INLAND MONTHLY INCOME FUND III INC, POS AM, 1997-05-01

INLAND MONTHLY INCOME FUND III INC
POS AM, 1997-05-01
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1
As filed with the Securities and Exchange Commission on April 30, 1997
Registration No. 333-6459
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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POST-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-11
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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INLAND REAL ESTATE CORPORATION
(Exact name of registrant as specified in governing instruments)

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2901 Butterfield Road
Oak Brook, Illinois 60521
(Address of principal executive offices)

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Robert H. Baum, Esq.
Inland Real Estate Corporation
2901 Butterfield Road
Oak Brook, Illinois 60521
(Name and address of agent for service)

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With a copy to:
Michael J. Choate, Esq.
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611

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INLAND REAL ESTATE CORPORATION
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K

<TABLE>
<CAPTION>
Heading in Prospectus as may be updated in Supplement
Item Number and Caption Nos. 1 through 11
----------------------- ---------------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Post-Effective Amendment No. 3 to Registration Statement
Statement and Outside Front Cover Page and Prospectus Cover Page
Cover Page of Prospectus

2. Inside Front and Outside Back Inside Front Cover Page of Prospectus; Outside Back Cover
Cover Pages of Prospectus Page of Prospectus

3. Summary Information, Risk Prospectus Cover Page; Prospectus Summary; Compensation
Factors and Ratio of Earnings Table; Risk Factors; Conflicts of Interest; Plan of
to Fixed Charges Distribution

4. Determination of Offering Price Not Applicable

5. Dilution Not Applicable

6. Selling Security Holders Not Applicable

7. Plan of Distribution Cover Page; Prospectus Summary; Plan of Distribution;
Investment, Reinvestment and Share Repurchase Programs

8. Use of Proceeds Estimated Use of Proceeds of Offering

9. Selected Financial Data Not Applicable

10. Management's Discussion and Capitalization; Management's Discussion and Analysis of
Analysis of Financial Condition the Financial Condition of the Company
and Results of Operations

11. General Information as to Prospectus Summary; Prior Performance of the Company's
Registrant Affiliates; Management; Summary of the Organizational
Documents; Prior Performance Tables

12. Policy with Respect to Certain Risk Factors; Conflicts of Interest; Investment Objectives
Activities and Policies; Real Property Investments; Summary of the
Organizational Documents; Reports to Stockholders

13. Investment Policies of Registrant Risk Factors; Conflicts of Interest; Investment
Objectives and Policies; Real Property Investments;
Summary of the Organizational Documents
</TABLE>

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<TABLE>
<CAPTION>
Heading in Prospectus as may be updated in Supplement
Item Number and Caption Nos. 1 through 11
----------------------- ---------------------------------------------------------
<S> <C> <C>
14. Description of Real Estate Investment Objectives and Policies; Real Property
Investments

15. Operating Data Prior Performance of the Company's Affiliates; Prior
Performance Tables

16. Tax Treatment of Registrant and Risk Factors; Federal Income Tax Considerations; ERISA
Its Security Holders Considerations

17. Market Price of and Risk Factors
Distributions on the
Registrant's Common Equity and
Related Stockholder Matters

18. Description of Registrant's Description of Securities
Securities

19. Legal Proceedings Not Applicable

20. Security Ownership of Certain Capitalization
Beneficial Owners and
Management

21. Directors and Executive Management
Officers

22. Executive Compensation Compensation Table; Management

23. Certain Relationships and Conflicts of Interest; Management; Investment Objectives
Related Transactions and Policies; Real Property Investments

24. Selection, Management and Prospectus Summary; Investment Objectives and Policies;
Custody of Registrant's Real Property Investments
Investments

25. Policies with Respect to Conflicts of Interest; Investment Objectives and Policies;
Certain Transactions Summary of the Organizational Documents

26. Limitations of Liability Fiduciary Responsibility of Directors and the Advisor;
Indemnification

27. Financial Statements and Financial Statements
Information
</TABLE>

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<TABLE>
<CAPTION>
Heading in Prospectus as may be updated in Supplement
Item Number and Caption Nos. 1 through 11
----------------------- ---------------------------------------------------------
<S> <C> <C>
28. Interests of Named Experts and Counsel Not Applicable

29. Disclosure of Commission Position on Fiduciary Responsibility of Directors and the
Indemnification for Securities Act Advisor; Indemnification; Plan of Distribution
Liabilities

</TABLE>

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<PAGE> 5
Inland Real Estate Corporation
Sticker Supplement

Supplement No. 11 to the Company's Prospectus supersedes each of the
previous supplements filed by the Company, discloses information regarding
recently completed and pending acquisitions by the Company and updates certain
information in sections of the Prospectus headed "Estimated Use of Proceeds",
"Prior Performance of the Company's Affiliates", "Management", "Selected
Financial Data", "Real Property Investments", "Capitalization", "Principal
Stockholders", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Plan of Distribution" and "Experts". In addition,
this Supplement No. 11 updates and supersedes the financial statements and
prior performance tables included in the Prospectus. Unless otherwise defined,
capitalized terms used herein shall have the same meaning as in the Prospectus.

The Company commenced the "best efforts" offering on July 24, 1996,
and as of April 14, 1997, the Company had accepted subscriptions for 6,060,133
shares ($56,305,809 net of Selling Commissions, the Marketing Contribution and
the Due Diligence Expense Allowance Fee). Inland Securities Corporation, an
Affiliate of the Advisor, serves as dealer-manager of the Offering and is
entitled to receive selling commissions and certain other amounts. As of April
14, 1997, Inland Securities Corporation was entitled to receive commissions,
the Marketing Contribution and the Due Diligence Expense Allowance Fee totaling
$5,757,127. An Affiliate of the Advisor is also entitled to receive Property
Management Fees for management and leasing services.

<PAGE> 6

SUPPLEMENT NO. 11
DATED APRIL 30, 1997
TO THE PROSPECTUS DATED JULY 24, 1996
OF INLAND REAL ESTATE CORPORATION

This Supplement No. 11 is provided for the purpose of supplementing
the Prospectus dated July 24, 1996 of Inland Real Estate Corporation (the
"Company"), as previously supplemented by Supplement No. 10 dated January 31,
1997 (which superseded Supplements Nos. 1-9). This Supplement No. 11
supersedes each of these supplements, discloses information regarding recently
completed and pending acquisitions by the Company and updates certain
information in sections of the Prospectus headed "Estimated Use of Proceeds",
"Prior Performance of the Company's Affiliates", "Management", "Selected
Financial Data", "Real Property Investments", "Capitalization", "Principal
Stockholders", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Plan of Distribution" and "Experts". This Supplement
No. 11 updates and supersedes the financial statements and prior performance
tables included in the Prospectus. Unless otherwise defined, capitalized terms
used herein shall have the same meaning as in the Prospectus.

RISK FACTORS/ESTIMATED USE OF PROCEEDS OF OFFERING

Investors are advised that the Offering is not conditioned upon the
Company raising a minimum amount of proceeds. Therefore, the Company may not
raise proceeds sufficient to apply to any use other than the payment of
organization and offering expenses associated with the Offering. Up to 12.61%
of the amount invested by any purchaser will be used by the Company to fund
various expenses associated with the Offering and a working capital reserve.
As a result, the Company estimates that only 87.39% of Gross Offering Proceeds
will be used to acquire properties if the Maximum Offering is sold. In
addition, although the Company anticipates that the total Public Offering
Expenses will total approximately 11.11% of the Gross Offering Proceeds,
investors are advised that these expenses may total up to 15% of Public
Offering Expenses.

PRIOR PERFORMANCE OF THE COMPANY'S AFFILIATES

PRIOR INVESTMENT PROGRAMS

The Inland organization, during the past ten years, has sponsored
seven public and 16 private real estate programs which have raised in excess in
$206,800,000. In excess of 17,100 investors have invested in these
Inland-sponsored programs. The investment objectives and policies of the
Company are similar to those of several investment programs which have owned
and operated retail properties. However, the vast majority of these investment
programs were dissimilar from the Company in that the partnerships owned
apartment properties or whole or partial interests in mortgage loans.

The information in this Section and in the Prior Performance Tables
included in this Prospectus as Exhibit A shows relevant summary information
concerning real estate programs sponsored by the Advisor and its Affiliates,
the purpose of which is to provide information on the prior performance of
these programs so that potential investors may evaluate the experience of the
Advisor and its Affiliates in sponsoring such

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programs. The following discussion is intended to briefly summarize the
objectives and performance of prior programs and to disclose any material
adverse business developments sustained by them.

SUMMARY INFORMATION

The table below provides certain summarized information concerning
prior programs through the date of this Prospectus and is qualified in its
entirety by reference to the foregoing introductory discussion and the detailed
information appearing in the Prior Performance Tables in this Prospectus.
Investors should not construe inclusion of the succeeding tables, which cover
the period from January 1, 1987 through December 31, 1996, as implying in any
manner that the Company will have results comparable to those reflected in the
tables; the yield and cash available and other factors could be substantially
different for the Company's properties. Investors should note that by
acquiring Shares in the Company, they will not be acquiring any interests in
any prior programs.

<TABLE>
<CAPTION>
Prior Prior
Public Private
Programs Programs
<S> <C> <C>
Number of programs sponsored . . . . . . . . . . . . . . 7 16
Aggregate amount raised from investors . . . . . . . . . $181,706,000 $25,112,454
Aggregate number of investors . . . . . . . . . . . . . . 16,500 656
Number of properties purchased . . . . . . . . . . . . . 87 31 (1)
Aggregate cost of properties . . . . . . . . . . . . . . $163,913,000 (2) $118,233,000 (3)

Percentage of properties (based on cost) that were:
Commercial
Retail . . . . . . . . . . . . . . . . . . . . . . . 2.5% 0.0%
Single-user retail net-lease . . . . . . . . . . . . 8.7% 27.5%
Nursing homes . . . . . . . . . . . . . . . . . . . 8.7% 0.0%
Offices . . . . . . . . . . . . . . . . . . . . . . 0.0% 0.0%
Industrial . . . . . . . . . . . . . . . . . . . . . 0.0% 0.0%
Health clubs . . . . . . . . . . . . . . . . . . . . 4.7% 0.0%
Mini-storage . . . . . . . . . . . . . . . . . . . . 0.0% 0.3%
Total commercial . . . . . . . . . . . . . . . . . 24.6% 28.5%

Multi-family residential . . . . . . . . . . . . . . . 19.0% 72.2%
Land . . . . . . . . . . . . . . . . . . . . . . . . . 56.4% 0.3%

Percentage of properties (based on cost) that were:
Newly constructed (within a year of acquisition . . . . 8.7% 4.9%
Existing . . . . . . . . . . . . . . . . . . . . . . . 91.3% 95.1%
Construction . . . . . . . . . . . . . . . . . . . . . 0.0% 0.0%

Number of properties sold . . . . . . . . . . . . . . . . 12 6
23.2% (4)
Number of properties exchanged . . . . . . . . . . . . . 0 6
</TABLE>

(1) Includes 14 properties acquired following the disposition of a
program's original real estate asset. See "--Loan Modifications and
Work-Outs" in this Section.

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(2) Includes purchase price and acquisition fees and expenses.
(3) Represents the aggregate purchase prices paid by the investment
programs. Includes $32,479,315 in properties acquired following the
disposition of a program's original real estate asset.
(4) Based on costs of property including portions of land parcels sold at
December 31, 1996, and costs capitalized subsequent to acquisition.

During the three years prior to December 31, 1996, publicly registered
investment programs sponsored by IREIC purchased a total of 17 parcels of land
totaling 2,993 acres, all located in northeast Illinois. The land was
purchased on an all-cash basis. Upon written request of the Company, any
potential investor may obtain, without charge, a copy of Table VI, filed with
the Commission in connection with this Offering, which provides more detailed
information concerning these acquisitions.

PUBLICLY REGISTERED LIMITED PARTNERSHIPS

INLAND'S MONTHLY INCOME FUND, L.P. ("MONTHLY INCOME FUND I") -- The
offering period for Monthly Income Fund I began August 3, 1987 and ended August
3, 1988. The objectives were to invest in improved residential, retail,
industrial and other income-producing properties on an all-cash basis to
provide monthly cash distributions of at least 8% per annum throughout the life
of the partnership and to provide a hedge against inflation through capital
appreciation.

Monthly Income Fund I raised $30,000,000 from over 2,200 investors.
Originally, Monthly Income Fund I purchased seven properties, including five in
Illinois, one in Ohio and one in Oklahoma, for a total investment of
$27,511,692 which includes acquisition costs of $25,831,542 plus an additional
$1,487,500 expended for the upgrade of the McHenry Plaza, a neighborhood retail
center, in McHenry, Illinois, plus $192,650 for upgrade costs at other
properties. The properties owned by Inland Monthly Income Fund I include, in
addition to McHenry Plaza, two nursing centers, two retail stores leased on a
triple-net basis by Wal-Mart Stores Inc., a health club facility and an
apartment complex, which was sold on an installment basis in 1994 and 1995.
Through December 31, 1996, cash distributions have been maintained at an 8%
level and on an accrual basis have totaled $374.65 per $500 unit or $21,224,485
including $18,281,897 from operating cash flow, $305,000 of net sales proceeds
from the sale of the apartment complex, $2,095,863 from supplemental capital
contributions from IREIC and $541,725 as a partial return of capital from
partnership reserves. In the opinion of IREIC, the partnership is
substantially meeting its investment objective for cash flow.

Two of Monthly Income Fund I's properties, which represent 26.3% of
its total assets as measured by their original purchase price, are nursing
center facilities which are 100% leased by Elite Care Corporation ("Elite").
Monthly Income Fund I's lease with Elite became effective in February 1991,
following the termination of a lease with Adventist Living Centers Inc.
("ALC"), the tenant which was in place when Monthly Income Fund I purchased the
properties. After ALC began experiencing financial difficulties, IREIC sought
out Elite as a replacement nursing home operator/tenant. The net effect to
Monthly Income Fund I was a .5% decrease in the effective rent over the term of
the leases for the two nursing homes, from $67,270 per month when ALC was the
tenant to $66,936 from Elite. Under the terms of the lease agreements for the
nursing care facilities the partnership must approve any sublease transaction.
The current operator of these facilities has negotiated with a new operator to
sublease the facilities. IREIC has reviewed and approved the transaction with
no significant changes to the terms of the leases.

The major tenant at McHenry Plaza is a Walgreens drug store. Other
tenants are Don Robert's Beauty School, Northern Federal Savings Bank, Merit
Medical Equipment and Family Entertainment Center. These tenants took
possession of their spaces at the center from 1990 through 1996, following the
July 1989 termination of a lease with Duckwell-Alco Stores, Inc. ("Alco"), the
tenant which leased 94% of the space

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in the center at the time Monthly Income Fund I purchased the property. IREIC
embarked on a program to re-lease the center to new tenants, and secured a
$1,700,000 line of credit for property upgrades, remodeling and re-leasing
expenses. Annual principal and interest payments on this debt total $187,943.
Approximately 80% of the property is currently leased. Additional expenditures
for build-out and leasing commissions are anticipated as the remaining rentable
space is leased. The lease-up of McHenry Plaza will increase the cash flow
available for distribution by Monthly Income Fund I.

The partnership successfully completed the conversion of the apartment
complex to condominiums. Condominium sales began during the first quarter of
1994. As of December 31, 1995, all of the 38 six-unit buildings at the property
had been sold.

The defaults by ALC and Alco, the expense of upgrades and build-out at
the McHenry Plaza and lower than expected net rental income from the apartment
complex have reduced cash available for distribution by Monthly Income Fund I.
Under the terms of a guarantee agreement, IREIC has made supplementary capital
contributions totaling $2,095,863 from the inception of the program through
December 31, 1996 for the purpose of providing 8% annual cash distributions to
investors. These supplementary capital contributions will begin to be repaid
from cash flow in the future, but only if excess cash flow exists after payment
of an 8% annual distribution to investors. The effect on investors is that
cash flow distributions will not exceed 8% per annum for the foreseeable
future. In addition, IREIC may be reimbursed for its supplementary capital
contributions from the sale or financing of properties, but only after
investors have received the return of their capital. The effect on investors is
that profits from the sale of the properties will be reduced by the amounts
contributed by IREIC under the 8% distribution guarantee agreement.

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

Monthly Income Fund II raised $25,323,569 from more than 2,100
investors and purchased five properties, a net-leased Wholesale Club retail
property in Indiana, a net-leased health club in Ohio, a net-leased nursing
center in Illinois, a net-leased retail store in Arizona and the Euro-Fresh
Market Plaza (formerly Eagle Plaza), a neighborhood retail center in Illinois,
for a total acquisition cost of $21,224,542. Through December 31, 1996, cash
distributions have been maintained at or above an 8% level and on an accrual
basis have totaled $372.44 per $500 unit or $17,982,890, including $13,587,325
from operations and an additional $4,395,565 which constitutes the net proceeds
from the sale of the Wholesale Club.

One of Monthly Income Fund II's properties, which represents 35.44% of
its total assets, as measured by its original purchase price, is a nursing
center which is 100% leased to Elite. Monthly Income Fund II's lease with
Elite became effective in February 1991, following the termination of a lease
with ALC, the tenant which was in place when Monthly Income Fund II purchased
the property. After ALC began experiencing financial difficulties, IREIC sought
out Elite as a replacement nursing home operator/tenant. The net effect to
Monthly Income Fund II was an 8% decrease in the effective rent from the
nursing center over the term of the lease, from $77,368 per month when ALC was
the tenant to $71,895 from Elite. Under the terms of the lease agreement for
the nursing center the partnership must approve any sublease transaction. The
current operator of this facility has negotiated with a new operator to
sublease the facility. IREIC has reviewed and approved the transaction with no
significant changes to the terms of the lease.

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On January 8, 1991, Monthly Income Fund II sold its Wholesale Club
property in Indiana for $4,400,000. Net sales proceeds of $4,395,565 were
distributed to investors on February 1, 1991. The property was purchased by
Monthly Income Fund II in December 1988 for $3,427,278, which included
acquisition fees of $275,013 and acquisition costs of $9,265. The gain on sale
for financial reporting purposes was $847,467, which is net of selling expenses
and commissions.

On January 21, 1994, the anchor tenant at Eagle Plaza neighborhood
retail center, Eagle Foods, closed its store. On February 4, 1994 and with the
approval of IREIC, Eagle Foods assigned its lease to Certified Grocers Midwest,
Inc. ("Certified") who vacated in August 1995. During May 1996, Euro-Fresh
Market ("Euro-Fresh") began its occupancy if the anchor store and the shopping
center has been renamed Euro-Fresh Market Plaza. Under the original lease, as
well as the assignment of the lease, Eagle Foods has guaranteed payments until
November 1998.

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

INLAND REAL ESTATE GROWTH FUND, L.P. ("GROWTH FUND I") -- The offering
period for Growth Fund I began December 9, 1985 and ended August 9, 1987. The
objectives were to invest in multi-family residential properties on a
moderately leveraged basis for capital appreciation through increases in
property values, tax-sheltered quarterly cash distributions and the build-up of
equity through reduction of mortgage indebtedness.

Growth Fund I raised $9,465,000 from more than 700 investors and
purchased four properties which included one multi-family residential property
in Arizona and a partial interest in another multi-family residential property
in Illinois. The other two properties were repurchased from Growth Fund I by
IREIC. The terms of these repurchase transactions placed Growth Fund I in the
same cash position it would have been in had the properties never been
acquired. Growth Fund I sold the multi-family residential property located in
Illinois as condominium units to individual purchasers for $6,685,950. Of the
total net sales proceeds of $6,455,375, $1,650,000 was used to pay off the
underlying debt on the property, $1,715,198 was distributed to limited partners
during 1994, $1,832,785 was used to pay down the debt on the partnership's
Arizona property and the remainder was used to fund condominium conversion
costs. The property was purchased by Growth Fund I in December 1985 for
$3,836,416, which included acquisition fees of $483,500. The gain on sale for
financial reporting purposes was $2,236,220, which is net of selling expenses
and commissions. Cash distributions to limited partners through December 31,
1996 totaled $524.07 per $1,000 unit or $4,651,898, including $1,416,185 from
operations, $1,724,843 from the sale or refinancing of the partnership's
properties, $943,224 from the repurchase of partnership properties by IREIC and
$567,646 partial return of capital from partnership reserves. The monthly
principal and interest payments on the Arizona property were reduced from
$27,819 to $12,314 as a result of refinancing the Arizona property in March
1994 and the debt reduction described above.

In IREIC's opinion, the Arizona real estate market has been improving
over the last two years, and a sale of the Arizona property will be evaluated
on an ongoing basis with the intent to profitably conclude the partnership. The
decline in the Arizona market from 1989 through 1992 reduced net operating
income from that property and, therefore, the quarterly cash distributions
which might otherwise have been received by limited partners during that
period. Similarly, the decline of the Arizona market has extended the holding
period for that property. If and when the Arizona property can be sold at a
profit, the annual rate of capital appreciation realized by investors will be
less than if the Arizona market had not declined.

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As of January 1, 1997, the partnership has listed and is actively
marketing Scottsdale Sierra Apartments for sale at an amount in excess of its
carrying value and has suspended depreciation. As of the date of this report,
the partnership has received and is currently negotiating an offer for the
purchase of Scottsdale Sierra Apartments for an amount which exceeds the
carrying value of the property.

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

Growth Fund II raised $4,038,250 from 336 investors and purchased two
properties, a multi-family residential property in Illinois and a health club
in Ohio. These properties were purchased for a total acquisition cost of
$5,615,826. The health club is currently approximately 60% financed with 40%
equity. Cash distributions to limited partners through December 31, 1996
totaled $1,139.65 per $1,000 unit or $4,526,031, including $877,260 from
operations and $3,648,771 return of capital from the sale of the multi-family
property in Illinois as 18 individual six-unit apartment buildings. All 18 of
the six-unit buildings were sold to third-party buyers on an installment basis
for $245,334 to $250,000 per building or a total of $4,261,895 (net of selling
expenses). Growth Fund II's cost basis in the buildings was $4,112,195. The
partnership extended financing to buyers to allow buyers to make monthly
interest payments to Growth Fund II for a period of not more than seven to ten
years, at which time the balance of the purchase price would be due. However,
as of December 31, 1995, 13 of the installment sale loans had been prepaid in
full and five had been substantially pre-paid (the partnership continues to be
owed $80,000 on these loans, secured by second mortgages). In the opinion of
IREIC, the sale of the multi-family property as individual six-unit apartment
buildings has resulted in modest capital appreciation within a short holding
period. IREIC is evaluating strategies to sell the partnership's remaining
assets and bring the partnership to a profitable conclusion.

INLAND LAND APPRECIATION FUND, L.P. ("LAND FUND I") -- The offering
period for Land Fund I began October 12, 1988 and ended October 6, 1989. The
objectives were to invest in pre-development land on an all-cash basis and
realize appreciation of such land upon resale.

Land Fund I raised $30,001,000 from 3,425 investors and purchased 25
land parcels, all in suburban counties surrounding Chicago, Illinois, for an
aggregate purchase price of $25,187,069. As of December 31, 1996, Land Fund I
has had multiple sales transactions involving all or portions of 13 parcels
which generated $5,875,580 in net sales proceeds. Land Fund I's cost basis in
the land parcels sold was $3,222,163 resulting in a gain, net of selling
expenses and commissions, of $2,653,417 for financial reporting purposes. In
the opinion of IREIC, the partnership is currently meeting its investment
objectives and has, through completed sales transactions, realized significant
capital appreciation on the assets sold. Cash distributions to limited
partners through December 31, 1996 totaled $4,146,404, all from the sale of
land parcels.

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

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for financial reporting purposes. In the opinion of IREIC, the partnership is
currently meeting its investment objectives and has, through completed
sales transactions, realized significant capital appreciation on the assets
sold. Cash distributions to limited partners through December 31, 1996 totaled
$2,836,963, including $2,115,963 from sales and $721,000 from operations.

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

Land Fund III raised $32,399,282 from 2,683 investors and purchased 18
land parcels, one of which included a house and several outbuildings, for an
aggregate purchase price of $25,945,989. Land Fund III has completed two sales
transactions, involving the house and portions of two parcels which generated
$646,334 in net sales proceeds. Land Fund III's cost basis in the land parcels
sold was $417,551 resulting in a gain, net of selling expenses and commissions,
of $228,783 for financial reporting purposes. In the opinion of IREIC, the
partnership is currently meeting its investment objectives and has, through
completed sales transactions, realized significant capital appreciation on the
assets sold. Cash distributions to limited partners through December 31, 1996
totaled $646,474, all from the sale of land parcels.

PRIVATE PARTNERSHIPS

Since inception, Affiliates of the Advisor have sponsored 514 private
placement limited partnerships which have raised more than $524,201,000 from
approximately 17,000 investors and invested in properties for an aggregate
price of more than $1 billion in cash and notes. Of the 522 properties
purchased, 93% have been in Illinois. Approximately 90% of the funds were
invested in apartment buildings, 6% in shopping centers, 2% in office buildings
and 2% in other properties. Including sales to Affiliates, 281 partnerships
have sold their original property investments. Officers and employees of IREIC
and its Affiliates invested more than $17,000,000 in these partnerships.

From 1990 and through the end of 1996, investors in Inland's private
partnerships have received total distributions in excess of $109,807,900
consisting of cash flow from partnership operations, sales and refinancing
proceeds and cash received during the course of property exchanges. Following a
proposal by Inland Real Estate Corporation, the former corporate general
partner, investors in 301 private partnerships voted in 1990 to make IREIC the
corporate general partner for those partnerships.

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have participated in the sale of properties to the Apartment REIT. On August 1,
1994, Judge Thomas O'Brien granted IREIC's motion to dismiss, finding that
plaintiffs lacked standing to bring this case individually. Plaintiffs were
granted leave to file an amended complaint within 28 days. On August 29, 1994,
six investors filed an amended complaint, purportedly on behalf of a class of
other investors, and derivatively on behalf of six limited partnerships of
which IREIC is the general partner. The derivative counts seek damages from
IREIC for alleged breach of fiduciary duty and breach of contract, and assert a
right to an accounting. IREIC filed a motion to dismiss in response to the
amended complaint. The suit was dismissed on March 31, 1995 with prejudice,
and the plaintiffs were given until May 1, 1996 to file an appeal. An appeal
was filed on April 25, 1996 and the parties briefed the issue. Arguments were
heard by the Appellate Court in February 1997, but a decision has not yet been
reached by the court regarding this appeal.

PRIVATE PLACEMENT REAL ESTATE EQUITY PROGRAM

WISCONSIN CAPITAL LAND FUND, L.P., an Illinois limited partnership,
was formed in October 1992. The objectives were to invest in pre-development
land in the Madison, Wisconsin area on an all-cash basis and realize
appreciation of such land upon resale. The offering period for units in this
privately offered partnership began October 1992 and ended June 14, 1993 with
the maximum amount, $2,275,000, raised. Seven parcels of land in the Madison,
Wisconsin, area were purchased with the proceeds of the offering. Limited
partners will receive cash distributions as land parcels are sold.

PRIVATE PLACEMENT MORTGAGE AND NOTE PROGRAMS

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

TRIPLE SECURITY FUND, L.P., an Illinois limited partnership, was
formed in May 1992. The principal investment objectives of the partnership
were to invest in participations in third-party mortgage loans owned by an
Affiliate of IREIC and thereby return investors' capital within five years, and
to provide a 10% annual return on invested capital during the life of the
partnership. The return of capital and the 10% annual return were guaranteed by
IREIC. The offering period for interests in this privately offered partnership
began in May 1992 and ended in June 1992 with the maximum amount of $3,000,000
raised. All of the offering proceeds were used to invest in participations in
14 wraparound mortgage loans and first mortgage loans, secured by condominium,
multi-family residential and commercial properties located in the Chicago
metropolitan area. Limited partners received their first monthly cash
distribution on July 17, 1992. Cash distributions to limited partners through
September 30, 1996 totaled $4,294,216, including $1,226,419 from operations and
subsidy income of $67,797 from IREIC, pursuant to the guarantee for that
program. $3,000,000 was a return of capital resulting from a payoff by the
Affiliate. This partnership was liquidated in 1996.

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

8
<PAGE> 14
9% INCOME JUNIOR MORTGAGE FUND, L.P., an Illinois limited partnership,
was formed in July 1992. The principal investment objectives of the
partnership were to invest in third-party junior mortgage loans owned by an
Affiliate of the Advisor and thereby return investors' capital within six
years, and to provide a 9% annual return on invested capital during the life of
the partnership. The return of capital and the 9% annual return were guaranteed
by IREIC. The offering period for interests in this privately offered
partnership began in July 1992 and ended September 1992 with the maximum amount
of $1,000,000 raised. All of the offering proceeds were used to invest in
third- party junior mortgage loans owned by the Affiliate, secured by
condominium, multi-family residential and commercial properties located in the
Chicago metropolitan area. Limited partners received their first monthly cash
distribution on September 17, 1992. Cash distributions through December 31,
1996 totaled $463,474, of which $366,176 was interest earnings, $97,240 was a
return of capital resulting from the amortization of mortgage loans and $9,539
was a loan from IREIC, pursuant to the distribution guarantee for that program.

