
NOTE: Checks to be made payable to: INVESTORS REAL ESTATE TRUST, 12 SOUTH
MAIN ST.,
MINOT, ND 58701

- -------------------------------------------------------------------------------
Accepted by: INVESTORS REAL ESTATE TRUST

________________________________
By: ODELL-WENTZ & ASSOCIATES Date _________________
(Advisor)

ii-53 Page 183 of 183