INLAND EMPLOYEE APPRECIATION FUND, L.P., an Illinois limited
partnership offering investments in promissory notes, was formed in December
1992. The offering period for the purchase of Notes began in December 1992 and
ended in February 1993 with the maximum amount of $400,000 raised. Notes were
offered only to Illinois residents who are employees of IREIC and its
Affiliates. Notes with a term of four years and providing 10% annual interest
were issued by the partnership. The return of capital to noteholders and the
specified annual return are guaranteed by IREIC. Inland Employee Appreciation
Fund, L.P. invested in a loan made to an Affiliate of IREIC, which was secured
by collateral assignments of third-party investor loans owned by the Affiliate.
Noteholders received their first monthly interest distribution on March 17,
1993. Cash distributions through May 31, 1996 totaled $502,198, of which
$99,769 was interest earnings and $2,429 was subsidy income from IREIC,
pursuant to the guarantee for that program. The balance of $400,000 was a
return of capital. This partnership was liquidated in 1996.

In February 1993, IREIC sponsored 9% MONTHLY CASH FUND, L.P., an
Illinois limited partnership offering investments in promissory notes to
accredited investors. The offering period for this program began February 1,
1993 and ended on May 17, 1993 when the maximum amount of $4,000,000 raised.
Notes maturing August 1, 1999 and providing a 9% annual return were issued by
the partnership. 9% Monthly Cash Fund, L.P. invested in loans made to an
Affiliate of IREIC secured by collateral assignments of third party mortgage
loans owned by the Affiliate. The return of capital to noteholders and the 9%
annual return are guaranteed by IREIC. Cash distributions through December 31,
1996 totaled $1,259,231, of which $1,254,921 was interest earnings and $4,310
was from working capital reserves.

In April 1993, IREIC sponsored 9% MONTHLY CASH FUND II, L.P., an
Illinois limited partnership offering investments in promissory notes to
accredited investors, with investment objectives identical to those of 9%
Monthly Cash Fund, L.P. The offering period for this program began April 5,
1993 and ended July 23, 1993, with the maximum amount of $4,000,000 raised.
Notes maturing February 1, 2000 and providing a 9% annual return were issued by
the partnership. 9% Monthly Cash Fund II, L.P. has invested in a loan made to
an Affiliate of IREIC, secured by collateral assignments of third-party
mortgage loans owned by the Affiliate. The return of capital to noteholders and
the 9% annual return are guaranteed by IREIC. Cash distributions through
December 31, 1996 totaled $1,197,453, of which $1,194,260 was interest earnings
and $3,193 was from working capital reserves.

9
<PAGE> 15
receive additional interest, dependent on the future sale of the property. An
initial distribution to investors of escrow interest, totaling $13,685, was
made November 17, 1993. Cash distributions through December 31, 1996 totaled
$1,599,110, of which $1,579,654 was interest earnings and $19,456 was subsidy
income from IREIC pursuant to the guarantee for that program.

In December 1993, IREIC sponsored INLAND CONDOMINIUM FINANCING FUND,
L.P., an Illinois limited partnership offering investment in promissory notes.
The offering period for this program began December 15, 1993 and closed on June
30, 1994. This partnership offered notes in the principal amount of $1,031,000
maturing July 1, 2001 with 10% per annum interest and 100% return of principal
guaranteed by IREIC. The proceeds of the offering have been used to make
unsecured loans to limited partnerships which are Affiliates of IREIC, for the
purposes of paying expenses relating to the conversion of apartment properties
owned by those partnerships to condominiums, and conducting condominium unit
sales and other partnership expenses. Cash distributions began on March 17,
1994. Distributions through December 31, 1996 totaled $281,117, all of which
were interest earnings.

An August 1988 private placement securities offering sponsored by an
Affiliate of IREIC was INLAND JUNIOR MORTGAGE FUND, L.P., an Illinois limited
partnership. The offering period for this program ended May 1989 with $410,000
raised. All of the proceeds available for investment were used to purchase 82
second mortgages owned by Inland Mortgage Investment Corporation ("IMIC"),
secured predominantly by condominium units located in the Chicago metropolitan
area. In February 1996, 20 limited partners exercised their put option and IMIC
bought their interests. Cash distributions through January 28, 1997 have
totaled $541,156, including $131,156 from interest earnings and $410,000 return
of capital from loan repayments. All capital has been returned and the
partnership will be liquidated in 1997.

LOAN MODIFICATIONS AND WORK-OUTS

Between 1990 and December 31, 1996, 40 Inland-sponsored partnerships
owning 27 properties ceased making debt service payments to unaffiliated
lenders which held the underlying financing on the properties. These actions
were taken with the objective of reducing or restructuring the debt to levels
commensurate with the levels of performance of the operating properties. In the
case of six of these partnerships, namely 14 W. Elm Limited Partnership, 1445
North State Parkway Limited Partnership, 5600 Sheridan Limited Partnership,
5630 Sheridan Limited Partnership, 6030 Sheridan Limited Partnership and Oak
Brook Commons Limited Partnership, the original asset of each of these
partnerships was transferred to a new partnership which was 100% owned by the
old partnership. IREIC believed that the new partnerships were better
positioned to accomplish a work-out with the lender. In connection with the
transfers of three of these properties to the new partnerships discussed above,
the lender holding the first mortgages on these properties filed a separate
proceeding against the general partner and its Affiliates, claiming contractual
interference and other allegations. This complaint was withdrawn as part of a
final settlement reached with the lender in February 1993.

10
<PAGE> 16
third-party lender and then sold to a third party. The new partnerships owned
by the 14 W. Elm, 6030 Sheridan and Oak Brook Commons Limited Partnerships
participated with the general partner and its affiliates and with 16 other
affiliated limited partnerships, all of whose properties were subject to
first-mortgage loans from the same third-party lender, in a settlement
agreement with that lender. Under the terms of the settlement agreement, the 16
other affiliated limited partnerships- -none of which were in default on their
mortgage loans--provided additional security to the lender with respect to each
of their loans by transferring administration of property tax escrow accounts
to the lender. The transfer of the escrow accounts had no financial impact on
the 16 partnerships. Five of the 16 other partnerships also obtained favorable
loan modifications from the lender. In the case of the new partnership owned
by the 14 W. Elm Limited Partnership, the lender cooperated in a tax-deferred
exchange of the partnership's real estate asset. The partnership assigned its
interest in its property, subject to the existing indebtedness, to an
unaffiliated third party in exchange for an assignment of the unaffiliated
third party's interest in another property, subject to indebtedness in a
principal amount similar to that on the 14 W. Elm property. This transaction
was accomplished with the objective of avoiding the creation of any current
income tax liability to the partnership or its limited partners. As a result of
this tax-deferred exchange, the 14 W. Elm Limited Partnership owns a net-lease
commercial property secured by a long- term lease with a creditworthy tenant.
The debt service on the indebtedness used to acquire the exchange property is
in the form of fully amortizing payments over the term of the store lease, with
the net-lease payments received from the tenant equal to the required debt
service payments. The possibility of cash flow distributions to the limited
partners is, therefore, precluded. However, the expectation exists for equity
accumulation through the amortization of the loan and, therefore, a
distribution to the limited partners upon the disposition of the exchange
property. IREIC believes that the limited partners of the 14 W. Elm Limited
Partnership are in a better position to realize a return of their capital
investment through the ultimate disposition of the exchange property. In the
case of the new partnership owned by the Oak Brook Commons Limited Partnership,
the lender acquired the property through foreclosure and the general partner
has supplied the Oak Brook Commons Limited Partnership with a new property, an
ownership interest in a retail store in Marshall, Minnesota, leased on a
triple-net basis by Wal-Mart Stores, Inc. In the case of the new partnership
owned by the 6030 Sheridan Limited Partnership, the lender agreed to permit a
tax-deferred exchange of the partnership's property, similar to that completed
by the 14 W. Elm Limited Partnership and subsequently the lender sold its
mortgage to an unaffiliated party who then acquired the property. The new
partnership acquired a replacement property similar to that acquired by the 14
W. Elm Limited Partnership, which property was then conveyed to the 6030
Sheridan Limited Partnership.

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

Four of the 40 Inland-sponsored partnerships described in the first
paragraph of this section owned four adjacent office buildings in Park Ridge,
Illinois. These four operating partnerships were, in turn, owned by 21 other
Inland-sponsored partnerships which had sold their original real estate assets
and reinvested a portion of the proceeds from those sales in ownership units in
the four operating partnerships. During 1991, the lenders which held the first
mortgages encumbering the four office buildings acquired the deeds to the
properties in lieu of foreclosure. The four operating partnerships were
subsequently liquidated. The general partner of the 21 partnerships which had
owned the four operating partnerships arranged for the transfer to

11
<PAGE> 17
each of the 21 partnerships of certain ownership interests in five net-lease
commercial properties having long-term leases with creditworthy tenants. The
debt service on the indebtedness used to acquire the commercial properties
consists of principal and interest payments which fully amortize the
indebtedness over the term of the store leases, with the net-lease payments
received from the tenants equal to the required debt service payments. The
possibility of cash flow distributions to the limited partners in the 21
partnerships is, therefore, precluded. However, the expectation exists for
equity accumulation through the amortization of the loan and, therefore, a
future distribution to the limited partners upon the disposition of the
commercial properties. The 21 partnerships experienced minimal adverse tax
consequences from the liquidation of the four operating partnerships and their
receipt of the ownership interests in the commercial properties. IREIC believes
that the limited partners of the 21 partnerships are now positioned to realize
a return of their capital investment through the ultimate disposition of the
commercial properties.

In the case of the 900 DeWitt and the Hoffman Ridge Limited
Partnerships, two of the 40 limited partnerships mentioned in the first
paragraph of this section, tax-deferred exchanges of the partnerships'
properties were accomplished, in the same manner as described above. The
partnerships acquired net-lease commercial properties. Subsequent to the
exchanges, the 900 DeWitt and Hoffman Ridge properties were acquired by the
first-mortgage lenders whose loans were secured by those properties.

In the case of the Park Colony Limited Partnership, one of the 40
limited partnerships mentioned in the first paragraph of this section, the
partnership defaulted on a loan secured by a second mortgage against the Park
Colony property. The lender which owned the second-mortgage loan purchased the
position of the lender which had funded the first mortgage loan secured by the
property. The lender then sold the debt, at a substantial discount, to an
Affiliate of the general partner of Park Colony Limited Partnership, and all
legal actions associated with the loan default were dismissed. The partnership
then refinanced the debt at the lower principal amount, retiring the debt owned
by the Affiliate. IREIC believes that this debt reduction is of significant
benefit to the partnership, which is now better positioned to realize its
investment objectives.

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

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

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

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<PAGE> 18
property, the Bensenville property was acquired by the first-mortgage lender
whose loan was secured by the property.

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

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

In October 1996, two limited partnerships owning contiguous apartment
buildings in south suburban Chicago ceased making payments on their respective
HUD-insured first mortgage loans. The Chateaux Versailles and Granoble Limited
Partnerships, through their General Partner, are attempting to negotiate with
the lenders to modify the terms of the loans to levels commensurate with the
operating performance of the properties. To date, no agreement has been
reached.

EFFECTS OF PROPERTY EXCHANGES ON INVESTORS

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

ADDITIONAL INFORMATION

Through December 31, 1996, 18 private partnerships sponsored by
Affiliates of the Advisor which sold properties on an installment basis
re-acquired their properties as a result of defaults by the purchasers.
Thirteen of the properties that were re-acquired were subsequently sold. One
property was returned to the lender and the remaining properties are being
operated by the partnerships.

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<PAGE> 19
Through December 31, 1996, seven private partnerships sponsored by
Affiliates of the Advisor have agreed to modifications of the original terms of
the installment receivables. The impact of these modifications on the
installment receivables includes reductions in net interest income during the
first year or two following a modification (and corresponding decreases in
distributions to limited partners during that period) and increases in interest
income thereafter (and corresponding increases in distributions), as well as
the deferral of some interest until maturity and, in the case of two
partnerships, the extension of a maturity date. The decreases in distributions
to limited partners range from 25% to 50% of the originally scheduled
distributions for the initial one- or two-year period of the modifications
followed by similar increases over the originally scheduled distributions for
the year or two following the modifications. Any interest deferred until
maturity would result in a lower-than-originally-scheduled distribution until
the maturity date, when such deferred amounts would be received from the
borrowers. The distribution to investors of the principal proceeds due upon
maturity would also be received at a later date, i.e., one to two years later,
due to a negotiated extension of the original maturity date.

During 1988, one private partnership sponsored by an Affiliate of
IREIC transferred its property to the municipality in which it was located
pursuant to an involuntary conversion proceeding. On March 1, 1989, the
proceeds of the conversion were reinvested in a new property, a transaction
intended to qualify as tax-deferred under the Code.

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

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

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Effective August 16, 1996, Cynthia M. Hassett resigned as Secretary,
Treasurer and Chief Financial Officer. The Company's board of directors
appointed Kelly Tucek as Secretary, Treasurer and Chief Financial Officer to
fill the vacancies created by Ms. Hassett's resignation.

KELLY TUCEK. Secretary, Treasurer and Chief Financial Officer of the
Company since August 1996. Ms. Tucek joined Inland in 1989 and is an Assistant
Vice President of IREIC. Ms. Tucek is responsible for the Investment
Accounting Department which includes the accounting of the Company and all
public limited partnership accounting functions along with quarterly and annual
SEC filings. Prior to joining Inland, Ms. Tucek was on the audit staff of
Coopers and Lybrand since 1984. She received her B.A. Degree in Accounting and
Computer Science from North Central College.

THE ADVISOR

CATHERINE L. LYNCH. Secretary and Treasurer of the Advisor, joined
Inland in 1989 and is the Treasurer of IREIC. Ms. Lynch is responsible for
managing the Corporate Accounting Department. Prior to joining Inland, Ms.
Lynch worked in the field of public accounting for KPMG Peat Marwick since

14
<PAGE> 20
1980. She received her B.S. degree in Accounting from Illinois State
University. Ms. Lynch is a Certified Public Accountant and a member of the
American Institute of Certified Public Accountants and the Illinois CPA
Society. She is registered with the National Association of Securities Dealers
as a Financial Operations Principal.

INDEPENDENT DIRECTOR STOCK OPTION PLAN

Under the Independent Director Stock Option Plan, each Independent
Director has been granted non-qualified stock options to purchase 3,000 Shares
at an exercise price of $9.05 per Share. In addition, each Independent
Director who is in office on the date of each annual meeting of stockholders
will receive an option to purchase an additional 500 Shares. Options granted
under the Independent Director Stock Option Plan are generally exercisable on
the second anniversary of the date of grant. To date, options to purchase a
total of 10,500 Shares have vested for all of the Independent Directors,
collectively.

On October 24, 1996, Mr. Roland W. Burris exercised an option to
purchase 1,000 Shares at a price of $9.05 per Share.

SELECTED FINANCIAL DATA

The following table sets forth selected financial information derived
from the financial statements of the Company. Balance sheet data at December
31, 1996, 1995 and 1994 and income statement data for the years ended December
31, 1996, 1995 and 1994 have been derived from the audited financial statements
of the Company. In addition, the data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the financial statements of the Company and related notes
thereto included elsewhere in this Prospectus.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

15
<PAGE> 21
<TABLE>
<CAPTION>
(unaudited)
Year ended December 31,
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Total assets . . . . . . . . . . . . . . . . . . $104,508,686 18,750,877 2,402,373

Mortgages payable . . . . . . . . . . . . . . . . 30,838,233 750,727 -

Total income . . . . . . . . . . . . . . . . . . 6,327,734 1,180,422 -

Net income . . . . . . . . . . . . . . . . . . . 2,452,221 496,514 -

Net income per share (b) . . . . . . . . . . . . .55 .53 -

Distributions declared . . . . . . . . . . . . . 3,704,943 736,627 -

Distributions per share (b) . . . . . . . . . . . .82 .78 -

Funds from Operations (b)(c) . . . . . . . . . . 3,391,365 666,408 -

Funds available for distribution (c) . . . . . . 3,709,818 787,011 -

Cash flows from operating
activities. . . . . . . . . . . . . . . . . . 5,529,709 978,350 -

Cash flows from investing activities . . . . . . (68,976,841) (6,577,843) (1,703,498)

Cash flows from financing activities . . . . . . 71,199,936 6,327,490 1,714,432

Weighted average number of common
shares outstanding . . . . . . . . . . . . . 4,494,620 943,156 20,000
</TABLE>

(a) The above selected financial data should be read in conjunction with
the financial statements and related notes appearing elsewhere in this
Prospectus.

(b) The net income and distributions per share are based upon the weighted
average number of common shares outstanding. The $.82 per share
Distribution for the year ended December 31, 1996, represented 109.3%
of the Company's Funds From Operations ("FFO") and 99.9% of funds
available for distribution for that period. See Footnote (b) below
for information regarding the Company's calculation of FFO.
Distributions by the Company to the extent of its current and
accumulated earnings and profits for federal income tax purposes will
be taxable to Stockholders as ordinary dividend income. Distributions
in excess of earnings and profits generally will be treated as a
non-taxable reduction of the stockholder's basis in the Shares to the
extent thereof, and thereafter as taxable gain (a return of capital).
These Distributions will have the effect of deferring taxation of the
amount of the Distribution until the sale of the Stockholder's Shares.
For 1996, $611,418 (or 16.50% of the $3,704,943 Distribution paid for
1996 represented a return of capital. In order to maintain its
qualification as a REIT, the Company must make annual distributions to
Stockholders of at least 95% of its taxable income which was
approximately $2,938,800 (or 79.32% of the Distribution paid). Taxable
income does not include net capital gains. Under certain
circumstances,

16
<PAGE> 22
the Company may be required to make Distributions in excess of cash
available for distribution in order to meet the REIT distribution
requirements. Distributions are determined by the Company's Board of
Directors and are dependent on a number of factors, including the
amount of funds available for distribution, the Company's financial
condition, any decision by the Board of Directors to reinvest funds
rather than to distribute the funds, the Company's capital
expenditures, the annual distribution required to maintain REIT status
under the Code and other factors the Board of Directors may deem
relevant.

(c) "FFO" means net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation on real estate
and other non-cash items. FFO and funds available for distribution
are calculated as follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income . . . . . . . . . . . . . . $ 2,452,221 496,514
Depreciation . . . . . . . . . . . . . 939,144 169,894
----------- -------

Funds from operations(1) . . . . . . 3,391,365 666,408

Deferred rent receivable (2) . . . . . (119,225) (12,413)
Rental income received under
master lease agreements (3) . . . . . 437,678 133,016
----------- -------

Funds available for distribution . . $ 3,709,818 787,011
=========== =======
</TABLE>

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

(2) Certain tenant leases contain provisions providing for stepped rent
increases. GAAP requires the Company to record rental income for the period of
occupancy using the effective monthly rent, which is the average monthly rent
for the entire period of occupancy during the term of the lease. The
accompanying financial statements include increases of $119,225 and $12,413 in
1996 and 1995, respectively, of rental income for the period of occupancy for
which stepped rent increases apply and $131,638 and $12,413 in related accounts
receivable as of December 31, 1996 and 1995, respectively. The Company
anticipates collecting these amounts over the terms of the related leases as
scheduled rent payments are made.

(3) As part of several purchases, the Company will receive rent under
master lease agreements on the spaces currently vacant for periods ranging from
one year to eighteen months or until the spaces are leased. Generally accepted
accounting principles require that as these payments are received, they be
recorded as a reduction in the purchase price of the properties rather than as
rental income. The Company has recorded $437,678 and $133,016 of such payments
as of December 31, 1996 and 1995, respectively.

17
<PAGE> 23
INVESTMENT OBJECTIVES AND POLICIES

DISTRIBUTIONS

The Company's Board approved an increase in Distributions payable to
stockholders, beginning with the first distribution in the fourth quarter 1996,
from $0.80 per Share to $0.83 per Share on an annualized basis, equivalent to
8.3% per annum on weighted average Shares. Effective March 1, 1997, the Board
approved an increase in distributions payable to $0.85 per share on an
annualized basis.

REAL PROPERTY INVESTMENTS

The Company currently owns twenty-three Neighborhood Retail Centers and two
single-user retail properties. In each case, the Company received an
appraisal of fair market value prior to acquiring the particular property.
Appraisals are, however, estimates of value and should not be relied on as a
measure of true worth or realizable value. The terms of the leases at each
property vary depending upon tenant size, but in many cases contain contractual
provisions which automatically increase the amount of base rent payable at
certain points during the term of the lease. These leases may also contain
provisions which provide for the payment of additional rent calculated as a
percentage of a tenant's gross sales above pre-determined thresholds.

The Directors, including the Independent Directors, approved these
acquisitions as being fair and reasonable to the Company.

THE WALGREENS/DECATUR PROPERTY

On January 31, 1995, the Company acquired the Walgreens/Decatur property
from Inland Property Sales, Inc. ("IPS"), an Affiliate of the Advisor, for the
purchase price of $1,209,053, including acquisition costs of $482. Although it
was originally anticipated that this property would be acquired on an all cash
basis, management of the Company made the determination, based on the
recommendations of the Advisor, that the investment objectives of the Company
would be better met by assuming a portion of the first mortgage loan secured by
such property, since: (i) the terms of the current first mortgage loan are more
favorable for the Company than mortgage rates currently available from
unaffiliated third parties; and (ii) the Company was able to apply its
available cash towards the acquisition of an additional property.

The Walgreen Company ("Walgreens"), which is the largest drug store chain
in the United States based on sales volume and is considered to be creditworthy
by the Company, leases 100% of the free-standing building, which has 13,500
square-feet of GLA and was constructed in 1988. IPS purchased the
Walgreens/Decatur property in 1990 for a purchase price of $1,152,500,
including a cash downpayment of $112,500 and first-mortgage debt of $1,040,000.
On June 9, 1994, IPS refinanced the Walgreens/Decatur property. The existing
first-mortgage loan was retired in the amount of $1,025,498, including nine
days of interest at $2,462. A new first mortgage loan was funded in the
principal amount of $1,075,000.

18
<PAGE> 24
The following table describes the formulation of the purchase price paid by
the Company:

<TABLE>
<S> <C>
IPS 1990 cash downpayments for purchase . . . . . . . . . . . . . . . . . $ 112,500
1994 excess refinancing proceeds received by IPS . . . . . . . . . . . . . (24,044)
Costs of June 9, 1994 refinancing
Closing costs paid by IPS to third parties . . . . . . . . . . . . 34,364
Closing costs paid by IPS to Affiliate . . . . . . . . . . . . . . 10,751
Initial paydown of first mortgage loan . . . . . . . . . . . . . . . . . . 300,000
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482
Assumption of first mortgage loan . . . . . . . . . . . . . . . . . . . . 775,000
-------
Total Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,209,053
=========
</TABLE>

As of April 15, 1997, the balance of the assumed mortgage was
approximately $736,000. This mortgage has an interest rate of 7.655%,
amortizes over a 25-year period and matures May 31, 2004. The Company is
responsible for monthly payments of principal and interest of $5,689. For
federal income tax purposes, the Company's basis in the Walgreens/Decatur
property is $1,130,723. Real estate taxes and insurance for the
Walgreens/Decatur property paid in 1996 were $26,851.

Walgreens' lease requires it to pay $127,820 in annual base rent
($9.47 per square foot). The rent does not include any allowances for tenant
improvements, leasing commissions or similar amounts. The lease provides for
payment of percentage rent equal to the amount by which 2.5% of general sales
and 1% of liquor sales exceed the base rent. 2.5% of general merchandise sales
and 1% of liquor sales currently equal approximately $84,340; therefore, no
percentage rent is currently payable. Walgreens has the option to cancel the
lease on September 1, 2008 or it can exercise up to five, five-year extensions.
The lease is on a double-net basis. Walgreens guarantees payment of rent,
reimbursement of property taxes and payment of all other property expenses,
exclusive of the roof and structural elements of the building.

The table below sets forth certain information with respect to the
occupancy rate of the Walgreens/Decatur property as a percentage for the time
IPS owned the property and the annual rent per square foot received for that
period, as well as since the Company owned the property. The information
provided by IPS is unaudited.

<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received
December 31, Rate Per Sq. Ft.
------------ --------- -----------
<S> <C> <C>
1996 100% $9.47
1995 100 9.47
1994 100 9.47
1993 100 9.47
1992 100 9.47
</TABLE>

19
<PAGE> 25
THE EAGLE CREST SHOPPING CENTER

On March 1, 1995, the Company acquired the Eagle Crest Shopping Center
("Eagle Crest"), a Neighborhood Retail Center located in Naperville, Illinois,
from IPS for $4,816,970, including acquisition costs of $11,059. Although it
was originally anticipated that Eagle Crest would be acquired on an all-cash
basis, management of the Company determined, based on the recommendation of the
Advisor, that the investment objectives of the Company would be better met by
assuming a portion of the first mortgage loan held by IPS secured by such
property, as well as entering into a loan agreement with IPS for the balance of
the purchase price. By utilizing seller financing to purchase Eagle Crest, the
Company was able to begin receiving the net income, after debt service
payments, from Eagle Crest on an expedited basis, thus increasing the Company's
earnings.

Eagle Crest aggregates 67,650 square feet of GLA and is 97% leased.
Its major tenant is Eagle Foods, Inc. ("Eagle"). Eagle, which leases 46,096
square feet (approximately 68%) of Eagle Crest's GLA, is the only tenant at
Eagle Crest which leases more than 10% of Eagle Crest's GLA and is considered
creditworthy by the Company. IPS purchased Eagle Crest in April 1991 for
$3,200,000, including a cash down payment of $457,813, first- and
second-mortgage debt of $2,244,139 and a note owed to the seller in the amount
of $493,192. In 1992, IPS refinanced the first-mortgage debt in the principal
amount of $2,450,000, realizing $76,792 in net refinancing proceeds. Since
purchasing Eagle Crest, IPS expended $142,441 for capital improvements at the
property. In 1993, Eagle completed extensive improvements to its store at
Eagle Crest, converting the store to a "country market" format. On March 1,
1994, IPS again refinanced Eagle Crest, increasing the principal amount of the
first mortgage loan from $2,450,000 to $3,600,000, using the additional
$1,150,000 in loan proceeds, plus $50,000 of IPS's funds, to reimburse
$1,200,000 to Eagle for the improvements made by Eagle to its store. In return
for the reimbursement Eagle began paying an additional $157,500 per annum in
rent under its lease. Eagle's lease requires it to pay base rent equal to
$6.68 per square foot per annum through February 2014. The lease contains five
five-year renewal options at a base rent equal to $6.68 per square foot. Eagle
leases its store on a double-net basis and is responsible for paying its pro
rata share of property taxes and a fixed amount of the common area maintenance
("CAM") at Eagle Crest, which payments were $50,761 and $23,048, respectively,
for 1996.

The following table describes the formulation of the purchase price
paid by the Company:

<TABLE>
<S> <C>
IPS 1991 cash downpayment for purchase . . . . . . . . . . . . . . . . . . . . . . $ 457,813
Cumulative IPS capital improvements to Eagle Crest . . . . . . . . . . . . . . . . 142,441
1992 excess refinancing proceeds received by IPS . . . . . . . . . . . . . . . . . (76,792)
1994 Refinancing:
Closing costs paid by IPS to third parties . . . . . . . . . . . . . . . . 59,995
Closing costs paid by IPS to Affiliate . . . . . . . . . . . . . . . . . . 36,000
Loan guarantee fee paid by IPS to Affiliate . . . . . . . . . . . . . . . . . . . 12,500
Assumption of first mortgage loan . . . . . . . . . . . . . . . . . . . . . . . . 3,600,000
1994 pay-off of note by IPS to original seller . . . . . . . . . . . . . . . . . . 220,000
Pay-off of unpaid notes owed to original seller . . . . . . . . . . . . . . . . . 353,954*

Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,059
-------------
Total Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,816,970
=============
</TABLE>

* Amount of principal and accrued interest due as of July 1, 1994.
Interest accrued at the rate of $1,970 per month and this amount was
adjusted at the time of purchase by the Company.

20
<PAGE> 26
The balance of the assumed mortgage was paid in full in April 1995
with interest at 9.5% per annum. The total amount paid was $3,551,100, of
which $3,533,760 was principal paid from Gross Offering Proceeds and $17,340
was interest paid from Company operations. The deferred portion of the
purchase price, totaling $1,212,427, was paid to IPS in full, including accrued
interest of $22,009, in May 1995. The interest was paid from Company
operations. For federal income tax purposes, the Company's basis in Eagle
Crest is $2,938,352.

None of the rents received from any of the Eagle Crest tenants include
allowances for tenant improvements, leasing commissions or similar amounts.
Property taxes paid in 1996 for the tax year ended 1995 (the most recent tax
year for which information is available) totaled $75,979.

The table below sets forth certain information with respect to the
occupancy rate for the time IPS has owned the property and the annual rent per
square foot received for that period, as well as since the Company owned the
property. The information provided by IPS is unaudited.

<TABLE>
<CAPTION>
Annual
Year Ending Rents
December Occupancy Received
31, Rate Per Sq. Ft.
----------- --------- -----------
<S> <C> <C>
1996 100% $8.84
1995 100 8.70
1994 100 8.16
1993 100 6.06
1992 100 6.11
</TABLE>

At April 15, 1997, Eagle Crest had a total of twelve tenants. The
following tables set forth certain information with respect to the amount of
and expiration of leases at this Neighborhood Retail Center:

<TABLE>
<CAPTION>
Approx.
Gross Average Percent of Percent of
Leasable Area Base Rent Total Annual
("GLA") of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ -------- ------------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 3 3,510 57,758 579,495 16.46 5.19% 9.97%

1998 4 9,525 130,745 524,077 13.73 14.08 24.95

1999 2 5,533 59,078 392,445 10.68 8.18 15.02

2000 1 888 18,633 334,257 20.98 1.00 5.57

2001 1 18 7,536 315,624 418.66 - 2.00

2002-2006 - - - 308,088 - - -
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases.
It is management of the Company's current opinion that the space will
be released at market prices.

21
<PAGE> 27
<TABLE>
<CAPTION>
Square Feet Renewal Current Annual Rent Per
Lessee Leased Lease Ends Options Base Rent Square Foot
------ ------ ---------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Eagle Foods 46,096 2/2014 5/5 years $ 308,088 $ 6.68

Blue Angel Travel 910 6/1997 None 16,800 18.46

State Farm Insurance 888 7/2000 None 18,633 20.98

Dental Office 900 7/1997 None 17,158 19.06

Pot Pourri Gifts 4,028 1/1999 1/5 years 42,294 10.50

La Cantina Lounge 2,000 12/1998 1/5 years 31,900 15.95

Pepe's Restaurant 2,000 12/1998 1/5 years 31,900 15.95

Prudential Real Estate 4,250 2/1998 None 44,625 10.50

The Grill 1,275 11/1998 1/5 years 19,125 15.00

Clothes Clean Center 1,700 6/1997 None 23,800 14.00

Hair Inc. 1,505 4/1999 3/3 years 16,780 11.15

Coffee Grinder (outlet) 18 6/2001 None 6,720 373.33

Vacant 2,080 -- -- -- --
</TABLE>

MONTGOMERY-GOODYEAR SHOPPING CENTER

On September 14, 1995, the Company acquired the Montgomery-Goodyear
Shopping Center ("Montgomery-Goodyear"), a Neighborhood Retail Center located
in Montgomery, Illinois, from an unaffiliated third party for $1,145,992,
including acquisition costs of $5,992. A portion of the purchase price was
evidenced by a promissory note payable to Inland Mortgage Investment
Corporation, an affiliate of the Advisor ("IMIC"), in the gross amount of
$600,000, bearing interest at a rate of 10.9% per annum and maturing on October
14, 1995. The remainder of the purchase price, net of prorations, of
approximately $535,000 was funded with proceeds of one of the Prior Offerings.
The promissory note was paid in full in October 1995. The total amount paid
was $604,260, of which $600,000 was principal paid from the proceeds of one of
the Prior Offerings and $4,260 was interest paid from Company operations. For
federal income tax purposes, the Company's basis in the Montgomery-Goodyear
building is $827,390. Real estate taxes and insurance for the Montgomery-
Goodyear property paid in 1996 were $28,859.

Montgomery-Goodyear, built in 1991, aggregates 12,863 square feet of
gross leasable area ("GLA") and is 77% occupied. Its major tenant is Goodyear
Tire & Rubber Co. which leases 6,293 square feet and is considered creditworthy
by the Company. The other tenant is Merlin Corporation, which leases
approximately 28% of GLA.

The table below sets forth certain information with respect to the
occupancy rate at the Montgomery-Goodyear property for the time an unaffiliated
third party had owned the property and the annual rent per square foot received
for the period, as well as since the Company owned the property. The
information was supplied by the seller of Montgomery-Goodyear to the Company.
Construction of the Montgomery-Goodyear property was completed in late 1991.

22
<PAGE> 28
<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received
December 31, Rate Per Square Foot
------------ ---- ---------------
<S> <C> <C>
1996 100% $11.39
1995 100 11.39
1994 100 11.39
1993 100 11.39
1992 100 11.39
</TABLE>

At April 15, 1997, Montgomery-Goodyear had a total of two tenants.
The following tables set forth certain information with respect to the amount
of and expiration of leases at this Neighborhood Retail Center:

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
-------- --- -------- ------- ----- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997-2000 -- -- -- 115,080 -- -- --

2001 -- -- -- 116,280 -- -- --

2002-2005 -- -- -- 121,428 -- -- --

2006 1 6,293 64,800 121,428 $10.30 48.7% 53.3%
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market rates.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent Per
Lessee Leased Ends Options Base Rent Square Foot
- ------ ----------- ----- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
Goodyear Tire & Rubber Co. 6,293 11/2006 5/5 years $63,600 $10.10
Merlin Corporation 3,600 2/2007 3/5 years 51,480 14.30
Vacant 3,010 -- -- -- --
</TABLE>

THE HARTFORD/NAPERVILLE PLAZA PROPERTY

On September 14, 1995, the Company acquired Hartford/Naperville Plaza
("Hartford/Naperville") located in Naperville, Illinois from an unaffiliated
third party for $4,414,015, including acquisition costs of $14,015. A portion
of the purchase price was evidenced by a promissory note payable to IMIC, in
the gross amount of $600,000, bearing interest at a rate of 10.9% per annum and
maturing on October 14, 1995. In addition, the Company paid closing costs of
$13,915 and deposited $150,000 in an escrow account for

23
<PAGE> 29
leasehold improvements to the Blockbuster, Inc. space. The remainder of the
purchase price was funded with proceeds of one of the Prior Offerings. The
promissory note was paid in full in October 1995. The total amount paid was
$605,102, of which $600,000 was principal paid from Gross Offering Proceeds and
$5,102 was interest paid from Company operations. For federal income tax
purposes, the Company's basis in Hartford/Naperville is $3,325,211. Real
estate taxes for Hartford/Naperville paid in 1996 for the tax year ended 1995
were $25,330.

Hartford/Naperville aggregates 43,862 square feet of GLA and
construction was completed in July 1995. Its anchor tenants include nationally
recognized tenants such as Sears Hardware with 21,000 square feet and
Blockbuster Video with 6,500 square feet, as well as Keller/Williams Realty
with 6,160 square feet, and each is considered creditworthy by the Company.

Hartford/Naperville is currently 94% leased and is anchored by Sears
Hardware, Blockbuster Video and Keller/Williams Realty, each of which leases
more than 10% of the building's square footage. The lease with Sears Hardware
requires a base rent of $9.35 per square foot per annum until August 2005 and
contains three renewal options of five years each. Sears Hardware sells
hardware supplies and tools. The lease with Blockbuster Video requires a base
rent of $14.76 per square foot per annum until September 30, 2000 and $17.25
per square foot per annum from October 1, 2000 until October 31, 2005, and
contains four renewal options of five years each. Blockbuster Video sells and
rents prerecorded audio and video products. The lease with Keller/Williams
Realty requires a base rent of $14.76 per square foot per annum until December
2000 and such lease has no renewal options. Keller/Williams Realty is a local
real estate brokerage firm.

The table below sets forth certain information with respect to the
occupancy rate at Hartford/ Naperville property for the time an unaffiliated
third party had owned the property and the annual rent per square foot received
for the period, as well as since the Company owned the property. The
information was supplied by the seller of Hartford/ Naperville to the Company.

<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received
December 31, Rate Per Square Foot
------------ ---- --- ------ ----
<S> <C> <C>
1996 100% $11.60
</TABLE>

At April 15, 1997, Hartford/Naperville had a total of seven tenants.
The following tables set forth certain information with respect to the amount
of and expiration of leases at this Neighborhood Retail Center:

24
<PAGE> 30

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ -------- ------------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997-1999 -- -- -- $ 548,170 -- -- --

2000 3 9,010 $137,758 563,425 $15.29 20.54% 24.45%

2001 1 2,992 40,392 384,067 13.50 6.82 10.52%

2002-2004 -- -- -- 343,675 -- -- --

2005 3 29,260 343,675 343,675 11.75 66.71 100.00%

2006 -- -- -- -- -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market rates.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent Per
Lessee Leased Ends Options Base Rent Square Foot
- ------ ------ ---- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sears Hardware 21,000 8/2005 3/5 years $196,350 $ 9.35
Blockbuster Video 6,500 10/2005 4/5 years 97,500 15.00
Keller/Williams Realty 6,160 12/2000 None 90,900 14.76
Hair Cuttery 1,320 3/2000 1/5 years 21,780 16.50
Signature Cleaners 1,760 12/2005 1/5 years 35,200 20.00
Sound Deluxe 2,992 2/2001 1/5 years 40,390 13.50
Nancy's Pizza 1,530 12/2000 3/5 years 22,950 15.00
Vacant 2,600 -- -- -- --
</TABLE>

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a prospective value of Hartford/Naperville of the leased
fee interest upon reaching stabilized occupancy as of October 1, 1995 of
$4,680,000.

NANTUCKET SQUARE SHOPPING CENTER

On September 20, 1995, the Company acquired Nantucket Square Shopping
Center ("Nantucket Square"), a Neighborhood Retail Center located in
Schaumburg, Illinois from an unaffiliated third party for a purchase price of
$4,257,918, including acquisition costs of $4,913. A portion of the purchase
price was evidenced by a promissory note payable to IMIC in the gross amount of
$3,550,000, bearing interest at a rate of 10.5% per annum and maturing on
November 19, 1995. The remainder of the purchase price was funded with
proceeds of one of the Prior Offerings. The promissory note was paid in full
in December 1995. The total amount paid was $3,612,011, of which $3,550,000
was principal paid from Gross Offering Proceeds and $62,011 was interest paid
from the Company's cash reserves. There are two buildings on the property, one
of which is a one-story, multi-tenant shopping mall located on approximately
7.75 acres of land containing 53,720 square feet. The other building is a
one-story, free-standing building which houses a Burger King restaurant
containing approximately 3,260 square feet. Real estate taxes for the shopping
mall

25
<PAGE> 31
and the Burger King restaurant outlot were $233,628 and $44,100, respectively,
for 1996. Subsequent to the purchase of the property, the Company paid $51,135
for tenant improvements, from Gross Offering Proceeds, for two tenants
expanding their space, which sum was added to the cost of the property. For
federal income tax purposes, the Company's basis in the Nantucket Square
building is $2,372,160.

Nantucket Square is currently 94% leased and has four tenants which
lease more than 10% of the building's square footage. The lease with Play It
Again Sports requires a current base rent of $10 per square foot per annum
until September 30, 1998, $10.50 per square foot per annum from October 1, 1998
to September 30, 1999 and $11 per square foot per annum from October 1, 1999 to
September 30, 2000 with no renewal provisions. Play It Again Sports sells
sports equipment and related accessories. The lease with Kathy's Hallmark
requires a current base rent of $10.50 per square foot per annum until February
28, 1999 and $11.50 per square foot per annum from March 1, 1999 until May 31,
2000, and contains one renewal option of five years. Kathy's Hallmark sells
greeting cards and gift items. The lease with Super Trak Corp. requires a
current base rent of $7 per square foot per annum until November 30, 1998 and
$7.50 per square foot per annum from December 1, 1998 until November 30, 2003,
and contains three renewal options of five years each. Super Trak sells auto
parts and accessories. The lease with The Dental Store requires a base rent of
$9.00 per square foot per annum until September 30, 1999, $11.00 per square
foot per annum payable monthly from October 1, 1999 until September 30, 2000,
$11.50 per square foot per annum payable monthly from October 1, 2000 until
September 30, 2001, $12.00 per square foot per annum payable monthly from
October 1, 2001 until September 30, 2002, $12.50 per square foot per annum
payable monthly from October 1, 2002 until September 30, 2003, $12.75 per
square foot per annum payable monthly from October 1, 2003 until September 30,
2004, $13.00 per square foot per annum payable monthly from October 1, 2004
until September 30, 2005 and $13.25 per square foot per annum payable monthly
from October 1, 2005 until September 20, 2006. A tenant at Nantucket Square,
occupying 3,300 square feet of space, filed for financial and reorganization
protection under the federal bankruptcy laws. This tenant continues to occupy
its space and pay its monthly rent. The bankruptcy petition filed with the
bankruptcy court stated this tenant planned on closing a number of its other
stores but did not anticipate closing its store at Nantucket Square.

The table below sets forth certain information with respect to the
occupancy rate at the Nantucket Square property for the time an unaffiliated
third party had owned the property and the annual rent per square foot received
for the period, as well as since the Company owned the property. The
information, supplied by the seller of Nantucket Square to the Company, is
unaudited. Information for prior years is not available to the Company.

<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received Per
December 31, Rate Square Foot
------------ --------- -----------
<S> <C> <C>
1996 85% $8.76
1995 81 8.54
1994 83 8.44
</TABLE>

At April 15, 1997, Nantucket Square had a total of eighteen tenants.
The following tables set forth certain information with respect to the amount
of and expiration of leases at this Neighborhood Retail Center:

26
<PAGE> 32

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ -------- ------------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 -- -- -- $560,955 -- -- --

1998 6 9,228 $99,690 574,082 $10.80 16.20% 17.37%

1999 2 2,100 24,720 499,153 11.77 3.69 4.95

2000 5 17,218 203,753 478,087 11.83 30.22 42.62

2001 1 2,403 27,000 278,708 11.24 4.22 9.69

2002 2 4,461 86,500 255,422 19.39 7.83 33.87

2003 1 11,743 88,072 167,479 7.50 20.61 52.59

2004 -- -- -- 80,964 -- -- --

2005 -- -- -- 82,521 -- -- --

2006 1 6,228 82,521 82,521 13.25 10.93 100.00
</TABLE>

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent Per
Lessee Leased Ends Options Base Rent Square Foot
- ------ ------ ---- ------- ---- ---- ------ ----
<S> <C> <C> <C> <C> <C>
Currency Exchange 1,246 12/2000 1/5 years $ 18,690 $ 15.00
Baskin-Robbins Ice Cream 900 11/2000 None 15,300 17.00
Express Services 1,050 2/1998 1/3 years 11,550 11.00
Travel Agency 1,050 7/1999 None 11,550 11.00
Imperial Cleaners 1,200 12/2002 1/10 years 18,900 15.75
Proof Positive Photo 1,200 4/1998 1/3 years 15,528 12.94
Nancy's Pizza 1,200 8/1998 2/5 years 12,600 10.50
Super Trak 11,743 11/2003 3/5 years 82,201 7.00
Kathy's Hallmark 7,156 5/2000 1/5 years 75,138 10.50
Clothes Time 3,300 4/2004 2/5 years 31,350 9.50
Great Clips 1,428 9/1998 1/5 years 14,994 10.50
Radio Shack 2,403 2/2001 None 25,200 10.49
Once Upon A Child 2,703 7/2000 1/5 years 26,354 9.75
Play It Again Sports 5,213 9/2000 None 52,130 10.00
Burger King 3,261 7/2002 1/5 years 67,900 20.82
Nail Salon 1,050 12/1998 None 12,600 12.00
The Dental Store 6,228 9/2006 None 56,052 9.00
Premium Tobacco 1,050 12/1999 None 11,550 11.00
Vacant 3,600 -- -- -- --
</TABLE>

27
<PAGE> 33
ANTIOCH PLAZA

On December 28, 1995, the Company purchased the Antioch Plaza property
("Antioch Plaza"), a Neighborhood Retail Center located in Antioch, Illinois
from an unaffiliated third party for $1,750,365, including acquisition costs of
$365. A portion of the purchase price was evidenced by a promissory note
payable to Inland Real Estate Investment Corporation, an affiliate of the
Advisor ("IREIC"), in the gross amount of $660,000, which bore interest at a
rate of 9.5% per annum. The remainder of the purchase price, net of prorations
of approximately $1,100,000 was funded with proceeds of one of the Prior
Offerings. The loan to IREIC was repaid in full on January 9, 1996 and the
total amount paid was $661,163, of which $660,000 was principal paid from Gross
Offering Proceeds and $1,163 was interest paid from the Company's cash
reserves. Antioch Plaza, built in 1995, consists of a two-building,
free-standing, masonry- constructed strip center aggregating 19,810 square feet
of gross leasable area. Its major tenant is Blockbuster Video which leases
6,500 square feet of GLA and is considered creditworthy by the Company. At the
time of acquisition, a second lease had been signed by a dry-cleaning
establishment and a third lease was under negotiation. For federal income tax
purposes, the Company's basis in Antioch Plaza is $1,480,648 .

Antioch Plaza is currently 57% leased (100% leased when including the
master lease) and is anchored by Blockbuster Video. Currently 8,445 square feet
of the vacant space at Antioch Plaza is being master leased by the seller until
June 1997 at $12 per square foot, on a net basis. Blockbuster Video leases
more than 10% of the building's square footage. The lease with Blockbuster
Video requires a base rent of $10 per square foot per annum until August 31,
2000 and $11 per square foot per annum from September 1, 2000 until August 31,
2005, and contains four renewal options of five years each. Blockbuster Video
sells and rents prerecorded audio and video products.

The table below sets forth certain information with respect to the
occupancy rate at Antioch Plaza for the time an unaffiliated third party had
owned the property and the annual rent per square foot received for the period,
as well as since the Company owned the property. The information was supplied
by the seller of Antioch Plaza to the Company.

<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received
December 31, Rate Per Square Foot
------------ --------- ---------------
<S> <C> <C>
1996 57% $11.48
</TABLE>

At April 15, 1997, Antioch Plaza had a total of four tenants. The
following tables set forth certain information with respect to the amount of
and expiration of leases at this Neighborhood Retail Center:

28
<PAGE> 34
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ -------- ------------- ----------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1 10,160 $121,530 224,330 $11.96 51.29% 54.17%

1998 -- -- -- 102,800 -- -- --

1999 2 3,150 37,800 102,800 12.00 15.99 36.77

2000-2004 -- -- -- 71,500 -- -- --

2005 1 6,500 71,500 71,500 11.00 32.99 100.00

2006 -- -- -- -- -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market rates.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent Per
Lessee Leased Ends Options Base Rent Square Foot
------ ------ ---- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Blockbuster Video 6,500 8/2005 4/5 years $ 65,000 $ 10.00

Antioch Floral 1,650 12/1999 1/3 years 19,800 12.00

One Hour Cleaners 1,500 12/1999 1/3 years 18,000 12.00

Premium Tobacco 1,715 12/1997 None 20,190 11.77

Vacant* 8,445 6/1997 None 101,340 12.00
</TABLE>

_______________

* The vacancies currently total 8,445 square feet, however, the vacant
space is being master leased by the seller until June 1997 at $12.00
per square foot, on a net basis.

THE MUNDELEIN PLAZA PROPERTY

On March 29, 1996, the Company purchased the Mundelein Plaza property
("Mundelein Plaza"), a Neighborhood Retail Center located in Mundelein,
Illinois from an unaffiliated third party for $5,658,230, including acquisition
costs of $8,230, on an all cash basis. Mundelein Plaza, built in 1990,
consists of two one-story, multi-tenant brick and block strip centers located
on approximately 4.3 acres of land. Mundelein Plaza aggregates 67,896 square
feet of GLA and was constructed in 1990. Its anchor tenant is Sears Home Life
with 47,000 square feet. Sears Home Life is a nationally recognized home
furnishings chain and is considered creditworthy by the Company.

29
<PAGE> 35
Mundelein Plaza is currently 97% leased. Sears Home Life is the only
tenant occupying 10% or more of the rentable square feet. The lease with Sears
Home Life requires a base rent of $8.72 per square foot per annum until October
23, 1997, $9.29 per square foot per annum from October 24, 1997 to October 23,
1998, $9.53 per square foot per annum from October 24, 1998 to October 23,
1999, $9.81 per square foot per annum from October 24, 1999 to October 23, 2000
and contains two renewal options of five years each. The seller is providing a
lease guaranty for 6,181 square feet of space, on a net basis, through December
1997. 4,088 square feet of the space which is subject to the lease guaranty is
currently leased by Color Tile, Inc., which recently filed for financial and
reorganization protection under the federal bankruptcy laws. This tenant
continues to occupy its space and is anticipated to pay its monthly rent. The
bankruptcy petition filed with the Bankruptcy Court stated that this tenant
planned on closing a number of its other stores. The Company has been advised
that Color Tile, Inc. considers the store at Mundelein Plaza to be one of its
best performing stores and the Company does not anticipate the closing of the
Color Tile store at Mundelein Plaza. The other space, 2,093 square feet, is
leased to Tile World, Ltd., on a month-to-month lease. For federal income tax
purposes, the Company's basis in Mundelein Plaza is approximately $3,965,000.
Depreciation expense, for tax purposes, will be computed using the
straight-line method. Buildings and improvements are based upon estimated
useful lives of 40 years. Property taxes paid in 1996 for the tax year ended
1995 (the most recent tax year for which information is available) were
$93,384.

The table below sets forth certain information with respect to the
occupancy rate at Mundelein Plaza expressed as a percentage of total gross
leasable area for each of the last five years and the average effective annual
base rent per square foot for each of the last five years.

<TABLE>
<CAPTION>
Average Effective
Year Ending Occupancy Annual Rent Per
December 31, Rate Square Foot
------------ ----------------- ---------------
<S> <C> <C>
1996 100% $9.68
1995 100 9.41
1994 97 9.22
1993 97 9.03
1992 97 8.93
</TABLE>

At April 15, 1997, Mundelein Plaza had a total of eight tenants. The
following tables set forth certain information with respect to the amounts of
and expiration of leases at this Neighborhood Retail Center:

30
<PAGE> 36
<TABLE>
<CAPTION>
Approx.
Gross Average Percent of Percent of
Leasable Area Base Rent Total Annual
("GLA") of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent Leases(1) Leases Leases
------------ -------- ------------- ------ ---- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 3 10,728 144,678 723,646 13.49 15.80 19.99

1998 -- -- -- 593,228 -- -- --

1999 1 1,620 28,717 645,910 17.73 2.39 4.45

2000 3 51,620 524,396 583,676 10.16 76.03 89.84

2001-2004 -- -- -- 59,280 -- -- --

2005-2006 -- -- -- 63,364 -- -- --

</TABLE>

(1) No assumptions were made regarding the releasing of expired leases.
It is management of the Company's current opinion that the space will
be released at market rates.

<TABLE>
<CAPTION>
Square Current Annual Base Rent
Feet Term Renewal Base Per Square
Lessee Leased Ends Options Rent Foot
------- ------ ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Color Tile, Inc. (1) 4,088 12/2009 None $55,188 $13.50

R R B Cycles, Ltd. 2,460 12/2000 None 38,186 15.52

Cartel, Inc. 1,620 12/1998 None 27,068 16.71

C M C Music, Inc. 5,535 06/1997 1/5 years 66,420 12.00

Esterquest (Pet store) 3,100 12/1997 None 47,058 15.18

Sears Roebuck & Co.
(Sears Home Life) 47,000 10/2000 2/5 years 375,686 7.99

Tile World, Ltd. (1) (2) 2,093 Month to None 31,200 14.90
Month

Minnesota Fats 2,000 08/2000 3/5 years 21,600 10.80
</TABLE>

(1) Although currently leased, these spaces are subject to a lease
guaranty from the seller through December 1997.

(2) This space is currently leased on a month-to-month basis.

REGENCY POINT SHOPPING CENTER

On April 5, 1996, the Company acquired Regency Point Shopping Center
located in Lockport, Illinois ("Regency Point") from an unaffiliated third
party for $5,700,000. As part of the acquisition, the Company assumed the
existing first mortgage loan of approximately $4,473,200, along with a related
interest rate swap agreement. The remainder of the purchase price of
approximately $1,226,800 was funded, after prorations, with proceeds of one of
the Prior Offerings. For federal income tax purposes, the Company's basis in
the Regency Point building is approximately $4,700,000. Property taxes paid in
1996 for the tax year ended 1995 (the most recent tax year for which
information is available) were $16,513. Regency Point

31
<PAGE> 37
is located in the Des Plaines River Valley Enterprise Zone, therefore, the
assessed value of the property will remain fixed until the year 2003.

The first mortgage loan has a floating interest rate of 180 basis
points over the 30-day LIBOR rate, which rate is adjusted monthly and amortizes
over 25 years.

Regency Point, built in 1993 and 1994, consists of a one-story,
multi-tenant brick and block strip center aggregating 54,875 of rentable square
feet. Its anchor tenants include nationally recognized tenants such as
Walgreens with 13,000 square feet, Ace Hardware with 15,505 square feet and the
United States Postal Service with 2,503 square feet and are considered
creditworthy by the Company.

Regency Point is currently 100% leased and is anchored by Walgreens
and Ace Hardware. Walgreens and Ace Hardware both lease more than 10% of the
building's square footage. The lease with Walgreens requires Walgreens to pay
base rent equal to $10.98 per square foot per annum until December 31, 2013 and
contains six renewal options of five years. Walgreens is a national pharmacy
chain providing prescriptive and over-the-counter medications, sundries and
household items. The lease with Ace Hardware requires Ace Hardware to pay base
rent equal to $7.49 per square foot per annum until October 31, 2008 and
contains one renewal option for five years. Ace Hardware is a national retail
hardware chain.

The table below sets forth certain information with respect to the
occupancy rate at Regency Point expressed as a percentage of total gross
leasable area for each of the last four years (since the opening of Regency
Point) and the average effective annual base rent per square foot for each of
the last three years.

<TABLE>
<CAPTION>
Average
Effective
Annual Rent
Year Ending Occupancy Per Square
December 31, Rate Foot
------------ --------- -----------
<S> <C> <C>
1996 97% $10.33
1995(1) 93 9.83
1994 100 10.09
1993(2) 36 3.57
</TABLE>

(1) During 1995, an additional 5,000 square feet of space was added to
Regency Point, of which 1,950 square feet is leased with rent
beginning in February 1996.

(2) Regency Point was built in 1993 and 1994. The occupancy rate and
average effective annual rent per square foot represent the initial
rent-up phase of this property.

At April 15, 1997, Regency Point had a total of nineteen tenants. The
following table sets forth information with respect to the amount of and
expiration of leases at this Neighborhood Retail Center:

32
<PAGE> 38

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent Leases Leases Leases
------------ -------- ------------- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 2 3,390 $ 41,262 $ 630,936 $12.17 6.18% 6.54%

1998 3 3,575 56,099 586,502 15.69 6.51 9.57

1999 4 5,005 70,492 535,788 14.08 9.12 13.16

2000 1 985 15,244 466,404 15.48 1.79 3.27

2001 2 6,555 87,123 433,271 13.29 11.95 20.11

2002 1 1,040 16,948 366,920 16.30 1.90 4.62

2003 1 1,398 19,572 353,849 14.00 2.55 5.53

2004 1 2,503 31,913 339,643 12.75 4.56 9.40

2005 -- -- -- 307,730 -- -- --

2006 2 1,950 41,966 307,730 21.52 3.55 13.64
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market rates.

<TABLE>
<CAPTION>
Square Current Rent
Feet Lease Renewal Annual Per Square
Lessee Leased Ends Options Base Rent Foot
------ ------ ---- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Walgreens 13,000 12/2013 6/5 yr. $142,740 $10.98
Cellular Center 1,820 8/1999 1/5 yr. 24,570 13.50
Body Basters 1,600 6/1997 1/3 yr. 23,362 14.60
Personal Finance 985 1/2000 1/5 yr. 14,368 14.59
J.C. Flick 5,265 11/1998 1/3 yr & 1/2 yr. 66,161 12.57
Ace Hardware 15,505 10/2008 1/5 yr. 116,280 7.49
Vet 1,300 10/1998 1/5 yr. 19,563 15.05
Subway 1,105 12/1998 1/5 yr. 17,268 15.63
Cost Cutters 975 12/1998 1/5 yr. 13,850 14.21
Little Ceasars 1,040 1/1999 2/5 yr. 13,520 13.00
Just $1 1,040 1/1999 1/5 yr. 14,560 14.00
Optometrist 1,040 4/2002 none 14,619 14.06
Brown's Chicken 1,398 12/2003 1/5 yr. 18,174 13.00
Cleaners 1,300 12/1998 1/5 yr. 20,473 15.75
U.S. Post Office 2,503 3/2004 2/5 yr. 30,036 12.00
Currency Exchange 550 1/2006 1/10 yr. 12,000 21.81
St. Joseph Medical 1,790 1/2002 None 26,850 15.00
Douglas Steen 1,290 4/2001 None 17,719 13.74
Dunkin Donuts 1,400 1/2006 2/5 yr. 21,700 15.49
</TABLE>

33
<PAGE> 39
PROSPECT HEIGHTS PLAZA

On June 17, 1996, the Company acquired Prospect Heights Plaza
("Prospect Heights"), a Neighborhood Retail Center located in Prospect Heights,
Illinois from an unaffiliated third party for a purchase price of $2,165,000 on
an all cash basis. Prospect Heights, built in 1985, consists of two one-story,
multi-tenant brick buildings aggregating 28,080 rentable square feet.

The table below sets forth certain information with respect to the
occupancy rate at Prospect Heights expressed as a percentage of total gross
leasable area for each of the last five years and the average effective annual
base rent per square foot for each of the last five years.

<TABLE>
<CAPTION>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C>
1996 100% $ 7.45
1995 78 5.85
1994 100 7.53
1993 100 7.53
1992 100 7.53
</TABLE>

As of April 15, 1997, Prospect Heights was 83% leased. Tenants leasing
more than 10% of the total square footage currently include Walgreens with
12,600 square feet, United Farm Stands Corp. with 4,680 square feet and
Blockbuster Video with 6,250 square feet.

The lease with Walgreens requires a base rent of $5.50 per square foot
per annum until July 31, 2005, $6.00 per square foot per annum from August 1,
2005 to July 31, 2015 and $6.50 per square foot per annum from August 1, 2015
to July 31, 2025. The lease also requires the payment of percentage rent
annually based on 1% of food item sales, 1.5% of liquor sales and 2% of other
sales in excess of monthly rent paid including their portion of CAM, real
estate taxes and insurance. In 1996, no net percentage rent was received.
Walgreens has the option to terminate the lease in 2005, 2010, 2015, and 2020
with a one year notice.

The lease with United Farm Stands Corp. requires a base rent of
$12.00 per square foot per annum until January 31, 1998 and contains three
renewal options of two years each. United Farm Stands Corp. sells fruits and
vegetables.

For federal income tax purposes, the Company's depreciable basis in
the Prospect Heights buildings is approximately $1,407,000. Depreciation
expense, for tax purposes, will be computed using the straight-line method.
Buildings and improvements are based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $121,822.

34
<PAGE> 40
At April 15, 1997, Prospect Heights had four tenants. The following
tables set forth certain information with respect to the amount of and
expiration of leases at this Neighborhood Retail Center.

<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
------ ------ ---- ------- ---- ------ ----
<S> <C> <C> <C> <C> <C>
Walgreens 12,600 07/2025 None $ 72,450 $ 5.75
Blockbuster 6,250 07/1999 4/5 75,000 12.00
Power Motion 2,550 07/1998 1/3 28,800 11.29
Dr. W. Beck 2,000 12/1997 1/5 22,000 11.00
Vacant 4,680 -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent Leases Leases Leases
- ------------ -------- ------------- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1 2,000 $ 22,000 $199,450 $11.00 7.12% 11.03%
1998 1 2,550 30,000 177,450 11.76 9.08 16.91
1999 1 6,250 75,000 147,450 12.00 22.26 50.86
2000-2005 -- -- -- 72,450 -- -- --
2006 -- -- -- 75,600 -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be released
at market rates.

MONTGOMERY-SEARS SHOPPING CENTER

On June 17, 1996, the Company acquired the Montgomery-Sears Shopping
Center ("Montgomery-Sears"), a Neighborhood Retail Center located in
Montgomery, Illinois, from an unaffiliated third party for a purchase price of
$3,419,000 on an all cash basis. Montgomery-Sears, built in 1990, is a
one-story, multi tenant concrete masonry building aggregating 34,600 rentable
square feet.

The table below sets forth certain information with respect to the
occupancy rate at Montgomery-Sears expressed as a percentage of total gross
leasable area for each of the last five years and the average effective annual
base rent per square foot for each of the last five years.

<TABLE>
<CAPTION>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C>
1996 85% $9.13
1995 95 9.47
1994 95 10.48
1993 95 9.84
1992 95 9.50
</TABLE>

35
<PAGE> 41
As of April 15, 1997, Montgomery-Sears was 85% leased. Tenants leasing
more than 10% of the building's square footage include Sears Hardware with
20,000 square feet and Blockbuster Video with 7,000 square feet.

The lease with Sears requires a base rent of $11.44 per square foot
per annum until September 30, 1999 and $12.47 per square foot per annum from
October 1, 1999 to July 30, 2000 and contains two renewal options of five years
each. Sears has the right to terminate the lease at any time after July 15,
1997 with 180 days notice and payment of one year's rent. Sears Hardware sells
hardware supplies and tools. The lease with Blockbuster requires a base rent of
$13.20 per square foot per annum until August 31, 2000 and contains a renewal
option for an additional five years. Blockbuster Video sells and rents
prerecorded audio and video products.

The vacant space, totaling 5,100 square feet, at Montgomery-Sears is
master leased by the seller for a period of 24 months or until such time as a
tenant begins paying rent at $12.00 per square foot per annum, on a net basis,
for 3600 square feet and $10.20 per square foot, on a net basis, for 1500
square feet.

For federal income tax purposes, the Company's depreciable basis in
the Montgomery-Sears building is approximately $2,675,000. Depreciation
expense, for tax purposes, will be computed using the straight-line method.
Buildings and improvements are based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) are $65,310.

At April 15, 1997, Montgomery-Sears had four tenants. The following
tables set forth certain information with respect to the amount of and
expiration of leases at this Neighborhood Retail Center.

<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
------ ------ ---- ------- ---- -----------
<S> <C> <C> <C> <C> <C>
Sears Hardware 20,000 07/2000 2/5 $ 228,800 $ 11.44
Blockbuster 7,000 08/2000 1/5 92,400 13.20
Radio Shack 2,500 09/2000 1/5 25,000 10.00
Vacant* 3,600 06/1998 -- 43,200 12.00
Vacant* 1,500 06/1998 -- 15,300 10.20
</TABLE>

* The vacancies currently total 5,100 square feet, however, the vacant space
will be master leased by the seller for a two-year period at $12.00 per
square foot, on a net basis, for 3,600 square feet and $10.20 per square
foot, on a net basis, for 1,500 square feet.

36
<PAGE> 42
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent Leases Leases Leases
- ------------ -------- ------------- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 -- -- -- 416,640 -- -- --
1998 1 5,100 $ 61,200 416,640 $ 12.00 14.74% 14.69%
1999 -- -- -- 362,178 -- -- --
2000 3 29,500 379,004 379,004 12.85 85.26% 100.00%
2001-2006 -- -- -- -- -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases. It
is management of the Company's current opinion that the space will be
released at market rates.

THE ZANY BRAINY STORE

On July 1, 1996, the Company acquired fee simple title to a
single-user retail property in Wheaton, Illinois from an unaffiliated third
party for a purchase price of $2,455,000 on an all cash basis (the "Zany Brainy
Store"). This facility has been leased 100% to Children's Concepts, Inc. which
does business as Zany Brainy ("Zany Brainy") and sells children's books,
computer software, toys, and related items.

The Zany Brainy Store, built in 1995, is a single tenant retail
facility aggregating 12,499 rentable square feet.

The lease with Zany Brainy requires a base rent of $22.00 per square
foot per annum until November 2000, which increases for the period December
2000 to November 2006 to the lesser of $24 per square foot per annum or a
calculated amount using the consumer price index. The lease with Zany Brainy
contains two renewal options of five years each.

For federal income tax purposes, the Company's depreciable basis in
the Zany Brainy Store is approximately $1,617,000. Depreciation expense, for
tax purposes, will be computed using the straight-line method. Buildings and
improvements are based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) are $1,292.

The following tables set forth certain information with respect to the
amount of and expiration of the Zany Brainy lease.

37
<PAGE> 43
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ -------- ------------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997-1999 -- -- -- $ 274,978 -- -- --
2000 -- -- -- 289,560(2) -- -- --
2001-2004 -- -- -- 299,976 -- -- --
2005 1 12,499 $299,976 299,976 $ 24.00 100% 100%
2006 -- -- -- -- -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be
released at market rates.

(2) The base rent will increase in December 2000 to the lesser of $24.00 per
square foot per annum or $274,978* (1.0 plus the sum of CPI for the first
five years plus .025). For presentation purposes, $24.00 per square foot
per annum was used.

SALEM SQUARE SHOPPING CENTER, COUNTRYSIDE, ILLINOIS

On August 2, 1996, the Company acquired a Neighborhood Retail Center
located at the intersection of Plainfield Road and Brainard Avenue in
Countryside, Illinois known as Salem Square Shopping Center ("Salem Square")
from Salem Square Ltd., an Illinois limited partnership and American National
Bank & Trust of Chicago, not individually but as trustee under Trust No. 57190,
an unaffiliated third party, for approximately $6.2 million which was funded
entirely out of the Company's cash and cash equivalents. The purchase price
was approximately $55 per square foot, which the Company concluded was fair and
reasonable and within the range of values indicated in an appraisal received by
the Company and presented to the Company's board. Salem Square was built in
two phases in 1961 and 1985 and consists of a single-story commercial
multi-tenant retail facility aggregating 112,310 rentable square feet.

In evaluating Salem Square as a potential acquisition, the Company
considered a variety of factors including location, demographics, tenant mix,
price per square foot, existing rental rates compared to market rates, and the
occupancy of the center. The Company believes that the center is located within
a vibrant economic area. According to a study conducted by Mid-America Real
Estate Corporation, the population within a five mile radius of Salem Square is
240,000, with an average household income in excess of $62,000 per year, higher
than the national average. Further, although 75% of the rentable square feet at
Salem Square is leased to two discount clothing retailers, the Company's
management believes that the current rental rates for these two tenants are
below prevailing market rates, and that if one or both of these tenants vacated
their leased space before the end of the respective lease term, the space could
be released at rates higher than the current rental rates. The Company did not
consider any other factors materially relevant to the decision to acquire the
property. The Company did consider other factors such as traffic patterns in
the area.

The Company anticipates making approximately $80,000 in repairs and
improvements to Salem Square over the next few years, including painting,
parking lot repair, landscaping, and tuckpointing. A substantial portion of
this cost will be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Salem Square expressed as a percentage of total gross
leasable area for each of the last five calendar years and the average
effective annual base rent per square foot for each of the last five calendar
years.

38
<PAGE> 44
<TABLE>
<CAPTION>
Occupancy Rate as of
Year Ending December 31 of Effective Annual Rental
December 31, each year Per Square Foot
------------ -------------------- -----------------------
<S> <C> <C>
1996 97% $6.04
1995 100 6.40
1994 100 6.09
1993 100 6.09
1992 100 5.95
</TABLE>

As of April 15, 1997, Salem Square was 97% leased. Tenants leasing
more than 10% of the total square footage are Marshalls, which leases 29,827
square feet, and T.J. Maxx, which leases 63,535 square feet. Marshalls and
T.J. Maxx both are retailers of clothing for men, women and children, and home
furnishings.

The lease with Marshalls requires Marshalls to pay base rent equal to
$4.75 per square foot per annum payable monthly until January 31, 2002. The
lease also grants Marshalls two options to renew the lease for separate four
year terms. If the first option is exercised, Marshalls will be required to
pay a base rent equal to $5.35 per square foot per annum payable monthly from
February 1, 2002 through January 31, 2006. If the second option is exercised,
Marshalls will be required to pay a base rent equal to $5.85 per square foot
per annum payable monthly from February 1, 2006 through January 31, 2010. The
lease also requires Marshalls to pay percentage rent equal to 1% of gross sales
in excess of the annual fixed minimum rent (currently $141,678) plus Marshalls'
portion of real estate taxes paid on the property aggregating approximately
$71,900 in 1995. In 1996, 1% of gross sales did not exceed the annual fixed
minimum rent; therefore, no percentage rent was payable by Marshalls.

The lease with T.J. Maxx requires T.J. Maxx to pay base rent equal to
$5.75 per square foot per annum payable monthly until November 30, 2004. The
lease also grants three options to renew the lease for separate five year
terms. If T.J. Maxx exercises one or more of these options, the base rent per
square foot per annum will be: $5.82 (for the period from December 1, 2004
through November 30, 2009); $6.30 (for the period from December 1, 2009 through
November 20, 2014); and $6.79 (for the period from December 1, 2014 through
November 30, 2019). The lease also requires the payment of percentage rent
annually based on 1% of adjusted gross sales in excess of the annual fixed
minimum rent (currently $413,526). In 1996, 1% of gross sales did not exceed
the annual fixed minimum rent; therefore, no percentage rent was payable by
T.J. Maxx.

For federal income tax purposes, the Company's depreciable basis in
Salem Square is approximately $4,500,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $270,730. The real
estate taxes payable were calculated by multiplying Salem Square's assessed
value by an equalizer of 2.1243 and a tax rate of 7.391%.

39
<PAGE> 45
At April 15, 1997, a total of 108,568 square feet were leased to five
tenants at Salem Square. The following tables set forth certain information
with respect to the amount of and expiration of leases at this Neighborhood
Retail Center.

<TABLE>
<CAPTION>
Square Foot Renewal Current Annual Percentage Rent per
Lessee Leased Lease Ends Options Rent Rent Square Foot
------ ----------- ---------- ------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Trak Auto 6,000 01/2000 1/5 yr. $ 66,000 none $ 11.00
Famous Footwear 5,500 08/1999 None 59,510 none 10.82

Dress Barn 3,706 06/1998 1/5 yr. 50,031 none 13.50

Marshalls 29,827 01/2002 2/4 yr. 141,678 none 4.75
T.J. Maxx 63,535 11/2004 3/5 yr. 365,326 none 5.75
</TABLE>

<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ---------- ------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 none none none $682,542 none none none

1998 1 3,706 $50,028 682,542 $13.50 3.33% 7.33%

1999 1 5,500 59,510 632,514 10.82 4.90 9.41

2000 1 6,000 66,000 573,004 11.00 5.34 11.52

2001 none none none 507,004 none none none

2002 1 29,827 141,678 507,004 4.75 26.56 27.94

2003 none none none 365,326 none none none

2004 1 63,535 365,326 365,326 5.75 56.57 100.00

2005-2006 none none none none none none none
</TABLE>

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

HAWTHORN VILLAGE COMMONS, VERNON HILLS, ILLINOIS

On August 15, 1996, the Company acquired a Neighborhood Retail Center
located at the northeast corner of Town Line Road and Lakeview Parkway in
Vernon Hills, Illinois known as Hawthorn Village Commons ("Hawthorn Village")
from LaSalle National Trust, N.A., successor to LaSalle National Bank, as
Trustee under Trust Agreement known as Trust 106520 and Endowment and
Foundation Realty, Ltd. - JMB I, an unaffiliated third party, for approximately
$8.4 million. The Company funded the purchase using: (i) the proceeds of a
short-term loan maturing August 23, 1996 in the amount of approximately $2.9
million

40
<PAGE> 46
from Inland Mortgage Investment Corporation ("IMIC"), an Affiliate of the
Company (the "Short-Term Loan"); and (ii) cash and cash equivalents. The
Company did not pay any fees in connection with the Short-Term Loan, which
bears interest at a rate of 8% per annum. A majority of the Company's board,
including a majority of the Independent Directors, has approved the terms and
conditions of the Short-Term Loan. The Company repaid the Short-Term Loan
using the proceeds of a loan (the "Mortgage Loan") in the amount of $3,955,000
from LaSalle National Bank, an unaffiliated lender. The Company has paid a 1%
origination fee to the lender of the Mortgage Loan. The Mortgage Loan has a
term of five years and, prior to the maturity date, requires payments of
interest only, at an annual rate of 7.85%.

The purchase price for Hawthorn Village was approximately $85 per square
foot, which the Company concluded was fair and reasonable and within the range
of values indicated in an appraisal received by the Company. Hawthorn Village
was built in 1978 and remodeled in 1993 and consists of two single-story
buildings comprising a multi-tenant neighborhood retail facility aggregating
98,686 rentable square feet.

In evaluating Hawthorn Village as a potential acquisition, the Company
considered a variety of factors including location, demographics, tenant mix,
price per square foot, existing rental rates compared to market rates, traffic
patterns and the occupancy of the center. The Company believes that the center
is located within a vibrant economic area. According to a study conducted by
Urban Decision Systems, Inc. and dated November 21, 1995, the population within
a five mile radius of Hawthorn Village is 109,597, with an average household
income in excess of $98,472 per year, higher than the national average.
Walgreens, which occupies in excess of 10% of the rentable square feet at
Hawthorn Village, has the right to cancel its lease with one year's notice on
(i) December 31, 1997 (requiring the payment of a $60,000 fee) and (ii)
December 31, 2000 (requiring no fee). The Company's management believes that
if Walgreens cancels its lease, the space may be re-leased at a rate equal to
or greater than the current rental rate. The Company did not consider any
other factors materially relevant to the decision to acquire the property.

The table below sets forth certain information with respect to the
occupancy rate at Hawthorn Village expressed as a percentage of total gross
leasable area for each of the last five calendar years and the average
effective annual base rent per square foot for each of the last five calendar
years.

<TABLE>
<CAPTION>
Occupancy Rate as
Year Ending of December 31 of Effective Annual Rental
December 31, each year Per Square Foot
------------ ----------------- -----------------------
<S> <C> <C>
1996 98% $8.73

1995 100 9.10

1994 100 8.96

1993 98 8.49

1992 98 7.97
</TABLE>

As of April 15, 1997, Hawthorn Village was 98% leased. Tenants leasing
more than 10% of the total square footage are Dominick's, a grocery store,
which leases 46,984 square feet, and Walgreens, a drug store, which leases
11,974 square feet.

41
<PAGE> 47
The lease with Dominick's requires Dominick's to pay a base rent equal
to $4.73 per square foot per annum, payable monthly until February 2003. The
lease also grants Dominick's one option to renew the lease for a five year
term. If the option is exercised, Dominick's will be required to pay a base
rent equal to $4.73 per square foot per annum payable monthly from March 20,
2003 through March 19, 2008. The lease also requires Dominick's to pay
percentage rent annually based on 1% of sales in excess of: (i) the annual
minimum fixed rent (currently $228,641); minus (ii) 50% of real estate taxes
and common area maintenance expenses allocated to the leased property. In
1996, net percentage rent was $22,000.

The lease with Walgreens requires Walgreens to pay base rent of $7.02
per square foot per annum payable monthly until May 31, 1999 and $6.02 per
square foot per annum payable monthly from June 1, 1999 to December 31, 2005.
The lease also requires Walgreens to pay percentage rent annually equal to the
sum of: (i) 3% of gross sales, excluding liquor, up to $2.4 million; plus (ii)
2% on gross sales, excluding liquor, exceeding $2.4 million; plus (iii) 1.5% on
gross sales of liquor, adjusted by annual minimum rent. In 1996, net
percentage rent was $9,924.

For federal income tax purposes, the Company's depreciable basis in
Hawthorn Village is approximately $5,830,500. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $194,441. The real
estate taxes payable were calculated by multiplying Hawthorn Village's assessed
value at a tax rate of 8.035%.

At April 15, 1997, a total of 95,835 square feet was leased to
twenty-one tenants at Hawthorn Village. The following tables set forth certain
information with respect to the amount of and expiration of leases at this
Neighborhood Retail Center.

42
<PAGE> 48
<TABLE>
<CAPTION>
Square Feet Lease Renewal Current Rent per
Lessee Leased Ends Options Annual Rent Square Foot
------ ------ ---- ------- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C>
Dominick's 46,984 02/2003 1/5 yr. $ 228,641 $ 4.87
Formally Yours 1,609 08/1997 none 28,962 18.00

One Hour Photo 668 06/1998 1/5 yr. 12,645 18.93

Ice Cream Oasis 895 12/1997 1/2 yr. 20,585 23.00
Great Frame Up 1,455 07/1999 none 21,825 15.00

Hair Depot 1,950 12/1998 none 31,200 16.00
Mailboxes Etc. 1,486 10/1998 1/3 yr. 26,748 18.00

Village Dental Clinic 1,463 12/1998 none 21,945 15.00

Tasty Thai 1,802 01/1999 1/5 yr. 25,228 14.00
Pearle Vision Center 2,957 12/1998 1/5 yr. 65,054 22.00

Petal Peddlers 1,486 06/1998 none 20,804 14.00
Majestic Dry Cleaning 1,757 12/1998 1/5 yr. 25,459 14.49

El Famous Burrito 1,685 11/1998 none 31,307 18.57

Zanie's Comedy 6,046 10/1997 2/5 yr. 66,506 11.00
Walgreens 11,974 12/2005 none 84,000 7.02

Big Apple Bagels 2,000 09/2005 2/5 yr. 33,980 16.99
Caldwell Banker 3,631 05/1998 1/3 yr. 54,465 15.00

Bo-Bo's Gyros 1,410 04/2000 1/5 yr. 21,150 15.00

Starbuck's Coffee 1,744 10/2005 none 36,624 21.00
Temporary Personnel 1,403 08/1998 none 24,330 17.34

Oriental Rugs 1,448 09/1999 none 22,444 15.50
</TABLE>

43
<PAGE> 49
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ----------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 3 8,550 $116,053 $906,771 $13.57 8.66% 12.80%
1998 10 18,486 284,227 764,266 15.38 18.73 37.19

1999 3 4,705 73,008 492,655 15.52 4.77 14.82

2000 1 1,410 21,150 400,532 15.00 1.43 5.28
2001 none none none 383,742 none none none

2002 none none none 383,742 none none none
2003 1 46,984 228,642 385,486 4.87 47.61 59.31

2004 none none none 156,844 none none none

2005 3 15,384 156,844 156,844 10.20 15.59 100.00
2006 none none none none none none none
</TABLE>

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

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers which reported a fair market value for Hawthorn Village upon
reaching stabilized occupancy as of July 15, 1996, of $8,560,000.

SIX CORNERS PLAZA, CHICAGO, ILLINOIS

On October 18, 1996, the Company acquired a Neighborhood Retail Center
located at 3920 North Cicero Avenue in Chicago, Illinois known as Six Corners
Plaza ("Six Corners") from MBL Life Assurance Corporation, an unaffiliated
third party, for approximately $6.0 million. The purchase price was funded
using cash and cash equivalents. The purchase price was approximately $74 per
square foot, which the Company concluded was fair and reasonable and within the
range of values indicated in an appraisal received by the Company and presented
to the Company's board of directors.

Six Corners was built in 1966 and consists of a two-story building
aggregating 80,650 rentable square feet. As of April 15, 1997, Six Corners was
94% leased. Tenants leasing more than 10% of the total square footage are
Bally's Chicago Health & Tennis Club ("Bally's"), which leases 45,803 square
feet, or approximately 57% of the rentable square feet, and Illinois Masonic,
which leases 15,338 square feet, or approximately 19% of the rentable square
feet. Bally's is a fitness and exercise center, and Illinois Masonic is a
medical center.

In evaluating Six Corners as a potential acquisition, the Company
considered a variety of factors including location, demographics, tenant mix,
price per square foot, existing rental rates compared to market rates, and the
occupancy of the center. The Company believes that the center is located
within a vibrant economic area. According to a March 1996 study conducted by
Mid-America Real Estate Corporation which was based on 1990 census updates and
projections, the population within a three-mile radius of Six Corners

44
<PAGE> 50
is 412,159, with an estimated average household income in excess of $45,400 per
year, higher than the national average. Although 76% of the rentable square
feet at Six Corners is leased to two tenants, the Company's management believes
the superior demographics of the area surrounding the center, including high
population density, relatively high income and high vehicular traffic volume
near the center, meet the site evaluation criteria of many retailers.
Therefore, the Company's management believes that retenanting of any space
which is vacated in the future should be accomplished relatively quickly and at
rental rates comparable to those currently paid by the tenants at the facility.
The Company did not consider any other factors materially relevant to the
decision to acquire the property.

The Company does not anticipate making any significant repairs and
improvements to Six Corners over the next few years. A substantial portion of
any such cost would be paid by the tenants. The table below sets forth certain
information regarding occupancy and rental rates for the years ended December
31, 1995 and 1996. Information for prior years is not available to the
Company.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ----------------- -----------------------
<S> <C> <C>
1996 92% $11.95
1995 96 12.06
</TABLE>

The lease with Bally's requires Bally's to pay base rent equal to
$10.68 per square foot per annum payable monthly until July 31, 2010. The
lease also grants Bally's two options to renew the lease for separate five year
terms. If the first option is exercised, Bally's will be required to pay a
base rent of $12.67 per square foot per annum payable monthly from August 1,
2010. Thereafter, the price will increase 3% per year throughout both option
periods.

For federal income tax purposes, the Company's depreciable basis in
Six Corners is approximately $4,590,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $295,708. The real
estate taxes payable were calculated by multiplying Six Corners' assessed value
by an equalizer of 2.1243 and a tax rate of 9.345%.

At April 15, 1997, a total of 75,825 square feet were leased to eight
tenants at Six Corners. The following tables set forth certain information
with respect to the amount of and expiration of leases at this Neighborhood
Retail Center.

45
<PAGE> 51
<TABLE>
<CAPTION>
Square Foot Renewal Current Percentage Rent per
Leased Lease Ends Options Annual Rent Rent Square Foot
----------- ---------- ------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Bally's Chicago
Health Club 45,803 7/2010 2/5 year $489,176 none $10.68

Illinois Masonic (1) 13,988 3/1999 none $258,582 none $18.49

Illinois Masonic
Optometry Space (1) 1,350 3/1999 none $24,956 none $18.49

One Hour Photo 1,001 2/1999 none $17,517 none $17.50

Weight Watchers 2,844 8/1998 1/5 year $46,926 none $16.50

Payless Shoe Store 2,538 9/2002 none $44,451 none $17.55

Video Update 6,975 9/2000 none $69,750 none $10.00

Supercuts 1,326 1/2005 none $22,508 none $16.97

Vacant 4,825 none none none none none
</TABLE>

(1) Both spaces are leased to Illinois Masonic.

<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 none none none $ 966,416 none none none

1998 1 2,844 $ 48,348 1,002,432 $ 17.00 3.53% 4.82%

1999 3 16,339 294,102 968,288 18.00 20.01 30.37

2000 1 6,975 69,750 689,172 10.00 8.65 10.12

2001 none none none 632,975 none none none

2002 1 2,538 47,080 648,856 18.55 3.15 7.26

2003 none none none 614,465 none none none

2004 none none none 629,470 none none none

2005 1 1,326 27,619 644,127 20.83 1.64 4.29

2006 -- -- -- 647,196 -- -- --
</TABLE>

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

46
<PAGE> 52
SPRING HILL FASHION CORNER, WEST DUNDEE, ILLINOIS

On November 13, 1996, the Company acquired a Neighborhood Retail Center
located at 830-890 West Main Street, West Dundee, Illinois known as Spring Hill
Fashion Corner ("Spring Hill") from JMB/Spring Hill Associates, an unaffiliated
third party, for approximately $9.2 million. The purchase price was funded
using cash and cash equivalents, including the proceeds of monies previously
drawn against the Company's line of credit provided by LaSalle Bank on
September 30, 1996. The purchase price was approximately $73.48 per square
foot, which the Company concluded was fair and reasonable and within the range
of values indicated in an appraisal received by the Company and presented to
the Company's board of directors.

Spring Hill was built in 1985 and consists of a one-story building
aggregating 125,198 rentable square feet. As of April 15, 1997, Spring Hill
was 96% leased. In evaluating Spring Hill as a potential acquisition, the
Company considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and the occupancy of the center. The Company believes that the center
is located within a vibrant economic area. According to a 1996 study conducted
by Richard Ellis, the population within a five mile radius of Spring Hill is
111,500, with an estimated average household income in excess of $54,500 per
year, higher than the national average. Although 44% of the rentable square
feet at Spring Hill is leased to two tenants, the Company's management believes
that retenanting of any space which is vacated in the future should be
accomplished relatively quickly and at rental rates comparable to those
currently paid by the tenants at the facility. The Company did not consider
any other factors materially relevant to the decision to acquire the property.

The Company does not anticipate making any significant repairs and
improvements to Spring Hill over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Spring Hill expressed as a percentage of total gross leasable
area and the average effective annual base rent per square foot. Information
for prior years is not available to the Company since the property was acquired
through a foreclosure proceeding.

<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ----------------- -----------------------
<S> <C> <C>
1996 95% $9.71
1995 75 8.92
</TABLE>

Tenants leasing more than 10% of the total square footage are
Michael's, which leases 30,000 square feet, or approximately 24% of the
rentable square feet, and T. J. Maxx, which leases 25,161 square feet, or
approximately 20% of the rentable square feet. Michael's is a national chain
of craft stores, and T. J. Maxx is a discount clothing chain. The lease with
Michael's requires Michael's to pay base rent equal to $7.00 per square foot
per annum payable monthly until January 31, 2001, and $7.50 per square foot per
annum payable monthly from February 1, 2001 until January 31, 2006. The
Michael's lease contains no option to renew. The lease with T. J. Maxx
requires T. J. Maxx to pay base rent equal to $6.50 per square foot per annum
payable monthly until January 31, 2001. The lease with T. J. Maxx also grants
T. J. Maxx one option to

47
<PAGE> 53
renew the lease for a five-year term. If this option is exercised, T .J. Maxx
will be required to pay a base rent of $6.50 per square foot per annum payable
monthly from February 1, 2001 until January 31, 2006.

For federal income tax purposes, the Company's depreciable basis in
Spring Hill is approximately $7,406,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $123,315. The real
estate taxes payable were calculated by multiplying Spring Hill's assessed
value by an equalizer of 1.00 and a tax rate of 6.2199%.

At April 15, 1997, a total of 120,198 square feet were leased to
nineteen tenants at Spring Hill. The following tables set forth certain
information with respect to the amount of and expiration of leases at this
Neighborhood Retail Center.

48
<PAGE> 54
<TABLE>
<CAPTION>
Current

Square Feet Lease Renewal Annual Rent per
Lessee Leased Ends Options Rent Square Foot
------ ------ ---- ------- ---- -----------
<S> <C> <C> <C> <C> <C>
Pier 1 Imports 8,487 03/2002 none $110,331 $13.00

Travel Agents Int'l 2,000 09/1999 none 21,500 10.75

China Palace 5,000 07/2003 1/5 yr. 62,500 12.50

Wild Bird Unltd. 2,000 12/2000 none 26,120 13.06

Let's Learn 4,000 12/2000 none 39,960 9.99

Michael's 30,000 01/2006 none 210,000 7.00

Fantastic Sam's 900 06/2000 none 22,500 25.00

Jenny Craig 3,600 09/1998 1/5 yr. 41,400 11.50

Sizes Unltd. 4,000 01/2001 none 56,000 14.00

Sally Beauty Supply 2,000 03/1998 1/5 yr. 34,000 17.00

Music Go Round 3,000 09/2001 1/5 yr. 37,500 12.50

Once Upon a Child 4,000 02/2001 1/5 yr. 38,000 9.50

T. J. Maxx 25,161 01/2001 1/5 yr. 163,546 6.50

Play It Again Sports 3,500 02/2000 none 40,250 11.50

Funcoland 2,000 05/1997 none 24,000 12.00

Cosmetic Center 6,000 01/2003 2/5 yr. 60,000 10.00

Celebration Center 8,125 10/2004 none 89,700 11.04

Famous Footwear 5,425 09/2000 none 59,675 11.00

Nail Salon 1,000 2/2000 none 14,000 14.00

Vacant 5,000 none none none none
</TABLE>

49
<PAGE> 55
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1 2,000 $24,000 $1,153,920 $12.00 1.60% 2.08%

1998 2 5,600 71,400 1,164,809 12.75 4.47 6.13

1999 1 2,000 21,500 1,109,174 10.75 1.60 1.94

2000 6 16,825 223,068 1,102,115 13.26 13.44 20.24

2001 4 36,161 301,546 899,123 8.34 28.88 33.54

2002 1 8,487 126,244 601,744 14.87 6.78 20.98

2003 2 11,000 153,000 475,500 13.91 8.79 32.18

2004 1 8,125 97,500 322,500 12.00 6.49 30.23

2005 none none none 225,000 none none none

2006 1 30,000 225,000 225,000 7.50 23.96 100.00
</TABLE>

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

The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for the Spring Hill
property, as of November 15, 1996, of not less than $9,380,000 million.

GRAND & HUNT CLUB OUTLOT CENTER, GURNEE, ILLINOIS

On December 24, 1996, the Company acquired a Neighborhood Retail Center
located at Grand Avenue and Hunt Club Road in Gurnee, Illinois known as Grand &
Hunt Club Outlot Center ("Hunt Club") from Butler Real Estate, Inc., an
unaffiliated third party, for approximately $3.6 million. The purchase price
was funded using cash and cash equivalents. The purchase price was
approximately $169.26 per square foot, which the Company concluded was fair and
reasonable and within the range of values indicated in an appraisal received by
the Company and presented to the Company's board of directors.

Hunt Club was built in 1996 and consists of a one-story building
aggregating 21,222 rentable square feet. As of April 15, 1997, Hunt Club was
100% leased. In evaluating Hunt Club as a potential acquisition, the Company
considered a variety of factors including location, demographics, tenant mix,
price per square foot, existing rental rates compared to market rates, and the
occupancy of the center. The Company believes that the center is located
within a vibrant economic area. Although 100% of the rentable square feet at
Hunt Club is leased to two tenants, the Company's management believes that
retenanting of any space which is vacated in the future should be accomplished
relatively quickly and at rental rates comparable to those currently paid by
the tenants at the facility. The Company did not consider any other factors
materially relevant to the decision to acquire the property.

50
<PAGE> 56
The Company does not anticipate making any significant repairs and
improvements to Hunt Club over the next few years because the facility was
completed in 1996. Nevertheless, a substantial portion of any such cost would
be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Hunt Club expressed as a percentage of total gross leasable
area and the average effective annual base rent per square foot.

<TABLE>
<CAPTION>
Year Ending Occupancy Rate as of Effective Annual Rental
December 31, December 31 Per Square Foot
------------ ------------ ---------------
<S> <C> <C>
1996 100% $18.61
</TABLE>

Tenants leasing more than 10% of the total square footage are Super
Crown Books, which leases 16,722 square feet, or approximately 78.8% of the
rentable square feet, and Helzberg's Diamond Shops d/b/a Jewelry 3 ("Jewelry
3"), which leases 4,500 square feet, or approximately 21.2% of the rentable
square feet. Super Crown Books is a national chain of discount book stores and
Jewelry 3 is a jewelry store chain. The lease with Super Crown Books requires
Super Crown Books to pay base rent equal to $16.75 per square foot per annum
payable monthly from January 1, 1997 until February 28, 2002 and $17.75 per
square foot per annum payable monthly from March 1, 2002 until February 28,
2007. The Super Crown Books lease contains no option to renew. The lease with
Jewelry 3 requires Jewelry 3 to pay base rent equal to $25.50 per square foot
per annum payable monthly until December 31, 2001 and $29.32 per square foot
per annum payable monthly from January 1, 2002 until December 31, 2006. The
Jewelry 3 lease contains no option to renew.

For federal income tax purposes, the Company's depreciable basis in
Hunt Club is approximately $2,600,000. Depreciation expense, for tax purposes,
will be computed using the straight-line method. Buildings and improvements
are depreciated based upon estimated useful lives of 40 years. Information
regarding real estate taxes payable in 1997 for the tax year ended 1996 (the
most recent tax year for which information is generally available) is not
available since Hunt Club was completed in 1996. Prior to the completion of
Hunt Club in 1996, the property was vacant land. The Company believes that any
tax information relating to the vacant land would not be useful to investors.

At April 15, 1997, a total of 21,222 square feet were leased to two
tenants at Hunt Club. The following tables set forth certain information with
respect to the amount of and expiration of leases at this Neighborhood Retail
Center.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent per
Lessee Leased Ends Option Rent Square Foot
------ ----------- ----- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Super Crown Books 16,722 02/2007 None $280,094 $16.75

Jewelry 3 4,500 12/2006 None 114,750 25.50
</TABLE>

51
<PAGE> 57
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997-2001 none none none $394,844 none none none

2002 none none none 408,779 none none none

2003-2005 none none none 428,756 none none none

2006 1 4,500 $131,940 428,756 $29.32 21.2% 30.77%
</TABLE>

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

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers which reported a fair market value for the Hunt Club property, as of
December 17, 1996, of $3,610,000 million.

THE QUARRY OUTLOT, HODGKINS, ILLINOIS

On December 24, 1996, the Company acquired a Neighborhood Retail
Center located at La Grange Road and Joliet Road in Hodgkins, Illinois known as
The Quarry Outlot ("The Quarry") from Butler Real Estate, Inc., an unaffiliated
third party, for approximately $1.8 million. The purchase price was funded
using cash and cash equivalents. The purchase price was approximately $186.53
per square foot, which the Company concluded was fair and reasonable and within
the range of values indicated in an appraisal received by the Company and
presented to the Company's board of directors.

The Quarry was built in 1996 and consists of a one-story building
aggregating 9,650 rentable square feet. As of April 15, 1997, The Quarry was
100% leased. In evaluating The Quarry as a potential acquisition, the Company
considered a variety of factors including location, demographics, tenant mix,
price per square foot, existing rental rates compared to market rates, and the
occupancy of the center. The Company believes that the center is located
within a vibrant economic area. Although 100% of the rentable square feet at
The Quarry is leased to three tenants, the Company's management believes that
retenanting of any space which is vacated in the future should be accomplished
relatively quickly and at rental rates comparable to those currently paid by
the tenants at the facility. The Company did not consider any other factors
materially relevant to the decision to acquire the property.

The Company does not anticipate making any significant repairs and
improvements to The Quarry over the next few years because the facility was
completed in 1996. Nevertheless, a substantial portion of any such cost would
be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at The Quarry expressed as a percentage of total gross leasable
area and the average effective annual base rent per square foot.

<TABLE>
<CAPTION>
Year Ending Occupancy Rate Effective Annual Rental
December 31, as of December 31 Per Square Foot
------------ ----------------- -----------------------
<S> <C> <C>
1996 100% $20.88
</TABLE>

52
<PAGE> 58
Tenants leasing more than 10% of the total square footage are
Helzberg's Diamond Shops d/b/a Jewelry 3 ("Jewelry 3"), which leases 4,700
square feet, or approximately 48.7% of the rentable square feet, Casual Male
Big and Tall ("Casual Male"), which leases 3,150 square feet, or approximately
32.6% of the rentable square feet, and Dunkin Donuts/ Baskin Robbins, which
leases 1,800 square feet, or approximately 18.7% of the rentable square feet.
Jewelry 3 is a jewelry store chain, Casual Male is a retailer of clothing for
men, and Dunkin Donuts/ Baskin Robbins is a national chain of retail stores
selling donuts and ice cream. The lease with Jewelry 3 requires Jewelry 3 to
pay base rent equal to $24.00 per square foot per annum payable monthly until
December 31, 2001 and $26.35 per square foot per annum payable monthly from
January 1, 2002 until December 31, 2006. The Jewelry 3 lease contains no
option to renew. The lease with Casual Male requires Casual Male to pay base
rent equal to $15.00 per square foot per annum payable monthly until August 31,
1999, $16.00 per square foot per annum payable monthly from September 1, 1999
until August 31, 2003, $17.00 per square foot per annum payable monthly from
September 1, 2003 until August 31, 2006 and $18.70 per square foot per annum
payable monthly from September 1, 2006 until December 31, 2006. The Casual
Male lease contains no option to renew. The lease with Dunkin Donuts/ Baskin
Robbins requires Dunkin Donuts/ Baskin Robbins to pay base rent equal to $23.00
per square foot per annum payable monthly until October 31, 2001 and $25.30 per
square foot per annum payable monthly from November 1, 2001 until October 31,
2006. The Dunkin Donut/ Baskin Robbins lease contains no option to renew.

For federal income tax purposes, the Company's depreciable basis in
The Quarry is approximately $1,275,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Information regarding real estate taxes payable in 1997 for the tax year ended
1996 (the most recent tax year for which information is generally available) is
not available since The Quarry was completed in 1996. Prior to the completion
of The Quarry in 1996, the property was vacant land. The Company believes that
any tax information relating to the vacant land would not be useful to
investors.

At April 15, 1997, a total of 9,650 square feet were leased to three
tenants at The Quarry. The following tables set forth certain information with
respect to the amount of and expiration of leases at this Neighborhood Retail
Center.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent per
Lessee Leased Ends Options Rent Square Foot
------ ------ ---- ------- ---- ------ ----
<S> <C> <C> <C> <C> <C>
Jewelry 3 4,700 12/2006 None $112,800 $24.00

Casual Male 3,150 12/2006 None 47,250 15.00

Dunkin Donuts/
Baskin Robbins 1,800 10/2006 None 41,400 23.00
</TABLE>

53
<PAGE> 59
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 none none none $201,450 none none none
1998 none none none 201,450 none none none
1999 none none none 202,500 none none none
2000 none none none 204,600 none none none
2001 none none none 205,290 none none none
2002 none none none 219,785 none none none
2003 none none none 220,835 none none none
2004 none none none 222,935 none none none
2005 none none none 222,935 none none none
2006 3 9,650 $224,720 224,720 $23.29 100% 100%
</TABLE>

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

CRESTWOOD PLAZA SHOPPING CENTER, CRESTWOOD, ILLINOIS

On December 27, 1996, the Company acquired a Neighborhood Retail Center
located at 13335 South Cicero Avenue in Crestwood, Illinois known as Crestwood
Plaza Shopping Center ("Crestwood Plaza") from Inland Property Sales, Inc., an
affiliated third party, for approximately $1.81 million. The purchase price was
funded using cash and cash equivalents. The purchase price was approximately
$90.24 per square foot, which the Company concluded was fair and reasonable and
within the range of values indicated in an appraisal received by the Company
and presented to the Company's board of directors.

Crestwood Plaza was built in 1992 and consists of a one-story building
aggregating 20,044 rentable square feet. As of April 15, 1997, Crestwood Plaza
was 100% leased. In evaluating Crestwood Plaza as a potential acquisition, the
Company considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and the occupancy of the center. The Company believes that the center
is located within a vibrant economic area. Although 100% of the rentable
square feet at Crestwood Plaza is leased to two tenants, the Company's
management believes that retenanting of any space which is vacated in the
future should be accomplished relatively quickly and at rental rates comparable
to those currently paid by the tenants at the facility. The Company did not
consider any other factors materially relevant to the decision to acquire the
property.

The Company does not anticipate making any significant repairs and
improvements to Crestwood Plaza over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

54
<PAGE> 60
The table below sets forth certain information with respect to the
occupancy rate at Crestwood Plaza expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ------------ ---------------
<S> <C> <C>
1996 100% $10.13

1995 100% $10.13

1994 100% $10.13

1993 100% $10.13

1992 100% $10.13
</TABLE>

Tenants leasing more than 10% of the total square footage are
Entenmann's Inc., which leases 13,644 square feet, or approximately 68% of the
rentable square feet, and Pet Supplies Plus, which leases 6,400 square feet, or
approximately 32% of the rentable square feet. Entenmann's is a national
retailer of baked goods, and Pet Supplies Plus is a national retail pet supply
chain. The lease with Entenmann's requires Entenmann's to pay base rent equal
to $9.25 per square foot per annum payable monthly until October 31, 2002. The
Entenmann's lease contains no option to renew. The lease with Pet Supplies
Plus requires Pet Supplies Plus to pay base rent equal to $12.00 per square
foot per annum payable monthly until January 31, 1998. The lease with Pet
Supplies Plus also grants Pet Supplies Plus one option to renew the lease for a
five-year term. If this option is exercised, Pet Supplies Plus will be
required to pay a base rent of $12.99 per square foot per annum payable monthly
from February 1, 1998 until January 31, 2003.

For federal income tax purposes, the Company's depreciable basis in
Crestwood Plaza is approximately $1,480,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $51,494. The real
estate taxes payable were calculated by multiplying Crestwood Plaza's assessed
value by an equalizer of 2.1243 and a tax rate of 9.316%.

At April 15, 1997, a total of 20,044 square feet were leased to two
tenants at Crestwood Plaza. The following tables set forth certain information
with respect to the amount of and expiration of leases at this Neighborhood
Retail Center.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent per
Lessee Leased Ends Options Rent Square Foot
------ ------ ---- ------- ---- -----------
<S> <C> <C> <C> <C> <C>
Entenmann's Inc. 13,644 10/2002 none $126,207 $9.25

Pet Supplies Plus 6,400 01/1998 1/ 5 yr. 76,800 12.00
</TABLE>

55
<PAGE> 61
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 none none none $203,007 none none none

1998 1 6,400 $ 76,800 203,007 $12.00 32% 37.83%

1999-2001 none none none 126,207 none none none

2002 1 13,644 126,207 126,207 9.25 68% 100%
</TABLE>

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

The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for the Crestwood Plaza
property, as of December 17, 1996, of not less than $1,850,000.

PARK ST. CLAIR PLAZA, SCHAUMBURG, ILLINOIS

On December 31, 1996, the Company acquired a Neighborhood Retail Center
located at the corner of Higgins and Meacham Roads in Schaumburg, Illinois
known as Park St. Clair Plaza ("Park St. Clair") from KHF Land Partnership, an
unaffiliated third party, for approximately $1.525 million. The purchase price
was funded using cash and cash equivalents. The purchase price was
approximately $128.59 per square foot, which the Company concluded was fair and
reasonable and within the range of values indicated in an appraisal received by
the Company and presented to the Company's board of directors.

Park St. Clair was built in 1994 and consists of a one-story building
aggregating 11,859 rentable square feet. As of April 15, 1997, Park St. Clair
was 100% leased. In evaluating Park St. Clair as a potential acquisition, the
Company considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and the occupancy of the center. The Company believes that the center
is located within a vibrant economic area. Although 100% of the rentable
square feet at Park St. Clair is leased to two tenants, the Company's
management believes that retenanting of any space which is vacated in the
future should be accomplished relatively quickly and at rental rates comparable
to those currently paid by the tenants at the facility. The Company did not
consider any other factors materially relevant to the decision to acquire the
property.

The Company does not anticipate making any significant repairs and
improvements to Park St. Clair over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Park St. Clair expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.

56
<PAGE> 62
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ----------------- -----------------------
<S> <C> <C>
1996 100% $15.06

1995 35% $ 5.70

1994 35% $ 5.65
</TABLE>

Tenants leasing more than 10% of the total square footage are Hallmark
Cards ("Hallmark"), which leases 7,669 square feet, or approximately 65% of the
rentable square feet, and Ameritech Mobile Comm ("Ameritech"), which leases
4,190 square feet, or approximately 35% of the rentable square feet. Hallmark
is a national retailer of greeting cards, and Ameritech is a mobile
telecommunications provider. The lease with Hallmark requires Hallmark to pay
base rent equal to $14.00 per square foot per annum payable monthly until
November 30, 2001. The lease with Hallmark also grants Hallmark one option to
renew the lease for a five-year term. If this option is exercised, Hallmark
will be required to pay a base rent of $19.00 per square foot per annum payable
monthly from December 1, 2001 until November 30, 2006. The lease with
Ameritech requires Ameritech to pay base rent equal to $17.00 per square foot
per annum payable monthly until September 30, 1997, $17.50 per square foot per
annum payable monthly until September 30, 1998 and $18.00 per square foot per
annum payable monthly until September 30, 1999. The lease with Ameritech also
grants Ameritech one option to renew the lease for a five-year term. If this
option is exercised, Ameritech will be required to pay a base rent of $18.00
per square foot per annum payable monthly from October 1, 1998 until September
30, 2004.

For federal income tax purposes, the Company's depreciable basis in
Park St. Clair is approximately $1,220,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $38,938. The real
estate taxes payable were calculated by multiplying Park St. Clair's assessed
value by an equalizer of 2.1243 and a tax rate of 8.967%.

At April 15, 1997, a total of 11,859 square feet were leased to two
tenants at Park St. Clair. The following tables set forth certain information
with respect to the amount of and expiration of leases at this Neighborhood
Retail Center.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent per
Lessee Leased Ends Options Rent Square Foot
------ ------ ---- ------- ---- -----------
<S> <C> <C> <C> <C> <C>
Hallmark Cards 7,669 11/2001 1/ 5 yr. $ 107,366 $14.00

Ameritech Mobile Comm 4,190 09/1999 1/ 5 yr. 71,230 17.00
</TABLE>

57
<PAGE> 63

<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Approx. GLA Annual Base Per Square Building GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- ------------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 none none none $179,120 none none none

1998 none none none 181,215 none none none

1999 1 4,190 $75,420 195,568 $18.00 35.3% 38.56%

2000 none none none 122,704 none none none

2001 1 7,669 145,711 145,711 19.00 64.7% 100%
</TABLE>

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

The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for the Park St. Clair
property, as of December 31, 1996, of not less than $1.6 million.

LANSING SQUARE SHOPPING CENTER, LANSING, ILLINOIS

On December 31, 1996, the Company acquired a Neighborhood Retail Center
located at Torrence Avenue and Interstate 80/94 in Lansing, Illinois known as
Lansing Square Shopping Center ("Lansing Square") from Lansing Square RPF II
Limited Partnership, an unaffiliated third party, for approximately $16.3
million. The purchase price was funded using cash and cash equivalents as well
as the proceeds of a series of loans from LaSalle Bank. The proceeds of the
loans from LaSalle Bank (the "LaSalle Loans") totaling $12,850,000, were
received on December 30, 1996. The LaSalle Loans are secured by properties the
Company previously acquired. Of the total of $12,850,000, approximately
$8,000,000 was used in the acquisition of Lansing Square. The LaSalle Loans
require the payment of interest only at a rate of 7.6%, fixed for five years
and then variable for an additional two years. The purchase price for Lansing
Square was approximately $69.80 per square foot, which the Company concluded
was fair and reasonable and within the range of values indicated in an
appraisal received by the Company and presented to the Company's board of
directors.

Lansing Square was built in 1991 and consists of three one-story
buildings aggregating 233,508 rentable square feet. As of April 15, 1997,
Lansing Square was 90.3% leased. In evaluating Lansing Square as a potential
acquisition, the Company considered a variety of factors including location,
demographics, tenant mix, price per square foot, existing rental rates compared
to market rates, and the occupancy of the center. The Company believes that
the center is located in a vibrant economic area. Although 75.5% of the
rentable square feet at Lansing Square is leased to three tenants, the
Company's management believes that retenanting of any space which is vacated in
the future should be accomplished relatively quickly and at rental rates
comparable to those currently paid by the tenants at the facility. The Company
did not consider any other factors materially relevant to the decision to
acquire the property.

The Company does not anticipate making any significant repairs and
improvements to Lansing Square over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

58
<PAGE> 64
The table below sets forth certain information with respect to the
occupancy rate at Lansing Square expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ------------ ---------------
<S> <C> <C>
1996 89.0% $ 5.51

1995 76.0 5.81

1994 75.0 7.28

1993 92.0 7.38

1992 90.8 7.26
</TABLE>

Tenants leasing more than 10% of the total square footage are Sams
Club, which leases 107,927 square feet, or approximately 46% of the rentable
square feet, Baby Superstore, which leases 43,596 square feet, or approximately
19% of the rentable square feet, and Office Max, which leases 24,700 square
feet, or approximately 11% of the rentable square feet. Sams Club is a
national warehouse club, Baby Superstore is a national retailer of merchandise
for infants and children and Office Max is a national office supply chain. The
lease with Sams Club requires Sams Club to pay base rent equal to $7.31 per
square foot per annum payable monthly until November 30, 2011. The Sams Club
lease contains no option to renew. The lease with Baby Superstore requires
Baby Superstore to pay base rent equal to $6.50 per square foot per annum
payable monthly until October 31, 2000 and $7.00 per square foot per annum
payable monthly until December 31, 2001. The Baby Superstore lease contains no
option to renew. The lease with Office Max requires Office Max to pay base
rent equal to $7.25 per square foot per annum payable monthly until April 30,
1997, $7.75 per square foot per annum payable monthly until April 30, 2002 and
$8.25 per square foot per annum payable monthly until January 31, 2008. The
Office Max lease contains no option to renew.

For federal income tax purposes, the Company's depreciable basis in
Lansing Square is approximately $13,000,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $1,252,577. The real
estate taxes payable were calculated by multiplying Lansing Square's assessed
value by an equalizer of 2.1243 and a tax rate of 11.494%.

At April 15, 1997, a total of 210,810 square feet were leased to
eighteen tenants at Lansing Square. The following tables set forth certain
information with respect to the amount of and expiration of leases at this
Neighborhood Retail Center.

59
<PAGE> 65

<TABLE>
<CAPTION>
Current Rent per
Square Feet Lease Renewal Annual Square
Lessee Leased Ends Options Rent Foot
------ ---------- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Sam's Club 107,927 11/2011 none $788,946 $7.31

Office Max 24,700 01/2008 none 179,075 7.25

Baby Superstore 43,596 01/2006 none 283,374 6.50

Furniture Max 8,000 07/2002 none 116,000 14.50

Blockbuster 6,275 12/2001 none 100,400 16.00

Ameritech 3,600 06/2000 none 59,328 16.48

Wolf Camera 1,200 06/2002 1/5 yr. 23,376 19.48

Norwest Financial 1,500 01/1999 1/5 yr. 19,875 13.25

Racers Row 1,500 09/2000 none 23,250 15.50

Cost Cutters 900 11/2001 none 14,751 16.39

Papa Johns 1,200 01/2007 none 16,800 14.00

Great American
Bagels 2,400 10/2000 none 34,800 14.50

Sterling Vision 1,200 05/1999 none 18,600 15.50

Pappy's Gyros 1,200 08/1997 1/5 yr. 19,200 16.00

Dunkin Donuts 1,112 04/2002 none 21,128 19.00

Discus CD's 1,200 06/1999 1/3 yr. 18,000 15.00

Home Systems 1,200 02/1998 none 17,400 14.50

Happiness Is Pets 2,100 03/2007 none 29,400 14.00

Vacant 22,698 none none none none
</TABLE>

60
<PAGE> 66

<TABLE>
<CAPTION>
Percent of
Average Base Total Percent of
Rent Per Building Annual Base
Approx. GLA Annual Base Square Foot GLA Rent
Number of of Expiring Rent of Total Under Represented Represented
Year Ending Leases Leases Expiring Annual Base Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Rent1 Leases Leases Leases
- ------------ -------- ------------- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1 1,200 $19,200 $1,794,141 $16.00 .51% 1.07%

1998 1 1,200 17,400 1,783,586 14.50 .51 1.00

1999 3 3,900 59,250 1,775,810 15.19 1.67 3.34

2000 3 7,500 127,663 1,727,680 17.02 3.21 7.39

2001 2 7,175 132,065 1,635,291 18.41 3.07 8.08

2002 3 10,312 169,720 1,511,946 16.46 4.42 11.23

2003 none none none 1,346,893 none none none

2004 none none none 1,349,043 none none none

2005 none none none 1,349,593 none none none

2006 2 45,696 337,722 1,349,643 7.39 19.57 25.02
</TABLE>

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

The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for the Lansing Square
property, as of January 1, 1997, of $16.3 million.

THE SUMMIT OF PARK RIDGE, PARK RIDGE, ILLINOIS

On December 31, 1996, the Company acquired a Neighborhood Retail Center
located at 100-150 Euclid Avenue in Park Ridge, Illinois known as The Summit of
Park Ridge ("The Summit") from WHPX-S Real Estate Limited Partnership, an
unaffiliated third party, for approximately $3.2 million. The purchase price
was funded using cash and cash equivalents. The purchase price was
approximately $96.25 per square foot, which the Company concluded was fair and
reasonable and within the range of values indicated in an appraisal received by
the Company and presented to the Company's board of directors.

The Summit was built in 1986 and consists of a one-story building
aggregating 33,248 rentable square feet. As of April 15, 1997, The Summit was
81% leased (100% leased when including the master lease). In evaluating The
Summit as a potential acquisition, the Company considered a variety of factors
including location, demographics, tenant mix, price per square foot, existing
rental rates compared to market rates, and the occupancy of the center. The
Company believes that the center is located within a vibrant economic area.
The Company's management believes that retenanting of any space which is
vacated in the future should be accomplished relatively quickly and at rental
rates comparable to those currently paid by the tenants at the facility. The
Company did not consider any other factors materially relevant to the decision
to acquire the property.

The Company does not anticipate making any significant repairs and
improvements to The Summit over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

61
<PAGE> 67
Tenants leasing more than 10% of the total square footage are Giappo's
Pizza, which leases 3,683 square feet, or approximately 11% of the rentable
square feet, and Le Peep Restaurant ("Le Peep"), which leases 3,621 square
feet, or approximately 11% of the rentable square feet. The lease with
Giappo's Pizza requires Giappo's Pizza to pay base rent equal to $12.00 per
square foot per annum payable monthly until July 31, 1997, $13.00 per square
foot per annum payable monthly until July 31, 1998, $14.00 per square foot per
annum payable monthly until July 31, 2000, $15.00 per square foot per annum
payable monthly until July 31, 2004 and $16.00 per square foot per month
payable monthly until July 31, 2007. The Giappo's Pizza lease contains no
option to renew. The lease with Le Peep requires Le Peep to pay base rent
equal to $15.50 per square foot per annum payable monthly until December 31,
1998 and $17.00 per square foot per annum payable monthly until December 31,
2002. The lease with Le Peep also grants Le Peep one option to renew the lease
for a seven-year term. If this option is exercised, Le Peep will be required
to pay a base rent of $19.00 per square foot per annum payable monthly from
January 1, 2003 until December 31, 2009.

For federal income tax purposes, the Company's depreciable basis in
The Summit is approximately $2,500,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $171,743. The real
estate taxes payable were calculated by multiplying The Summit's assessed value
by an equalizer of 2.1243 and a tax rate of 9.016%.

At April 15, 1997, a total of 26,844 square feet were leased to twelve
tenants at The Summit. The following tables set forth certain information with
respect to the amount of and expiration of leases at this Neighborhood Retail
Center.

<TABLE>
<CAPTION>
Square Current Rent
Feet Lease Renewal Annual per Square
Lessee Leased Ends Options Rent Foot
------ ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Le Peep Restaurant 3,621 12/2002 1/7 yr. $56,126 $15.50

Siam Thai Restaurant 2,454 06/2000 1/4 yr. 43,482 17.72

Big Apple Bagels 1,124 10/2003 none 14,612 13.00

Sav-A-Lot 2,414 01/1999 none 26,554 11.00

Giappo's Pizza 3,683 07/2007 none 44,196 8.00

Fashion Media 2,142 08/2004 none 29,988 14.00

Success Lab of Park
Ridge 2,142 12/1997 1/5 yr. 28,917 13.50

H&R Block 2,142 04/2001 1/5 yr. 22,063 10.30

Heavenly Pet Center 2,000 09/1997 1/2 yr. 18,000 9.00

Hay Caramba! 2,888 02/2006 1/11 yr. 31,479 10.90

Yahav & Silvers DDS 1,446 10/2000 1/5 yr. 18,798 13.00

Baker's Daughter 788 10/2001 none 7,092 9.00

Vacant 6,404 none none none none
</TABLE>

62
<PAGE> 68
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
-------- --- -------- ------- ----- ------ ---- ---- --- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 2 4,142 $46,917 $346,774 $11.33 12.45% 13.53%
1998 none none none 305,544 none none none

1999 1 2,414 26,554 316,317 11.00 7.26 8.39

2000 2 3,900 65,175 295,835 16.71 11.73 22.03
2001 2 2,930 33,124 234,614 11.31 8.81 14.11

2002 1 3,621 61,557 203,648 17.00 10.89 30.23
2003 1 1,124 15,736 144,963 14.00 3.38 10.86

2004 1 2,142 34,272 132,206 16.00 6.44 25.92

2005 none none none 100,804 none none none
2006 1 2,338 41,876 100,804 14.50 8.69 41.54
</TABLE>

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

The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for The Summit property,
as of December 17, 1996, of not less than $3,250,000.

MAPLE PARK PLACE SHOPPING CENTER, BOLINGBROOK, ILLINOIS

On January 9, 1997, the Company acquired a Neighborhood Retail Center
located at Naperville and Boughton Roads in Bolingbrook, Illinois known as
Maple Park Place Shopping Center ("Maple Park") from KBS Retail Limited
Partnership, a Delaware limited partnership, an unaffiliated third party, for
approximately $15.3 million. The Company funded the purchase using: (i) the
proceeds of a short-term loan maturing April 7, 1997 in the amount of
approximately $8.0 million from Inland Mortgage Investment Corporation
("IMIC"), an Affiliate of the Company (the "Short-Term Loan"); and (ii) cash
and cash equivalents. The Company did not pay any fees in connection with the
Short-Term Loan, which bears interest at a rate of 9% per annum. The Company
repaid the Short-Term Loan on January 25, 1997 using the proceeds of two loans
(the "Mortgage Loans") totaling $12,840,000 from an unaffiliated lender. The
Company paid a 1.25% fee in connection with these Mortgage Loans. The Mortgage
Loans have a term of seven years and, prior to the maturity date, require
payments of interest only, at a rate of 7.8% per year, fixed for the first five
years with interest for the remaining two years payable at an annual rate equal
to the prime rate plus 0.5%. A majority of the Company's board, including a
majority of the Independent Directors, have approved the terms and conditions
of the Short-Term Loan. The purchase price for Maple Park was approximately
$69.52 per square foot, which the Company concluded was fair and reasonable and
within the range of values indicated in an appraisal received by the Company
and presented to the Company's board of directors.

Maple Park was built in 1992, with expansions made in 1994, and
consists of a one-story building aggregating 215,722 rentable square feet. As
of April 15, 1997, Maple Park was 99% leased. In evaluating Maple Park as a
potential acquisition, the Company considered a variety of factors including
location, demographics, tenant mix, price per square foot, existing rental
rates compared to market rates, and the

63
<PAGE> 69
occupancy of the center. The Company believes that the center is located in a
vibrant economic area. Although 75.3% of the rentable square feet at Maple
Park is leased to two tenants, the Company's management believes that
retenanting of any space which is vacated in the future should be accomplished
relatively quickly and at rental rates comparable to those currently paid by
the tenants at the facility. The Company did not consider any other factors
materially relevant to the decision to acquire the property.

The Company does not anticipate making any significant repairs and
improvements to Maple Park over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Maple Park expressed as a percentage of total gross leasable
area and the average effective annual base rent per square foot.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ------------ ---------------
<S> <C> <C>
1996 100% $8.18
1995 94 8.15
</TABLE>

Tenants leasing more than 10% of the total square footage are Kmart,
which leases 104,231 square feet, or approximately 49.5% of the rentable square
feet and Eagle Foods, which leases 56,706 square feet, or approximately 25.8%
of the rentable square feet. Kmart is a national discount retailer of
household goods and clothing and Eagle Foods is a national grocery store chain.
The lease with Kmart requires Kmart to pay base rent equal to $5.40 per square
foot per annum payable monthly until January 31, 2020. The Kmart lease
contains no option to renew. The lease with Eagle Foods requires Eagle Foods
to pay base rent equal to $10.16 per square foot per annum payable monthly
until October 31, 2002 and $10.41 per square foot per annum payable monthly
until August 31, 2017. The Eagle Foods lease contains no option to renew.

For federal income tax purposes, the Company's depreciable basis in
Maple Park is approximately $12,205,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $358,415. The real
estate taxes payable were calculated by multiplying Maple Park's assessed value
by an equalizer of 1.00 and a tax rate of 8.0013%.

At April 15, 1997, a total 212,932 square feet were leased to nineteen
tenants at Maple Park. The following tables set forth certain information with
respect to the amount of and expiration of leases at this Neighborhood Retail
Center.

64
<PAGE> 70
<TABLE>
<CAPTION>
Current Rent per
Square Feet Lease Renewal Annual Square
Lessee Leased Ends Options Rent Foot
------ ------ ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Forrestor Vision 1,400 02/2002 none $22,400 $16.00

Jamaica Me Crazy 1,400 04/1999 none 19,600 14.00

One Hour Cleaners 1,400 03/2002 none 24,500 17.50

Cellular One 1,610 03/1998 1/5 yr. 20,930 13.00

Fantastic Sams 1,190 02/2002 2/5 yr. 19,635 16.50

Joann's Hallmark 5,070 10/2000 1/4 yr. 55,770 11.00

Sonia Video 4,124 10/1997 none 43,302 10.50

GNC 1,600 10/1999 1/5 yr. 25,600 16.00

Dentist 1,600 09/2005 2/5 yr. 30,912 19.32

Gold Gym 13,200 04/2006 none 105,600 8.00

Associates Financial 3,200 10/1999 1/5 yr. 41,600 13.00

Inbound Sports 4,012 08/1999 1/5 yr. 60,180 15.00

Mail Boxes 1,200 12/1999 1/5 yr. 20,400 17.00

Prudential Properties 3,600 08/1999 1/5 yr. 46,800 13.00

Once Upon a Child 2,400 03/2000 1/5 yr. 36,000 15.00

Brueggers Bagels 2,295 01/2005 none 36,720 16.00

Prairie Paint, J.C.

Licht 2,400 11/1998 1/3 yr. 38,400 16.00

Eagle Foods 57,000 08/2017 none 576,133 10.16

Kmart 104,231 01/2020 none 589,157 5.65

Vacant 2,790 -- -- -- --
</TABLE>

65
<PAGE> 71
<TABLE>
<CAPTION>
Average
Base Rent Percent of
Per Total Percent of
Square Building Annual Base
Approx. GLA Annual Base Foot GLA Rent
Number of of Expiring Rent of Total Under Represented Represented
Year Ending Leases Leases Expiring Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent(1) Leases Leases Leases
- ------------ -------- ------------- ------ ------------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 4 9,654 $ 89,502 $1,809,262 $12.45 4.39% 4.95%
1998 2 3,935 58,130 1,728,492 14.77 1.80 3.36
1999 6 15,012 217,386 1,676,871 14.48 6.82 12.96
2000 2 7,470 96,705 1,462,096 12.95 3.39 6.61
2001 none none none 1,363,455 none none none
2002 1 1,190 22,015 1,368,279 18.50 0.50 1.61
2003 none none none 1,358,219 none none none
2004 none none none 1,359,610 none none none
2005 2 3,895 74,923 1,359,610 19.24 1.77 5.51
2006 1 13,200 105,600 1,284,687 8.00 6.00 8.22
</TABLE>

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

The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for the Maple Park
property, as of December 10, 1996, of not less than $15.3 million.

AURORA COMMONS SHOPPING CENTER, AURORA, ILLINOIS

On January 24, 1997, the Company acquired a Neighborhood Retail Center
located at Route 31 and Indian Trail Road in Aurora, Illinois known as Aurora
Commons Shopping Center ("Aurora Commons") from Aurora Commons Limited
Partnership and Northpoint Two Limited Partnership, unaffiliated third parties,
for approximately $11.5 million. The purchase price was funded using cash and
cash equivalents as well as by issuing a note assuming the existing first
mortgage (the "Mortgage") granted in favor of the John Hancock Life Insurance
Company, which has a remaining principal balance of approximately $9.58
million. The Mortgage requires the payment of principal and interest at a rate
of 9.0% per annum until the maturity date of October 31, 2001 and is cross
defaulted with a separate mortgage on the Southpoint Shopping Center located in
Arlington Heights, Illinois, which was simultaneously acquired by an Affiliate
of the Advisor. The purchase price for Aurora Commons was approximately $90.19
per square foot, which the Company concluded was fair and reasonable and within
the range of values indicated in an appraisal received by the Company and
presented to the Company's board of directors. The Directors, including all of
the Independent Directors, have approved this acquisition.

Aurora Commons was built in 1988 and consists of a one-story building
aggregating 127,510 rentable square feet. As of April 15, 1997, Aurora Commons
was 99% leased. In evaluating Aurora Commons as a potential acquisition, the
Company considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and the occupancy of the center. The Company believes that the center
is located in a vibrant economic area. Although 51% of the rentable square
feet at Aurora Commons is leased to one tenant, the Company's management
believes that retenanting of any space which is vacated in the future should be
accomplished relatively quickly and at rental rates

66
<PAGE> 72
comparable to those currently paid by the tenants at the facility. The Company
did not consider any other factors materially relevant to the decision to
acquire the property.

The Company does not anticipate making any significant repairs and
improvements to Aurora Commons over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Aurora Commons expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ------------ ---------------
<S> <C> <C>
1996 98% $9.12

1995 98% $9.11

1994 96% $8.86

1993 97% $8.05

1992 99% $8.64
</TABLE>

The sole tenant leasing more than 10% of the total square footage is
Jewel/Osco, which leases 64,965 square feet, or approximately 51% of the
rentable square feet. Jewel/Osco is a regional grocery/ pharmacy chain. The
lease with Jewel/Osco requires Jewel/Osco to pay base rent equal to $6.00 per
square foot per annum payable monthly until August 31, 2009. The Jewel/Osco
lease contains no option to renew.

For federal income tax purposes, the Company's depreciable basis in
Aurora Commons is approximately $10,040,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $274,807. The real
estate taxes payable were calculated by multiplying Aurora Commons' equalized
value by a tax rate of 7.9302%.

At April 15, 1997, a total of 126,012 square feet were leased to
twenty-three tenants at Aurora Commons. The following tables set forth certain
information with respect to the amount of and expiration of leases at this
Neighborhood Retail Center.

67
<PAGE> 73
<TABLE>
<CAPTION>
Current Rent per
Square Feet Lease Renewal Annual Square
Lessee Leased Ends Options Rent Foot
------ ------ ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Colortyme 2,396 10/1999 none $34,740 14.50

H&R Block 1,954 12/1999 none 31,948 16.35

Thang Ngo
Restaurant 1,954 12/2000 none 23,937 12.25

Sally Beauty
Supply 1,954 11/1999 1/5 yr. 31,264 16.00

Fashions $10 1,954 10/1998 none 28,333 14.50

Modern Times 1,667 12/1999 none 24,338 14.60

Interim Personnel 1,005 10/1999 none 15,849 15.77

Hollywood Nails 1,039 05/1997 none 18,183 17.50

Payless Shoes 2,553 05/1997 none 40,695 15.94

Norwest Financial 1,593 10/1999 1/2 yr. 23,497 14.75

Sizes Unlimited 7,051 4/2007 none 70,510 10.00

Dots 3,455 1/1999 1/5 yr. 43,188 12.50

Aurora Travel 666 1/1998 none 16,250 24.40

Trak Auto 5,931 1/2000 1/5 yr. 62,276 10.50

Famous Footwear 6,647 10/2001 1/10 yr. 59,823 9.00

Dollar Bills 3,873 1/2001 none 46,476 12.00

Jewel/Osco 64,965 08/2009 none 389,790 6.00

Cigarettes Cheaper 1,023 02/1999 1/3 yr. 17,391 17.00

One-hour Photo 865 06/1998 none 15,734 18.19

Red Wing Shoes 1,106 12/1999 1/3 yr. 15,484 14.00

Royal Jewelers 1,388 11/1999 1/3 yr. 26,372 19.00

Blockbuster Video 7,890 11/1999 1/5 yr. 108,488 13.75

Boston Market 3,083 05/1997 1/10 yr. 33,790 10.96

Vacant 1,498 -- -- -- --
</TABLE>

68
<PAGE> 74

<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Total Annual Foot Under Represented Represented
Year Ending Leases Leases Expiring Base Expiring by Expiring by Expiring
December 31, Expiring (squar feet) Leases Rent1 Leases Leases Leases
- ------------ -------- ------------ ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 3 6,675 $94,929 $1,180,637 $14.22 8.04% 8.04%

1998 3 3,485 59,249 1,097,401 17.00 2.73 5.40

1999 11 25,431 358,406 1,047,421 14.09 19.94 34.22

2000 2 7,885 89,241 667,409 11.32 6.18 13.37

2001 2 10,520 114,045 581,396 10.84 8.25 19.62

2002 none none none 467,351 none none none

2003 none none none 472,052 none none none

2004 none none none 474,402 none none none

2005 none none none 474,402 none none none

2006 none none none 474,402 none none none
</TABLE>

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

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers which reported a fair market value for the Aurora Commons property,
as of January 1, 1997, of $11.6 million.

LINCOLN PARK PLACE SHOPPING CENTER, CHICAGO, ILLINOIS

On January 24, 1997, the Company acquired a Neighborhood Retail Center
located at 666-670 West Diversey Parkway in Chicago, Illinois known as Lincoln
Park Place Shopping Center ("Lincoln Park") from Clark & Diversey Limited
Partnership, an unaffiliated third party, for approximately $2.1 million.
The Company funded the purchase using: (i) the proceeds of a short-term loan
maturing February 3, 1997 in the amount of approximately $2.0 million from
Inland Mortgage Investment Corporation ("IMIC"), an Affiliate of the Company
(the "Short-Term Loan"); and (ii) cash and cash equivalents. The Company did
not pay any fees in connection with the Short-Term Loan, which bears interest
at a rate of 9% per annum. A majority of the Company's board, including a
majority of the Independent Directors, have approved the terms and conditions
of the Short-Term Loan. The Company repaid the Short-Term Loan on January 25,
1997 using the proceeds of two loans (the "Mortgage Loans") totaling
$12,840,000 from an unaffiliated lender. The Company paid a 1.25% fee in
connection with these Mortgage Loans. The Mortgage Loans have a term of seven
years and, prior to the maturity date, require payments of interest only, at a
rate of 7.8% per year, fixed for the first five years with interest for the
remaining two years payable at an annual rate equal to the prime rate plus
0.5%. The purchase price for Lincoln Park was approximately $172.26 per square
foot, which the Company concluded was fair and reasonable and within the range
of values indicated in an appraisal received by the Company and presented to
the Company's board of directors.

Lincoln Park was built in 1990 consists of a one-story building
aggregating 10,678 rentable square feet. As of April 15, 1997, Lincoln Park
was 100% leased. In evaluating Lincoln Park as a potential acquisition, the
Company considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and the occupancy of the center. The

69
<PAGE> 75
Company believes that the center is located in a vibrant economic area.
Although 100% of the rentable square feet at Lincoln Park is leased to two
tenants, the Company's management believes that retenanting of any space which
is vacated in the future should be accomplished relatively quickly and at
rental rates comparable to those currently paid by the tenants at the facility.
The Company did not consider any other factors materially relevant to the
decision to acquire the property.

The Company does not anticipate making any significant repairs and
improvements to Lincoln Park over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Lincoln Park expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.

<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ ------------ ---------------
<S> <C> <C>
1996 100% $21.37

1995 100% $15.77

1994 69% $17.13

1993 100% $22.38

1992 69% $19.15
</TABLE>

Tenants leasing more than 10% of the total square footage are
Lechter's Housewares ("Lechter's"), which leases 6,375 square feet, or
approximately 59.7% of the rentable square feet and Nordic Trak, which leases
4,303 square feet, or approximately 40.3% of the rentable square feet. Nordic
Trak is a manufacturer and retailer of exercise equipment. The lease with
Lechter's requires Lechter's to pay base rent equal to $22.00 per square foot
per annum payable monthly until March 31, 2001. The lease with Lechter's also
grants Lechter's two options to renew the lease for five-year terms. If the
first option is exercised, Lechter's will be required to pay a base rent of
$25.00 per square foot per annum payable monthly from April 1, 2001 until March
31, 2006. If the second option is exercised, Lechter's will be required to pay
a base rent of $29.00 per square foot per annum payable monthly from April 1,
2006 until March 31, 2011. The lease with Nordic Trak requires Nordic Trak to
pay base rent equal to $22.00 per square foot per annum payable monthly until
October 31, 1997 and $23.00 per square foot per annum payable monthly until
October 31, 1999. The Nordic Trak lease contains no option to renew.

For federal income tax purposes, the Company's depreciable basis in
Lincoln Park is approximately $1,280,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Real estate taxes paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $82,674. The real
estate taxes payable were calculated by multiplying Lincoln Park's assessed
value by an equalizer of 2.1243 and a tax rate of 9.755%.

70
<PAGE> 76
At April 15, 1997, a total of 10,678 square feet were leased to two
tenants at Lincoln Park. The following tables set forth certain information
with respect to the amount of and expiration of leases at this Neighborhood
Retail Center.

<TABLE>
<CAPTION>
Current Rent per
Square Feet Lease Renewal Annual Square
Lessee Leased Ends Options Rent Foot
------ ------ ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Nordic Track 4,303 10/1999 none $94,666 $22.00
Lechter's 6,375 03/2001 2/5 140,250 $22.00
</TABLE>

1998 none none none 239,219 none none none

1999 1 4,303 $98,969 239,219 $23.00 40.3% 41.4%

2000 none none none 140,250 none none none

2001 1 6,375 140,250 140,250 22.00 59.7% 100.0%
</TABLE>

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

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers which reported a fair market value for the Lincoln Park property, as
of January 17, 1997, of $2,120,000.

NILES SHOPPING CENTER, NILES, ILLINOIS

On April 11, 1997, the Company acquired a Neighborhood Retail Center
located at 8351 West Golf Road in Niles, Illinois known as Niles Shopping
Center ("Niles Center") from American National Bank and Trust Company as
Trustee for Trust No. 77302, an unaffiliated third party, for approximately
$3.28 million. The purchase price was funded using cash and cash equivalents.
The purchase price was approximately $125.59 per square foot, which the Company
concluded was fair and reasonable and within the range of values indicated in
an appraisal received by the Company and presented to the Company's board of
directors.

Niles Center was built in 1982 and consists of a one-story building
aggregating 26,117 rentable square feet. As of April 11, 1997, Niles Center
was 100% leased. In evaluating Niles Center as a potential acquisition, the
Company considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and occupancy. The Company believes that the center which is located
approximately thirteen miles northwest of the Central Business District known
as the "Loop" in Chicago, Illinois is located within a vibrant economic area.
Although approximately 90% of the rentable square feet at Niles Center is
leased to five tenants, the Company's management believes that retenanting of
any space which is vacated in the future should be accomplished relatively
quickly and at

71
<PAGE> 77
rental rates comparable to those currently paid by the tenants at the facility.
The Company did not consider any other factors materially relevant to the
decision to acquire the property.

The Company does not anticipate making any significant repairs and
improvements to Niles Center over the next few years. Nevertheless, a
substantial portion of any cost of repairs and improvements would be paid by
the tenants.

The table below sets forth certain information with respect to the
occupancy rate at Niles Center expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.

<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
- ------------ ------------ ---------------
<S> <C> <C>
1996 100% $16.08

1995 100% $15.90

1994 100% $14.16

1993 100% $14.10

1992 100% $13.93
</TABLE>

Tenants leasing more than 10% of the total square footage are:
Intermac Technologies, a computer equipment retailer, which leases 7,000 square
feet, or approximately 26.8% of the rentable square feet; Wolf Camera, a camera
and photographic supply retailer, which leases 6,600 square feet, or
approximately 25.3% of the rentable square feet; Jennifer Convertibles, a
retailer of convertible sofas, which leases 3,375 square feet, or approximately
12.9% of the rentable square feet; Crown Books, a national discount retailer of
books, which leases 3,367 square feet, or approximately 12.9% of the rentable
square feet and ACEL Cell Phones, a retailer of cellular phones, which leases
3,275 square feet, or approximately 12.5% of the rentable square feet. The
lease with Intermac Technologies requires Intermac Technologies to pay base
rent equal to $14.50 per square foot per annum payable monthly until October
31, 1997 and $15.00 from November 1, 1997 until October 31, 2003. The lease
contains no option to renew. The lease with Wolf Camera requires Wolf Camera
to pay base rent equal to $13.50 per square foot per annum payable monthly
until January 31, 2002. The lease with Wolf Camera also grants Wolf Camera 2
options to renew the lease for a 5-year term each. If this option is
exercised, Wolf Camera will be required to pay a base rent of $15.00 per square
foot per annum payable monthly from February 1, 2002 until January 31,2007 and
$16.00 per square foot per annum payable monthly from February 1, 2007 until
January 31, 2012. The lease with Jennifer Convertibles requires Jennifer
Convertibles to pay base rent equal to $20.72 per square foot per annum payable
monthly until September 30, 1997, $21.35 per square foot per annum payable
monthly from October 1, 1997 until September 30, 1998, $21.99 per square foot
per annum payable monthly from October 1, 1998 until September 30, 1999, $22.65
per square foot per annum payable monthly from October 1, 1999 until September
30, 2000 and $23.33 per square foot per annum payable monthly until September
30, 2001. The lease with Jennifer Convertibles also grants Jennifer
Convertibles two options to renew the lease for a five-year term each. If the
first option is exercised, Jennifer Convertibles will be required to pay a base
rent of $24.01 per square foot per annum payable monthly from October 1, 2001
until September 30, 2002, $24.75 per square foot per annum payable monthly from
October 1, 2002 until September 30, 2003, $25.49 per

72
<PAGE> 78
square foot per annum payable monthly from October 1, 2003 until September 30,
2004, $26.27 per square foot per annum payable monthly from October 1, 2004
until September 30, 2005 and $27.04 per square foot per annum payable monthly
from October 1, 2005 until September 30, 2006. If the second option is
exercised, Jennifer Convertibles will be required to pay a base rent of $27.86
per square foot per annum payable monthly form October 1, 2006 until September
30, 2007, $28.69 per square foot per annum payable monthly from October 1, 2007
until September 30, 2008, $29.55 per square foot per annum payable monthly from
October 1, 2008 until September 30, 2009, $30.44 per square foot per annum
payable monthly from October 1, 2009 until September 30, 2010 and $30.35 per
square foot per annum payable monthly from October 1, 2010 until September 30,
2011. The lease with Crown Books requires Crown Books to pay base rent equal
to $11.50 per square foot per annum payable monthly until December 31, 1998.
This lease contains no option to renew. Crown Books is planning on vacating
this space prior to the lease expiration and if this space is not relet, rent
through the lease period will be paid out of a $90,000 escrow fund created by
the seller. The lease with ACEL Cell Phones requires ACEL Cell Phones to pay
base rent equal to $12.00 per square foot per annum payable monthly until
January 31, 2002. The lease with ACEL Cell Phones also grants ACEL Cell Phones
2 options to renew the lease for a 5- year term each. If the first option is
exercised, ACEL Cell Phones will be required to pay a base rent of $13.50 per
square foot per annum payable monthly from March 1, 2001 until February 28,
2006. If the Second Option is exercised, ACEL Cell Phones will be required to
pay a base rent of $14.50 per square foot per annum payable monthly from March
1, 2006 until February 28, 2011.

For federal income tax purposes, the Company's depreciable basis in
Niles Center will be approximately $2,448,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.

Information regarding real estate taxes payable in 1996 for the tax
year ended 1995 (the most recent tax year for which information is generally
available) were $120,031. The real estate taxes payable were calculated by
multiplying Niles Center's assessed value by an equalizer of 2.1243 and a tax
rate of 8.574%.

On April 11, 1997, a total of 26,117 square feet were leased to seven
tenants at Niles Center. The following tables set forth certain information
with respect to the amount of and expiration of leases at this Neighborhood
Retail Center.

<TABLE>
<CAPTION>
Square Feet Lease Renewal Current Rent per
Lessee Leased Ends Option Annual Rent Square Foot
------ ------ ---- ------ ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
1. Intermac 7,000 10/2003 No $101,500 $14.50
Technologies

2. Cigarettes 1,200 07/1999 1/3 yr. $ 30,000 $25.00
Cheaper

3. Crown Books 3,367 12/1997 No $ 38,720 $11.50

4. ACEL Cellular 3,275 02/2001 2/5 yr. $ 39,300 $12.00

5. Jennifer 3,375 10/2001 2/5 yr. $ 69,930 $20.72
Convertibles

6. Wolf Camera 6,600 01/2002 2/5 yr. $ 89,100 $13.50

7. Bo Rics Hair 1,300 04/2000 No $ 27,811 $21.39
</TABLE>

73
<PAGE> 79
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
------------ -------- --------------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 - - - $361,048 - - -

1998 1 3,367 $38,721 366,511 $11.50 12.89% 10.56%

1999 1 1,200 30,000 329,967 25.00 4.59% 7.09%

2000 1 1,300 27,807 302,212 21.39 4.98% 9.20%

2001 2 6,650 82,600 276,700 12.42 25.46% 29.85%

2002 1 6,600 89,100 194,100 13.50 25.27% 45.90%

2003 1 7,000 105,000 105,000 15.00 26.80% 100.00%
</TABLE>

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

The Company received an appraisal prepared by an independent appraiser who
is a member in good standing of the American Institute of Real Estate
Appraisers which reported a fair market value for the Niles Center property, as
of February 26, 1997, of $3,350,000. Appraisals are estimates of value and
should not be relied on as a measure of true worth or realizable value.

74
<PAGE> 80

POTENTIAL PROPERTY ACQUISITIONS

OAK FOREST COMMONS, OAK FOREST, ILLINOIS

The Company anticipates entering into a letter agreement to purchase a
Neighborhood Retail Center located at the northeast corner of 159th Street and
Central Avenue in Oak Forest, Illinois known as Oak Forest Commons ("Oak
Forest"). Under the anticipated terms of the acquisition, the Company would
purchase Oak Forest from T-L Oak Forest Commons, Inc., an unaffiliated third
party, for approximately $11.84 million. When a definitive agreement is
finalized and executed, the Company anticipates making an initial deposit on
the purchase of approximately 10% of the purchase price using cash and cash
equivalents. The Company anticipates that the remainder of the purchase price
will be payable in stages as the property is redeveloped and the anticipated
main tenant, Dominick's Finer Foods, Inc., begins paying rent under a lease
agreement. The Company anticipates that redevelopment of the property will be
completed, the balance of the purchase price will be paid and title to the
property will be transferred, within one year after a definitive agreement is
signed. Execution of a definitive agreement is subject to completion of
business and legal due diligence, which the Advisor is undertaking on behalf of
the Company, and receipt of a final environmental report indicating no
environmental concerns on the property. No acquisition fees will be payable in
connection with the acquisition of Oak Forest. There can be no assurance that
the Company will complete the acquisition of Oak Forest.

75
<PAGE> 81
Oak Forest is anticipated to be completed within one year after a
definitive purchase agreement is signed, and is expected to consist of a
one-story building comprising a multi-tenant community retail facility
aggregating approximately 106,200 rentable square feet. The center is expected
to be anchored by a Dominick's "Fresh Store," which is expected to lease
approximately 70,000 square feet.

DOWNERS GROVE PLAZA, DOWNERS GROVE, ILLINOIS

The Company anticipates entering into a letter agreement to purchase a
Neighborhood Retail Center located at the northwest corner of Ogden Avenue and
Williams Street in Downers Grove, Illinois known as Downers Grove Plaza
("Downers Grove"). Under the anticipated terms of the acquisition, the Company
would purchase Downers Grove from T-L Downers Grove Plaza, Inc., an
unaffiliated third party, for approximately $16.65 million. When a definitive
agreement is finalized and executed, the Company anticipates making an initial
deposit on the purchase of approximately 10% of the purchase price using cash
and cash equivalents. The Company anticipates that the remainder of the
purchase price will be payable in stages as the property is redeveloped and the
anticipated main tenant, Dominick's Finer Foods, Inc., begins paying rent under
a lease agreement. The Company anticipates that redevelopment of the property
will be completed, the balance of the purchase price will be paid and title to
the property will be transferred, within one year after a definitive agreement
is signed. Execution of a definitive agreement is subject to completion of
business and legal due diligence, which the Advisor is undertaking on behalf of
the Company, and receipt of a final environmental report indicating no
environmental concerns on the property. No acquisition fees will be payable in
connection with the acquisition of Downers Grove. There can be no assurance
that the Company will complete the acquisition of Downers Grove.

Downers Grove is anticipated to be completed within one year after a
definitive purchase agreement is signed, and is expected to consist of a
one-story building comprising a multi-tenant community retail facility
aggregating approximately 102,385 rentable square feet. The center is expected
to be anchored by a Dominick's "Fresh Store," which is expected to lease
approximately 72,000 square feet.

SEQUOIA SHOPPING CENTER, MILWAUKEE, WISCONSIN

The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at 6807 West Brown Deer Road in
Milwaukee, Wisconsin known as Sequoia Shopping Center ("Sequoia"). Under the
proposed terms of the acquisition, the Company would purchase Sequoia from
Hans Stutte, an unaffiliated third party, for approximately $3.01 million. The
Company anticipates funding the purchase using cash and cash equivalents.
Execution of a definitive agreement is subject to completion of due diligence,
which the Advisor is undertaking on behalf of the Company, receipt of the final
appraisal indicating the value of the property is not less than $3.01 million
and the receipt of a final environmental report indicating no environmental
concerns on the property. No acquisition fees will be payable in connection
with the acquisition of Sequoia. There can be no assurance that the Company
will complete the acquisition of Sequoia.

Sequoia was built in 1988 and consists of a one-story building
comprising a multi-tenant retail facility aggregating 35,447 rentable square
feet. Tenants leasing more than 10% of the rentable square feet are: Play It
Again Sports, U.S. Post Office and Kinko's.

76
<PAGE> 82
DOMINICK'S FINER FOODS, SCHAUMBURG, ILLINOIS

The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at 1293 East Higgins Road in Schaumburg,
Illinois known as Dominick's Finer Foods from Rybachi, L.P., an unaffiliated
third party, for approximately $10.7 million. The Company anticipates funding
the purchase using cash and cash equivalents. Due to the nature of the
property, the Asset Management Fee charged by an Affiliate of the Advisor will
be reduced from 4.5% of the gross revenues of the property to 2.0% of the
gross revenues of the property. Additionally, this Property Management Fee
will not be subordinated to Distributions. Execution of a definitive agreement
is subject to due diligence, which the Advisor is undertaking on behalf of the
Company, receipt of the final appraisal indicating the value of the property is
not less than $10.7 million and the receipt of a final environmental report
indicating no environmental concerns on the property. No acquisition fees will
be payable in connection with the acquisition of Dominick's Finer Foods. There
can be no assurance that the Company will complete the acquisition of
Dominick's Finer Foods.

Dominick's Finer Foods was built in 1996 and consists of a one story,
single tenant retail facility aggregating 71,400 rentable square feet.
Dominick's Finer Foods leases 100% of the rentable square feet.

DOMINICK'S FINER FOODS, HIGHLAND PARK, ILLINOIS

The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at the intersection of West Park Avenue
and Skokie Road in Highland Park, Illinois known as Dominick's Finer Foods from
Rybachi, L.P., an unaffiliated third party, for approximately $12.8 million.
The Company anticipates funding the purchase using cash and cash equivalents.
Due to the nature of the property, the Property Management Fee charged by an
Affiliate of the Advisor will be reduced from 4.5% of the gross revenues of
the property to 2.0% of the gross revenues of the property. Additionally, this
Property Management Fee will not be subordinated to Distributions. Execution
of a definitive agreement is subject to due diligence, which the Advisor is
undertaking on behalf of the Company, receipt of the final appraisal indicating
the value of the property is not less than $12.8 million and the receipt of a
final environmental report indicating no environmental concerns on the
property. No acquisition fees will be payable in connection with the
acquisition of Dominick's Finer Foods. There can be no assurance that the
Company will complete the acquisition of Dominick's Finer Foods.

Dominick's Finer Foods was built in 1996 and consists of a one story,
single tenant retail facility aggregating 71,442 rentable square feet.
Dominick's Finer Foods leases 100% of the rentable square feet.

AMERITECH OUTLOT BUILDING, JOLIET, ILLINOIS

The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at 3330 West Mall Loop Drive in Joliet,
Illinois known as Ameritech Outlot Building ("Ameritech Outlot") from
American National Bank & Trust Company of Chicago as trustee of trust No.
118532-07, an unaffiliated third party, for approximately $1.05 million.
The Company anticipates funding the purchase using cash and cash equivalents.
Execution of a definitive agreement is subject to due diligence, which the
Advisor is undertaking on behalf of the Company, receipt of the final appraisal
indicating the value of the property is not less than $1.05 million and the
receipt of a final environmental report indicating no environmental concerns on
the property. No acquisition fees will be payable in connection with the
acquisition of Ameritech Outlot. There can be no assurance that the Company
will complete the acquisition of Ameritech Outlot.

77
<PAGE> 83
Ameritech Outlot was built in 1995 and consists of a one story, single
tenant retail outlot building aggregating 4,504 rentable square feet.
Ameritech Cellular leases 100% of the rentable square feet.

CALUMET SQUARE SHOPPING CENTER, CALUMET CITY, ILLINOIS

The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at 777 River Oaks Drive in Calumet City,
Illinois, known as Calumet Square Shopping Center ("Calumet Square"), from
Lake River Oaks Properties LTD Partnership, an unaffiliated third party, for
approximately $2.108 million. The Company anticipates funding the purchase
using cash and cash equivalents. The roof of Calumet Square will be replaced
at an estimated cost of $95,000 which the Company will receive as a credit at
closing. Execution of a definitive agreement is subject to due diligence,
which the Advisor is undertaking on behalf of the Company, receipt of the final
appraisal indicating the value of the property is not less than $2.108 million
and the receipt of a final environmental report indicating no environmental
concerns on the property. No acquisition fees will be payable in connection
with the acquisition of Calumet Square. There can be no assurance that the
Company will complete the acquisition of Calumet Square.

Calumet Square was built in 1967 and was upgraded in 1987 and 1994.
Calumet Square consists of a one story, two tenant retail facility and an
outlot building aggregating 39,936 rentable square feet. Tenants leasing more
than 10% of the rentable square feet are Super Trak and Aronson Furniture.

CAPITALIZATION

The following table sets forth the historical capitalization of the
Company as of December 31, 1996 and the pro forma capitalization of the Company
as of that date as adjusted to give effect to the sale of all Shares in the
Prior Offering and in this Offering (as if all 11,000,000 Shares including
1,000,000 Shares distributed through the DRP are sold excluding those sold by
the Advisor), and the application of the estimated Net Proceeds as described in
"Estimated Use of Proceeds." The information set forth in the following table
should be read in conjunction with the historical financial statements of the
Company included elsewhere in this Prospectus and the discussion set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

78
<PAGE> 84

<TABLE>
<CAPTION>
DECEMBER 31, 1996
HISTORICAL PRO FORMA
---------- --- -----
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Mortgage notes payable . . . . . . . . . . . . . . . . . . . . . . . $ 30,838 $100,838

STOCKHOLDER'S EQUITY:
Preferred Stock, $.01 par value, 6,000,000 authorized,
none outstanding . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common Stock, $.01 par value, 24,000,000 authorized,
8,144,116 shares issued and outstanding historical;
24,000,000 shares issued and outstanding pro forma (1) . . . . . 81 240
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 70,512 211,576
Accumulated Distributions in Excess of Net Income . . . . . . . . . (1,493) (1,493)
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 69,100 210,323
-------- -------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . 99,938 311,161
====== =======
</TABLE>

(1) Does not include Shares issuable upon the exercise of
outstanding options granted under the Company's Stock Option Plan for
Independent Directors.

(2) The Company was originally capitalized in 1994 through the
cash contribution of $200,000 by the Advisor, for which the Advisor received
20,000 shares of Common Stock.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock as of the date of this
Prospectus: (i) each stockholder known by the Company to own beneficially in
excess of 5% of the outstanding shares of Common Stock; (ii) each Director;
(iii) each executive officer; and (iv) all Directors and executive officers as
a group. Except as otherwise indicated in the footnotes to the table, the
persons named below have sole voting and investment power with respect to the
shares of Common Stock beneficially owned by such person.

79
<PAGE> 85
<TABLE>
<CAPTION>
SHARES TO BE
BENEFICIALLY OWNED
AFTER COMPLETION
OF THE OFFERING
SHARES BENEFICIALLY (ASSUMING THE
OWNED AS OF THE DATE OF MAXIMUM OFFERING
THIS PROSPECTUS IS SOLD)
------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert D. Parks (a)(b) 9,497.3952 * 9,497.3952 *
G. Joseph Cosenza (a)(b) 22,569.0610 * 22,569.0610 *
Roland W. Burris (c)(f) 1,000.00 * 1,000.00 *
Douglas R. Finlayson, M.D. (d)(f) -- * -- *
Heidi N. Lawton (e)(f) -- * -- *
Kelly Tucek (a) -- * -- *
Roberta S. Matlin (a) 132.5778 * 132.5778 *
Directors and Executive Officers as a Group
(seven persons)
</TABLE>

___________________________
(a) The business address of each of Messrs. Parks and Cosenza, Ms. Tucek
and Ms. Matlin is c/o The Inland Group, Inc., 2901 Butterfield Road,
Oak Brook, Illinois 60521.

(b) Includes 20,000 Shares owned by the Advisor, of which Messrs. Parks
and Cosenza disclaim beneficial ownership. The Advisor is a
wholly-owned subsidiary of IREIC, which is an affiliate of TIGI.
Messrs. Parks and Cosenza are control persons with respect to TIGI.
See, generally, "Management -- the Advisor."

(c) The business address of Mr. Burris is c/o Jones, Ware & Grenard, 180
North LaSalle Street, Suite 3800, Chicago, Illinois 60601.

(d) The business address of Dr. Finlayson is c/o Westlake Clinic, 214
Washington Street, Ingleside, Illinois 60041.

(e) The business address of Ms. Lawton is c/o Lawton Realty Group, 2100
Clearwater Drive, Suite 106, Oak Brook, Illinois 60521.

(f) Does not include 2,500, 4,000 and 4,000 Shares issuable upon exercise
of options granted to Mr. Burris, Dr. Finlayson and Ms. Lawton,
respectively, pursuant to the Company's Independent Director Stock
Option Plan.

* Less than 1% of the Company's outstanding shares of Common Stock, as of the
date of this Prospectus.

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

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

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<PAGE> 86
LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1996, the Company had received subscriptions for a
total of 8,137,776 Shares resulting in $81,150,311 in gross offering proceeds.
The Company's capital needs and resources are expected to undergo changes as a
result of the completion of the initial public offering of Shares, the
commencement of the Second Offering and the acquisition of properties.
Operating cash flow is expected to increase as these additional properties are
added to the portfolio. Distributions to Stockholders are determined by the
Company's Board of Directors and are dependent on a number of factors,
including the amount of funds available for distribution, the Company's
financial condition, capital expenditures, and the annual distribution required
to maintain REIT status under the Code.

As of December 31, 1996, the Company had acquired twenty one
properties utilizing $95,015,721 of cash and cash equivalents. Cash and cash
equivalents consists of cash and short-term investments. Cash and cash
equivalents, including amounts held by property manager, were $8,491,735 and
$738,931 at December 31, 1996 and 1995, respectively. This increase was due to
the additional Offering proceeds raised and $25,670,000 in loan proceeds from
financing the properties. Partially offsetting the increase in cash and cash
equivalents was the purchase of fifteen additional properties in 1996 and the
payment of Offering Costs. The Company intends to use cash and cash
equivalents to purchase additional properties, to pay distributions and to pay
offering costs.

The properties owned by the Company are currently generating
sufficient cash flow to cover operating expenses of the Company plus pay a
monthly distribution on weighted average shares. The Company paid monthly
distributions of 8% per annum during the first, second and third quarters of
1996. Commencing with the fourth quarter of 1996, the Company increased the
monthly distributions to 8.3% per annum. Distributions declared for the year
ended December 31, 1996 were $3,704,943, of which $611,418 represents a return
of capital for federal income tax purposes. Beginning March 1, 1997, the
Company increased the monthly distribution paid to 8.5% per annum on weighted
average shares.

Management of the Company monitors the various qualification tests the
Company must meet to maintain its status as a real estate investment trust.
Ownership of the Company's stock is tested quarterly to determine that no more
than 50% in value of the outstanding stock is owned directly, or indirectly, by
five or fewer persons or entities at any time. Management of the Company also
reviews, on a quarterly basis, the Company's compliance with the Gross Income,
Asset and Distribution Tests as described in the section of the Prospectus
entitled "Federal Income Tax Considerations--Taxation of the Company--REIT
Qualification Tests". On an ongoing basis, as due diligence is performed by
Advisor on potential real estate purchases or temporary investment of
uninvested capital, management of both entities determines that the income from
the new asset will qualify for REIT purposes. For the year ended December 31,
1996, the Company qualified as a REIT.

CASH FLOWS FROM OPERATING ACTIVITIES

Net cash provided by operating activities increased by approximately
$4,550,000 for the year ended December 31, 1996 to $5,529,709 from $978,350 for
the same period in 1995. This increase is due primarily to an increase in net
income, as a result of the purchase of additional properties, for the year
ended December 31, 1996 as compared to the year ended December 31, 1995. As of
December 31, 1996 the Company had acquired twenty-one properties, as compared
to six properties as of December 31, 1995. This increase is also due to
$437,678 of rental income received under master lease agreements for the year
ended December 31,

81
<PAGE> 87
1996, as compared to $133,016 of rental income received under master lease
agreements for the year ended December 31, 1995.

CASH FLOWS FROM INVESTING ACTIVITIES

During the year ended December 31, 1996, the Company utilized
$68,976,841 in cash and cash equivalents for the purchase of and additions to
fifteen properties, as compared to the $6,577,843 utilized in the year ended
December 31, 1995 for the purchase of and additions to six properties. As part
of the purchases of the properties, the Company utilized $2,900,000 of
short-term notes payable from Affiliates, all of which had been repaid as of
December 31, 1996.

CASH FLOWS FROM FINANCING ACTIVITIES

For the year ended December 31, 1996, the Company generated
$71,199,936 of cash flows from financing activities as compared to $6,327,490
of cash flows generated from financing activities for the year ended December
31, 1995. This increase is due primarily to the increase in proceeds raised
from the Offering of $61,147,146 for the year ended December 31, 1996, as
compared to $19,803,163 of Offering proceeds raised for the year ended December
31, 1995. This increase is partially offset by an increase in the cash used
for the payment of Offering costs for the year ended December 31, 1996. The
increase is also partially offset by an increase in the amount of distributions
paid for the year ended December 31, 1996 of $3,285,528 as compared to the
distributions paid for the year ended December 31, 1995 of $607,095. The
Company placed financing on twelve of the Company's properties and received
$25,670,000 in loan proceeds. The Advisor has guaranteed payment of all public
offering expenses (excluding selling commissions, the marketing contribution
and the due diligence expense allowance fee) in excess of 5.5% of the Gross
Offering Proceeds of the Offering (the "Gross Offering Proceeds") or all
organization and offering expenses (including such selling expenses) which
together exceed 15% of the Gross Offering Proceeds. As of December 31, 1996,
organizational and offering costs did exceed the 5.5% and 15% limitations. The
Company anticipates that these costs will not exceed these limitations upon
completion of the Offering, however, any excess amounts will be reimbursed by
the Advisor.

RESULTS OF OPERATIONS

As of December 31, 1996, subscriptions for a total of 8,137,766 Shares
had been received from the public resulting in $81,150,311 in Gross Offering
Proceeds, which includes the Advisor's capital contribution of $200,000 and
Shares purchased through the DRP. At December 31, 1996, the Company owned
nineteen Neighborhood Retail Centers and two single-user retail properties.

Total income for the years ended December 31, 1996 and 1995 was
$6,327,734 and $1,180,422, respectively. This increase was due to the purchase
of additional properties in 1996. As of December 31, 1996, the Company had
acquired twenty-one properties, as compared to six properties as of December
31, 1995. The purchase of additional properties also resulted in increases in
property operating expenses paid or payable to Affiliates and non-affiliates
and depreciation expense.

The decrease in mortgage interest to Affiliates for the years ended
December 31, 1996, as compared to the years ended December 31, 1995, is due to
the payoff of the acquisition financing totaling $2,900,000.

82
<PAGE> 88
During 1994, the Advisor advanced $193,300 to the Company for costs incurred
with the Offering. These advances were repaid with a market rate of interest
to the Advisor in January 1995 with interest ranging from 7.75% to 9.50%. As
of December 31, 1996, the Company continues to be indebted on a mortgage in the
principal amount of $739,543, which bears interest at 7.655%, collateralized by
the Walgreens, Decatur property payable to an Affiliate.

The increase in mortgage interest to non-affiliates for the year ended
December 31, 1996, as compared to the year ended December 31, 1995, is due in
part to the mortgage which was assumed as part of the purchase of Regency
Point. The Company obtained $25,670,000 of financing from an unaffiliated
lender, using twelve properties previously acquired as collateral.

Interest income is the result of cash and cash equivalents being
invested in short-term investments until a property is purchased.

The increases in professional services to Affiliates and
non-affiliates and general and administrative expenses to Affiliates and
non-affiliates for the year ended December 31, 1996, as compared to the year
ended December 31, 1995, is due to the management of an increased number of
real estate assets.

SUBSEQUENT EVENTS

As of March 24, 1997, subscriptions for a total of 10,628,676 Shares
were received, bringing total gross offering proceeds to $106,137,967.

In January 1997, the Company paid a distribution of $548,947 to the
Stockholders.

Beginning March 1, 1997, the Company increased the monthly
distributions paid to 8.5% per annum on weighted average Shares.

On January 9, 1997, the Company purchased the Maple Park Place
Shopping Center from an unaffiliated third party for approximately $15,260,000.
The property is located in Bolingbrook, Illinois and contains 220,095 square
feet of leasable space. Its anchor tenants include Kmart, Eagle Foods and
Powerhouse Gym.

On January 24, 1997, the Company purchased Lincoln Park Place from an
unaffiliated third party for approximately $2,100,000. The property is located
in Chicago, Illinois. It consists of a 10,678 square foot building occupied by
two tenants, Lechters and Nordic Track.

On, January 24, 1997, the Company purchased Aurora Commons Shopping
Center from an unaffiliated third party for approximately $11,500,000. The
property is located in Aurora, Illinois and consists of three buildings
comprising 127,292 square feet. Its anchor tenants include Jewel/Osco, Boston
Market and Blockbuster.

In January 1997, the Company obtained additional financing secured by
the Lansing Square and Spring Hill Fashion Corner properties totaling
$12,840,000 from an unaffiliated lender. The Company paid a 1 1/4% fee in
connection with these mortgage loans. The mortgage loans have a term of seven
years and, prior to maturity date, require payments of interest only, at 7.8%,
fixed for the first five years with the remaining two years at prime plus 1/2%.

83
<PAGE> 89
On February 7, 1997, the Company made an initial deposit of $1,228,510
for the purchase of Forest Commons. The balance of the purchase price,
approximately $10,607,000, will be paid upon completion of the redevelopment of
the center and when the anticipated main tenant, Dominick's Finer Foods, Inc.,
begins paying rent under a lease agreement.

On February 7, 1997, the Company made an initial deposit of $1,265,630
for the purchase of Downers Grove Plaza. The balance of the purchase price,
approximately $15,382,000, will be paid upon completion of the redevelopment of
the center and when the anticipated main tenant, Dominick's Finer Foods, Inc.,
begins paying rent under a lease agreement.

On behalf of the Company, the Advisor is currently exploring the
purchase of additional Neighborhood Retail Centers and single-user retail
properties from unaffiliated third parties.

IMPACT OF ACCOUNTING PRINCIPLES

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation Plans" was issued in October 1995. The Statement is
effective for fiscal years beginning after December 15, 1995. As allowed by
the new Statement, the Company plans to continue to use Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting
for its stock options. This accounting pronouncement did not have a material
effect on the financial position or results of operations of the Company.

INFLATION

For the Company's Neighborhood Retail Centers, inflation is likely to
increase rental income from leases to new tenants and lease renewals, subject
to market conditions. The Company's rental income and operating expenses for
those properties owned or to be owned and operated under triple-net leases,
like the Walgreens/Decatur property, are not likely to be directly affected by
future inflation, since rents are or will be fixed under the leases and
property expenses are the responsibility of the tenants. The capital
appreciation of triple-net leased properties is likely to be influenced by
interest rate fluctuations. To the extent that inflation determines interest
rates, future inflation may have an effect on the capital appreciation of
triple-net leased properties.

PLAN OF DISTRIBUTION

The Company commenced the "best efforts" Offering on July 24, 1996,
and as of April 14, 1997 the Company had accepted subscriptions for 6,060,133
shares ($56,305,809 net of Selling Commissions, the Marketing Contributions and
the Due Diligence Expense Allowance Fee).

Inland Securities Corporation, an Affiliate of the Advisor, serves as
dealer manager of the Offering and is entitled to receive selling commissions
and certain other amounts. As of April 14, 1997, Inland Securities Corporation
was entitled to receive commissions, the Marketing Contribution and the Due
Diligence Expense Allowance Fee totaling $5,757,127 in connection with the
Offering. An Affiliate of the Advisor is also entitled to receive Property
Management Fees for management and leasing services. The Company incurred and
paid Property Management Fees of approximately $179,000 for the three months

84
<PAGE> 90
ended March 31, 1997 and $229,307 for the year ended December 31, 1996. The
Advisor may also receive an annual Advisor Asset Management Fee of not more
than 1% of the Average Invested Assets, paid quarterly. As of December 31,
1996, the Company had incurred and paid Advisor Management Fees of $238,108.

Investors are advised that for sales made to individuals residing in
the State of Minnesota, warrants will be issued only to Inland Securities
Corporation. No one else may receive warrants as commissions for sales. This
provision does not apply to sales outside of Minnesota.

DISTRIBUTION REINVESTMENT AND SHARE REPURCHASE PROGRAMS

The Company no longer anticipates terminating the Distribution
Reinvestment Program upon the completion of this Offering.

EXPERTS

The statement of gross income and direct operating expenses for the year ended
December 31, 1996 for Aurora Commons Shopping Center have been included herein
in reliance upon the report of Warady & Davis L.L.P., independent certified
public accountants, appearing elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing.

The financial statements of the Company as of December 31, 1996 and
1995, for the years ended 1996 and 1995 and for the period from May 12, 1994
(formation of the Company) to December 31, 1994 and the statement of gross
income and direct operating expenses of Maple Park Place Shopping Center
for the year ended December 31, 1996, the statement of gross income and direct
operating expenses of Niles Shopping Center for the year ended December 31,
1996, and the statement of gross income and direct operating expenses of Sequoia
Shopping Center have been included herein in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

85
<PAGE> 91
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INLAND REAL ESTATE CORPORATION

Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

Balance Sheets at December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . F-2

Statements of Operations for the years ended December 31, 1996 and 1995 . . . . . . . . F-4

Statements of Stockholders' Equity for the years ended December 31, 1996 and
1995 and the period from May 12, 1994 (formation of the Company) to
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Statements of Cash Flows for the years ended December 31, 1996 and
1995 and the period from May 12, 1994 (formation of the Company) to
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Notes to Financial Statements for the years ended December 31, 1996 and 1995 and for
the period from May 12, 1994 (formation of the Company) to December 31, 1994 . . . . . . F-8

Pro Forma Balance Sheet at December 31, 1996 (unaudited) . . . . . . . . . . . . . . . F-20

Notes to Pro Forma Balance Sheet at December 31, 1996 (unaudited) . . . . . . . . . . . F-22

Pro Forma Statement of Operations for the year ended
December 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26

Notes to Pro Forma Statement of Operations for the year
ended December 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-28

MAPLE PARK PLACE SHOPPING CENTER

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-43

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1996 of Maple Park Place Shopping Center . . . . . . . . . . . . F-44

Notes to Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1996 of Maple Park Place Shopping Center . . . . . . . . F-45

AURORA COMMONS SHOPPING CENTER

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-47

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1996 of Aurora Commons Shopping Center . . . . . . . . . . . . . F-48

Notes to Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1996 of Aurora Commons Shopping Center . . . . . . . . . F-49
</TABLE>

86
<PAGE> 92
<TABLE>
<CAPTION>
LINCOLN PARK PLACE SHOPPING CENTER
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-51

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1996 of Lincoln Park Place Shopping Center . . . . . . . . . . . F-52

Notes to Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1996 of Lincoln Park Place Shopping Center . . . . . . . F-53

NILES SHOPPING CENTER

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-55

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1996 of Niles Shopping Center . . . . . . . . . . . . . . . . . F-56

Notes to Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1996 of Niles Shopping Center . . . . . . . . . . . . . F-57

SEQUOIA SHOPPING CENTER

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-59

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1996 of Sequoia Shopping Center . . . . . . . . . . . . . . . . F-60

Notes to Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1996 of Sequoia Shopping Center . . . . . . . . . . . . F-61
</TABLE>

87
<PAGE> 93

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Inland Real Estate Corporation:

We have audited the financial statements of Inland Real Estate Corporation (the
Company) as listed in the accompanying index. In connection with the audits of
the financial statements, we also have audited the financial statement schedule
as listed in the accompanying index. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Inland Real Estate Corporation
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years ended December 31, 1996 and 1995 and for the period
from May 12, 1994 (formation date) to December 31, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

KPMG Peat Marwick

Chicago, Illinois
January 23, 1997
except as to Note 7 which is as of March 24, 1997

F-1

<PAGE> 94

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets

December 31, 1996 and 1995

<TABLE>
Assets
------

1996 1995
---- ----
<S> <C> <C>
Investment properties (Notes 1 and 4):
Land............................................ $ 24,705,743 5,437,948
Building and improvements....................... 69,927,238 12,074,484
------------- -------------
94,632,981 17,512,432
Less accumulated depreciation................... 1,109,038 169,894
------------- -------------
Net investment properties....................... 93,523,943 17,342,538
------------- -------------
Cash and cash equivalents including amounts
held by property manager (Note 1)............... 8,491,735 738,931
Restricted cash (Note 1).......................... 122,043 150,000
Accounts and rents receivable (Note 5)............ 1,914,756 333,823
Deposits and other assets (Note 4)................ 95,828 158,123
Deferred organization costs (net of
accumulated amortization of $5,492 and $0 at
December 31, 1996 and 1995, respectively)
(Note 1)........................................ 21,970 27,462
Loan fees (net of accumulated amortization
of $11,875 at December 31, 1996) (Note 1)....... 338,411 -
------------- -------------

Total assets.................................. $104,508,686 18,750,877
============= =============

</TABLE>

See accompanying notes to financial statements.

F-2

<PAGE> 95
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets
(continued)

December 31, 1996 and 1995

<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------

1996 1995
---- ----
Liabilities:
<S> <C> <C>
Accounts payable................................ $ 289,912 6,875
Accrued offering costs to Affiliates (Note 2)... 298,341 222,353
Accrued offering costs to non-affiliates........ 4,236 6,444
Accrued interest payable to Affiliates.......... 4,718 5,242
Accrued interest payable to non-affiliates...... 52,402 -
Accrued real estate taxes....................... 2,770,889 374,180
Distributions payable (Note 7).................. 548,947 129,532
Security deposits............................... 247,769 54,483
Note payable to Affiliates (Note 6)............. - 360,000
Mortgages payable (Notes 4 and 6)............... 30,838,233 750,727
Unearned income................................. 64,590 39,846
Other liabilities............................... 32,820 178,852
Due to Affiliates (Note 2)...................... 255,591 7,277
------------- -------------
Total liabilities............................. 35,408,448 2,135,811
------------- -------------

Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 24,000,000 Shares
authorized; 8,144,116 and 8,137,766 issued and
outstanding at December 31, 1996 and 2,003,073
and 2,000,073 Shares issued and outstanding
at December 31, 1995, respectively............ 81,000 19,996
Additional paid-in capital (net of offering
costs of $10,500,108 and $3,121,175 at
December 31, 1996 and 1995, respectively, of
which $8,096,213 and $2,129,264 was paid
to Affiliates, respectively).................. 70,512,073 16,835,183
Accumulated distributions in excess
of net income................................. (1,492,835) (240,113)
------------- -------------
Total stockholders' equity.................... 69,100,238 16,615,066
------------- -------------
Commitments and contingencies (Notes 3, 5 and 7)..
------------- -------------
Total liabilities and stockholders' equity........ $104,508,686 18,750,877
============= =============

</TABLE>
See accompanying notes to financial statements.

F-3

<PAGE> 96

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Operations

For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>

1996 1995
---- ----
<S> <C> <C>
Income:
Rental income (Notes 1 and 5).................. $ 4,467,903 869,485
Additional rental income....................... 1,336,809 228,024
Interest income................................ 438,188 82,913
Other income................................... 84,834 -
------------ ------------
6,327,734 1,180,422
------------ ------------
Expenses:
Professional services to Affiliates............ 16,476 7,277
Professional services to non-affiliates........ 46,790 1,615
General and administrative expenses to
Affiliates.................................... 42,904 -
General and administrative expenses
to non-affiliates............................. 77,389 13,880
Advisor asset management fee................... 238,108 -
Property operating expenses to Affiliates...... 229,307 46,791
Property operating expenses to non-affiliates.. 1,643,867 279,930
Mortgage interest to Affiliates................ 64,165 146,821
Mortgage interest to non-affiliates............ 533,320 17,340
Depreciation................................... 939,144 169,894
Amortization................................... 17,367 -
Acquisition costs expensed..................... 26,676 360
------------ ------------
3,875,513 683,908
------------ ------------
Net income.................................... $ 2,452,221 496,514
============ ============

Net income per weighted average
common stock shares outstanding
(4,494,620 and 943,156 for the years
ended December 31, 1996 and 1995,
respectively).................................. $ .55 .53
============ ============
</TABLE>

See accompanying notes to financial statements.

F-4

<PAGE> 97

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Stockholders' Equity

For the years ended December 31, 1996, 1995 and
for the period from May 12, 1994 (formation of the Company)
to December 31, 1994

<TABLE>
<CAPTION>
Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Proceeds from initial
offering.................. $ 200 199,800 - 200,000
----------- ----------- ----------- ------------
Balance December 31, 1994... 200 199,800 - 200,000

Net income.................. - - 496,514 496,514

Distributions declared
($.78 per weighted average
common stock shares
outstanding).............. - - (736,627) (736,627)

Proceeds from Offering (net
of Offering costs of
$3,121,175).............. 19,826 16,662,162 - 16,681,988

Repurchases of Shares....... (30) (26,779) - (26,809)
----------- ----------- ----------- ------------
Balance December 31, 1995... 19,996 16,835,183 (240,113) 16,615,066

Net income.................. - - 2,452,221 2,452,221

Distributions declared
($.82 per weighted average
common stock shares
outstanding).............. - - (3,704,943) (3,704,943)

Proceeds from Offering (net
of Offering costs of
$10,500,108).............. 61,038 53,707,177 - 53,768,215

Repurchases of Shares....... (34) (30,287) - (30,321)
----------- ----------- ----------- ------------
Balance December 31, 1996... $ 81,000 70,512,073 (1,492,835) 69,100,238
=========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.

F-5

<PAGE> 98

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Cash Flows

For the years ended December 31, 1996 and 1995
and for the period from May 12, 1994 (formation of the Company)
to December 31, 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................ $ 2,452,221 496,514 -
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation.................... 939,144 169,894 -
Amortization.................... 17,367 - -
Rental income under master
lease agreements.............. 437,678 133,016 -
Straight line rental income..... (119,225) (12,413) -
Changes in assets and liabilities:
Accounts and rents receivable. (1,461,708) (321,410) -
Deposits and other assets..... 62,295 (4,006) -
Accounts payable.............. 283,038 6,875 -
Accrued interest payable...... 51,878 5,242 -
Accrued real estate taxes..... 2,396,709 374,180 -
Security deposits............. 193,286 54,483 -
Other liabilities............. 3,968 28,852 -
Due to Affiliates............. 248,314 7,277 -
Unearned income............... 24,744 39,846 -
------------- ------------- -------------
Net cash provided by operating
activities........................ 5,529,709 978,350 -
------------- ------------- -------------
Cash flows from investing activities:
Escrowed funds.................... - - (1,699,381)
Payments for acquisition expenses. - - (4,117)
Purchase of investment properties. (68,717,979) (6,376,708) -
Tenant improvements............... (136,819) (51,135) -
Deposit for tenant improvements... (122,043) (150,000) -
------------- ------------- -------------
Net cash used in investing
activities........................ (68,976,841) (6,577,843) (1,703,498)
------------- ------------- -------------
Cash flows from financing activities:
Repayment of loan from Advisor.... - (193,300) 193,300
Proceeds from offering............ 61,147,147 19,803,163 200,000
Subscriptions received............ - - 1,699,381
Repurchase of Shares.............. (30,321) (26,809) -
Payments of offering costs........ (7,305,153) (2,514,129) (378,249)
Loan proceeds..................... 25,670,000 - -
Loan fees......................... (350,286) - -

</TABLE>
See accompanying notes to financial statements.

F-6

<PAGE> 99

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Cash Flows
(continued)

For the years ended December 31, 1996 and 1995
and for the period from May 12, 1994 (formation of the Company)
to December 31, 1994
<TABLE>
<CAPTION>

1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Distributions paid................ (3,285,528) (607,095) -
Repayment of notes from Affiliate. (3,271,185) - -
Principal payments of debt........ (1,374,738) (10,106,878) -
Payment of deferred organization
costs........................... - (27,462) -
------------- ------------- -------------
Net cash provided by financing
activities........................ 71,199,936 6,327,490 1,714,432
------------- ------------- -------------
Net increase in cash and
cash equivalents.................. 7,752,804 727,997 10,934
Cash and cash equivalents at
beginning of period............... 738,931 10,934 -
------------- ------------- -------------
Cash and cash equivalents at
end of period..................... $ 8,491,735 738,931 10,934
============= ============= =============
</TABLE>

Supplemental schedule of noncash investing and financing activities:

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Purchase of investment properties.. $(77,421,408) (17,594,313) -
Assumption of mortgage debt...... 5,803,429 4,595,178 -
Note payable to Affiliate........ 2,900,000 6,622,427 -
------------- ------------- ------------
$(68,717,979) (6,376,708) -
============= ============= ============

Distributions payable.............. $ 548,947 129,532 -
============= ============= ============

Cash paid for interest............. $ 545,607 158,919 -
============= ============= ============
</TABLE>

See accompanying notes to financial statements.

F-7

<PAGE> 100

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements

For the years ended December 31, 1996, 1995 and
for the period from May 12, 1994 (formation of the Company)
to December 31, 1994

(1) Organization and Basis of Accounting

Inland Real Estate Corporation (the "Company") was formed on May 12, 1994 to
invest in neighborhood retail centers located within an approximate 150-mile
radius of its headquarters in Oak Brook, Illinois. The Company may also
acquire single-user retail properties in locations throughout the United
States, certain of which may be sale and leaseback transactions, net leased to
creditworthy tenants. Inland Real Estate Advisory Services, Inc. (the
"Advisor"), an Affiliate of the Company, is the advisor to the Company. On
October 14, 1994, the Company commenced an initial public offering, on a best
efforts basis, ("Offering") of 5,000,000 shares of common stock ("Shares") at a
price of $10 per Share and 1,000,000 Shares at a price of $9.05 per Share to be
distributed pursuant to the Company's distribution reinvestment program (the
"DRP"). As of July 24, 1996, the Company had received subscriptions for a
total of 5,000,000 Shares, thereby completing the initial Offering. On July
24, 1996, the Company commenced an offering of an additional 10,000,000 Shares,
on a best efforts basis, (the "Second Offering") plus an additional 1,000,000
Shares for distribution through the DRP. As of December 31, 1996, the Company
had received subscriptions for a total of 3,137,776 Shares from the Second
Offering, resulting in $81,150,311 in gross offering proceeds, which includes
$1,470,938 received for 162,534 Shares purchased through the Distribution
Reinvestment Program. As of December 31, 1996, the Company has repurchased
6,350 Shares through the Share Repurchase Program.

The Company qualified as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended, for federal income tax purposes
commencing with the tax year ending December 31, 1995. Since the Company
qualified for taxation as a REIT, the Company generally will not be subject to
federal income tax to the extent it distributes its REIT taxable income to its
stockholders. If the Company fails to qualify as a REIT in any taxable year,
the Company will be subject to federal income tax on its taxable income at
regular corporate tax rates. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and federal income and excise taxes on its undistributed income.

The preparation of financial statements in conformity with 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 periods.
Actual results could differ from those estimates.

F-8

<PAGE> 101
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents and are carried at cost, which
approximates fair value. Cash and equivalents include $865,521 and $142,720
at December 31, 1996 and 1995, respectively, which are held by the Company's
affiliated property manager. Such amounts are unrestricted and held in the
Company's name.

Restricted cash at December 31, 1996 represents amounts held in escrow for
tenant improvements, concessions and leasing commissions at Antioch Plaza.
Such amounts will be added to the basis of the property as tenant improvements
are completed. Restricted cash at December 31, 1995 represents amounts held in
escrow for tenant improvements at Naperville/Hartford Plaza. The Company has
recorded a corresponding payable as a component of other liabilities.

The Partnership adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. SFAS
121 requires that the Partnership record an impairment loss on its property to
be held for investment whenever its carrying value cannot be fully recovered
through estimated undiscounted future cash flows from their operations and
sale. The amount of the impairment loss to be recognized would be the
difference between the property's carrying value and the property's estimated
fair value. The adoption of SFAS 121 did not have any effect on the
Partnership's financial position, results of operations or liquidity.

Depreciation expense is computed using the straight-line method. Buildings and
improvements are based upon estimated useful lives of 30 years. Tenant
improvements will be depreciated over the related lease period.

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

Deferred organization costs are amortized over a 60-month period.

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

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

F-9

<PAGE> 102

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

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

The carrying amount of cash and cash equivalents, restricted cash, accounts and
rents receivable, accounts payable and other liabilities, accrued offering
costs to Affiliates, accrued offering costs to non-Affiliates, accrued interest
payable to Affiliates, accrued real estate taxes, and distributions payable
approximate fair value because of the relatively short maturity of these
instruments.

Certain amounts in the 1995 financial statements have been reclassified to
conform with the 1996 presentation. Such reclassifications did not change the
1995 reported results.

(2) Transactions with Affiliates

As of December 31, 1996, the Company had incurred $10,500,108 of organization
and offering costs. Pursuant to the terms of the offering, the Advisor is
required to pay organizational and offering expenses (excluding sales
commissions, the marketing contribution and the due diligence expense allowance
fee) in excess of 5.5% of the gross proceeds of the Offering (the "Gross
Offering Proceeds") or all organization and offering expenses (including
selling commissions) which together exceed 15% of gross offering proceeds. As
of the completion of the initial Offering, organizational and offering did not
exceed the 5.5% or 15% limitations. As of December 31, 1996, organizational
and offering costs of the Second Offering did exceed the 5.5% and 15%
limitations. The Company anticipates that these costs will not exceed these
limitations upon completion of the offerings, however, any excess amounts will
be reimbursed by the Advisor.

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
Offering. Such costs to Affiliates incurred relating to the offering were
$692,248 and $409,858 as of December 31, 1996 and 1995, respectively, of which
$27,976 and $120,269 were unpaid as of December 31, 1996 and 1995,
respectively. In addition, an Affiliate of the Advisor serves as dealer
manager of the offering and is entitled to receive selling commissions, a
marketing contribution and a due diligence expense allowance fee from the
Company in connection with the offering. Such amounts incurred were $7,403,965
and $1,719,406 for the years ended December 31, 1996 and 1995, respectively, of
which $270,365 and $102,084 was unpaid as of December 31, 1996 and 1995,
respectively. As of December 31, 1996, approximately $6,296,000 of these
commissions had been passed through from the Affiliate to unaffiliated
soliciting broker/dealers.

F-10

<PAGE> 103

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
administration of the Company. Such costs are included in professional
services to Affiliates, general and administrative expenses to Affiliates and
acquisition costs expensed of which $749 remained unpaid at December 31, 1996.

As of December 31, 1996, the Advisor has contributed $200,000 to the capital of
the Company for which it received 20,000 Shares.

During 1994, the Advisor advanced $193,300 to the Company for costs incurred
with the Offering. These advances were repaid to the Advisor in January 1995
with interest ranging from 7.75% to 9.50%. The principal of $193,300 and
interest totaling $3,162 were paid from Gross Offering Proceeds.

The Advisor may receive an annual Advisor Asset Management Fee of not more than
1% of the Average Invested Assets, paid quarterly. For any year in which the
Company qualifies as a REIT, the Advisor must reimburse the Company: (i) to
the extent that the Advisor Asset Management Fee plus Other Operating Expenses
paid during the previous calendar year exceed 2% of the Company's Average
Invested Assets for the calendar year or 25% of the Company's Net Income for
that calendar year; and (ii) to the extent that Stockholders have not received
an annual Distribution equal to or greater than the 8% Current Return. For the
year ended December 31, 1996, the Company has incurred $238,108 of such fees,
all of which remains unpaid at December 31, 1996.

An Affiliate of the Advisor is entitled to receive Property Management Fees for
management and leasing services. The Company incurred and paid Property
Management Fees of $229,307 and $46,791 for the years ended December 31, 1996
and 1995, respectively, all of which has been paid.

The Company has incurred costs to Affiliates relating to the acquisition of the
properties, of which $16,734 is unpaid at December 31, 1996.

F-11

<PAGE> 104

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(3) Stock Option and Dealer Warrant Plan

The Company adopted an Independent Director Stock Option Plan which granted
each Independent Director an option to acquire 3,000 Shares as of October 19,
1994 and an additional 500 Shares on the date of each annual stockholders'
meeting commencing with the annual meeting in 1995 if the Independent Director
is a member of the Board on such date. The options for the initial 3,000
Shares granted shall be exercisable as follows: 1,000 Shares on the date of
grant and 1,000 Shares on each of the first and second anniversaries of the
date of grant. The succeeding options are exercisable on the second
anniversary of the date of grant. As of December 31, 1996, options for 1,000
Shares have been exercised $9.05.

In addition to sales commissions, Soliciting Dealers will also receive one
Soliciting Dealer Warrant for each 40 Shares sold by such Soliciting Dealer
during the offerings, subject to state and federal securities laws. The holder
of a Soliciting Dealer Warrant will be entitled to purchase one Share from the
Company at a price of $12 during the period commencing with the first date upon
which the Soliciting Dealer Warrants are issued and ending upon the first to
occur of: (i) October 14, 1999 or (ii) the closing date of a secondary offering
of the Shares by the Company. Notwithstanding the foregoing no Soliciting
Dealer Warrant will be exercisable until one year from the date of issuance.
As of December 31, 1996, none of these warrants were exercised.

F-12

<PAGE> 105

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties
Initial Cost (A) Gross amount at which carried
-------------------------- at end of period
Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------ ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Single-user Retail
- ------------------
Walgreens/Decatur
Decatur, IL............. 01/95 $ 78,330 1,130,723 - 78,330 1,130,723 1,209,053

Zany Brainy
Wheaton, IL............. 07/96 838,000 1,626,033 - 838,000 1,626,033 2,464,033

Neighborhood Retail Centers
- ---------------------------
Eagle Crest Shopping Center
Naperville, IL.......... 03/95 1,878,618 2,938,352 - 1,878,618 2,938,352 4,816,970

Montgomery-Goodyear
Montgomery, IL.......... 09/95 315,000 834,659 (12,692) 315,000 821,967 1,136,967

Hartford/Naperville Plaza
Naperville, IL.......... 09/95 990,000 3,427,961 11,244 990,000 3,439,205 4,429,205

Nantucket Square
Schaumburg, IL.......... 09/95 1,908,000 2,349,918 (72,214) 1,908,000 2,277,704 4,185,704

Antioch Plaza
Antioch, IL............. 12/95 268,000 1,360,445 (130,984) 268,000 1,229,461 1,497,461

Mundelein Plaza
Mundelein, IL........... 03/96 1,695,000 3,965,560 (22,820) 1,695,000 3,942,740 5,637,740

Regency Point
Lockport, IL............ 04/96 1,000,000 4,720,800 (21,900) 1,000,000 4,698,900 5,698,900

Prospect Heights
Prospect Heights, IL.... 06/96 494,300 1,683,755 (11,989) 494,300 1,671,766 2,166,066

Montgomery-Sears
Montgomery, IL.......... 06/96 768,000 2,714,173 (31,525) 768,000 2,682,648 3,450,648
------------ ------------- ------------ ------------- ------------- ------------
Subtotal $10,233,248 26,752,379 (292,880) 10,233,248 26,459,499 36,692,747

</TABLE>

F-13

<PAGE> 106

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)
<TABLE>
<CAPTION>

(4) Investment Properties (continued) Gross amount at which carried
Initial Cost (A) at end of period
-------------------------- Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------ ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Subtotal $10,233,248 26,752,379 (292,880) 10,233,248 26,459,499 36,692,747

Salem Square
Countryside, IL......... 08/96 1,735,000 4,449,217 (6,900) 1,735,000 4,442,317 6,177,317

Hawthorn Village
Vernon Hills, IL........ 08/96 2,619,500 5,887,640 - 2,619,500 5,887,640 8,507,140

Six Corners
Chicago, IL............. 10/96 1,440,000 4,538,152 - 1,440,000 4,538,152 5,978,152

Spring Hill Fashion Corner
West Dundee, IL......... 11/96 1,794,000 7,415,396 (9,000) 1,794,000 7,406,396 9,200,396

Crestwood Plaza
Crestwood, IL........... 12/96 325,577 1,483,183 - 325,577 1,483,183 1,808,760

Park St. Claire
Schaumburg, IL.......... 12/96 319,578 1,205,672 (3,463) 319,578 1,202,209 1,521,787

Lansing Square
Lansing, IL............. 12/96 4,075,000 12,179,383 (9,800) 4,075,000 12,169,583 16,244,583

Summit of Park Ridge
Park Ridge, IL.......... 12/96 672,000 2,497,950 (2,364) 672,000 2,495,586 3,167,586

Grand and Hunt Club
Gurnee, IL.............. 12/96 969,840 2,622,575 (58,333) 969,840 2,564,242 3,534,082

Quarry Outlot
Hodgkins, IL............ 12/96 522,000 1,278,431 - 522,000 1,278,431 1,800,431
------------ ------------- ------------ ------------- ------------- ------------
Total $24,705,743 70,309,978 (382,740) 24,705,743 69,927,238 94,632,981
============ ============ =========== ============ ============ ============

</TABLE>

F-14

<PAGE> 107

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

December 31, 1996

(4) Investment Properties (continued)

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

(B) Adjustments to basis includes additions to investment properties and
payments received under master lease agreements. As part of several
purchases, the Company will receive rent under master lease agreements on
the spaces currently vacant for periods ranging from one to two years or
until the spaces are leased. Generally Accepted Accounting Principles
("GAAP") require that as these payments are received, they be recorded as a
reduction in the purchase price of the properties rather than as rental
income. As of December 31, 1996, the cumulative amount of such payments
was $570,694. (Note 5)

Cost and accumulated depreciation of the above properties are summarized as
follows:

1996 1995
---- ----
<S> <C> <C>
Single User Retail Properties:
Cost.................................... $ 3,673,086 1,209,053
Less accumulated depreciation........... 112,871 34,550
------------ ------------
3,560,215 1,174,503
------------ ------------
Neighborhood Retail Centers:
Cost.................................... 90,959,895 16,303,379
Less accumulated depreciation........... 996,167 135,344
------------ ------------
89,963,728 16,168,035
------------ ------------
Total................................... $93,523,943 17,342,538
============ ============
</TABLE>

F-15

<PAGE> 108

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(5) Operating Leases

Master Lease Agreements

As part of the purchases of several of the properties, the Company will receive
rent under master lease agreements on spaces currently vacant for periods
ranging from one to two years or until the spaces are leased and tenants begin
paying rent. GAAP requires the Company to reduce the purchase price of the
properties as these payments are received, rather than record the payments as
rental income.

Minimum lease payments under operating leases to be received in the future,
excluding rental income under master lease agreements and assuming no expiring
leases are renewed:

<TABLE>
<CAPTION>
Number of
Minimum Lease Leases
Payments Expiring
------------- ------------
<S> <C> <C>
1997...................................... $ 10,796,526 20
1998...................................... 10,269,714 33
1999...................................... 9,264,471 23
2000...................................... 8,471,277 23
2001...................................... 6,891,348 17
Thereafter................................ 45,063,881 60
-------------
Total..................................... $ 90,757,217
=============
</TABLE>

No assumptions were made regarding the releasing of expired leases. It is the
opinion of the Company's management that the space will be released at market
rates.

Remaining lease terms range from one year to thirty two years. Pursuant to the
lease agreements, tenants of the property are required to reimburse the Company
for some or all of their pro rata share of the real estate taxes and operating
expenses of the property. Such amounts are included in additional rental
income.

Certain tenant leases contain provisions providing for stepped rent increases.
GAAP requires the Company to record rental income for the period of occupancy
using the effective monthly rent, which is the average monthly rent for the
entire period of occupancy during the term of the lease. The accompanying
financial statements include increases of $119,225 and $12,413 in 1996 and
1995, of rental income for the period of occupancy for which stepped rent
increases apply and $131,638 and $12,413 in related accounts receivable as of
December 31, 1996 and 1995, respectively. The Company anticipates collecting
these amounts over the terms of the related leases as scheduled rent payments
are made.

F-16

<PAGE> 109

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(6) Mortgages and Note Payable

Mortgages payable consist of the following at December 31, 1996 and 1995:

Balance at
December 31,
Property as Interest Maturity Monthly ------------
Collateral Rate Date Payment(a) 1996 1995
- ---------------- ---------- --------- ---------- -----------------------
<S> <C> <C> <C> <C>
Mortgage payable to Affiliate:

Walgreens 7.655% 05/2004 $ 5,689 $ 739,543 750,727

Mortgages payable to non-affiliates:

Regency Point (b) 08/2000 (b) 4,428,690 -

Eagle Crest 7.850% 10/2003 15,373 2,350,000 -

Nantucket Square 7.850% 10/2003 14,392 2,200,000 -

Antioch Plaza 7.850% 10/2003 5,724 875,000 -

Mundelein Plaza 7.850% 10/2003 18,382 2,810,000 -

Montgomery-Goodyear 7.850% 10/2003 4,121 630,000 -

Montgomery-Sears 7.850% 08/2003 10,761 1,645,000 -

Hartford/Naperville 7.850% 08/2003 15,111 2,310,000 -

Zany Brainy 7.590% 01/2004 7,875 1,245,000 -

Prospect Heights
Plaza 7.590% 01/2004 6,926 1,095,000 -

Hawthorn Village
Commons 7.590% 01/2004 27,071 4,280,000 -

Six Corners Plaza 7.590% 01/2004 19,608 3,100,000 -

Salem Square
Shopping Center 7.590% 01/2004 19,797 3,130,000 -
----------- ------------
Mortgages Payable.................................... $30,838,233 750,727
=========== ============

</TABLE>

F-17

<PAGE> 110

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

Note payable to Affiliates consists of the following at December 31, 1996 and
1995:

9.5% promissory note payable to Inland
Real Estate Investment Corporation, paid
in full on January 9, 1996.......................... $ - 360,000
----------- ------------
Note payable to Affiliate............................. $ - 360,000
=========== ============

(a) All payments are interest only, with the exception of the loans secured by
the Walgreens and Regency Point properties.

(b) Payments on this mortgage are based on a floating interest rate of 180
basis points over the 30-day LIBOR rate, which adjusts monthly, amortizing
over 25 years.

As of December 31, 1996, the required future principal payments on the
Partnership's long-term debt over the next five years are as follows:

1997.................................... $ 71,495
1998.................................... 74,454
1999.................................... 84,911
2000.................................... 4,252,170
2001.................................... 16,380

F-18

<PAGE> 111

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(7) Subsequent Events

As of March 24, 1997, subscriptions for a total of 10,628,676 Shares were
received, bringing total gross offering proceeds to $106,137,967.

In January 1997, the Company paid a distribution of $548,947 to the
Stockholders.

On January 9, 1997, the Company purchased the Maple Park Place Shopping Center
from an unaffiliated third party for approximately $15,260,000. The property
is located in Bolingbrook, Illinois and contains 220,095 square feet of
leasable space. Its anchor tenants include Kmart, Eagle Foods and Powerhouse
Gym.

On January 24, 1997, the Company purchased Aurora Commons Shopping Center from
an unaffiliated third party for approximately $11,500,000. The property is
located in Aurora, Illinois and consists of three buildings comprising 127,292
square feet. Its anchor tenants include Jewel/Osco, Boston Market and
Blockbuster.

In January 1997, the Company obtained additional financing secured by the
Lansing Square and Spring Hill Fashion Corner properties totaling $12,840,000
from an unaffiliated lender. The Company paid a 1 1/4% fee in connection with
these mortgage loans. The mortgage loans have a term of seven years and, prior
to maturity date, require payments of interest only, at 7.8%, fixed for the
first five years with the remaining two years at prime plus 1/2%.

On February 7, 1997, the Company made an initial deposit of $1,228,510 for the
purchase of Forest Commons. The balance of the purchase price, approximately
$10,607,000, will be paid upon completion of the redevelopment of the center
and when the anticipated main tenant, Dominick's Finer Foods, Inc., begins
paying rent under a lease agreement.

On February 7, 1997, the Company made an initial deposit of $1,265,630 for the
purchase of Downers Grove Plaza. The balance of the purchase price,
approximately $15,382,000, will be paid upon completion of the redevelopment of
the center and when the anticipated main tenant, Dominick's Finer Foods, Inc.,
begins paying rent under a lease agreement.

F-19

<PAGE> 112

Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1996
(unaudited)

The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect the acquisition of the Maple Park Place Shopping Center, Aurora Commons
Shopping Center, Lincoln Park Place Shopping Center, Niles Shopping Center,
Calumet Square, Ameritech Outlot, Sequoia Plaza, Highland Park Dominicks and
Schaumburg Dominicks as though these transactions occurred December 31, 1996.
This unaudited Pro Forma Balance Sheet should be read in conjunction with the
December 31, 1996 Financial Statements and the notes thereto as filed on Form
10-K.

This unaudited Pro Forma Balance Sheet is not necessarily indicative of what
the actual financial position would have been at December 31, 1996, nor does it
purport to represent the future financial position of the Company. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.

F-20

<PAGE> 113

Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1996
(unaudited)
<TABLE>
<CAPTION>

December 31,
December 31, 1996
1996 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------- ------------- --------------
<S> <C> <C> <C>
Assets
- ------
Net investment in
properties.................. $ 93,523,943 61,801,150 155,325,093
Cash and cash equivalents..... 8,491,735 - 8,491,735
Restricted cash............... 122,043 - 122,043
Accounts and rents
receivable.................. 1,914,756 810,737 2,725,493
Other assets.................. 456,209 45,201 501,410
------------- ------------- -------------
Total assets.................. $104,508,686 62,657,088 167,165,774
============= ============= =============

Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and accrued
expenses.................... $ 649,609 - 649,609
Accrued real estate taxes..... 2,770,889 821,631 3,592,520
Distributions payable (C)..... 548,947 - 548,947
Security deposits............. 247,769 87,804 335,573
Mortgages payable............. 30,838,233 21,275,747 52,113,980
Unearned income............... 64,590 - 64,590
Other liabilities............. 32,820 - 32,820
Due to Affiliates............. 255,591 - 255,591
------------- ------------- -------------
Total liabilities............. 35,408,448 22,185,182 57,593,630
------------- ------------- -------------
Common Stock.................. 81,000 47,060 128,060
Additional paid in capital
(net of Offering costs)..... 70,512,073 40,424,846 110,936,919
Accumulated distributions in
excess of net income........ (1,492,835) - (1,492,835)
------------- ------------- -------------
Total Stockholders' equity.... 69,100,238 40,471,906 109,572,144
------------- ------------- -------------
Total liabilities and
Stockholders' equity........ $104,508,686 62,657,088 167,165,774
============= ============= =============
</TABLE>

See accompanying notes to pro forma balance sheet.

F-21

<PAGE> 114

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)

(A) The December 31, 1996 Historical column represents the historical balance
sheet as presented in the December 31, 1996 10-K as filed with the SEC.

(B) The following pro forma adjustment relates to the acquisition of the
subject properties as though they were acquired on December 31, 1996. The
terms are described in the notes that follow.

Pro Forma Adjustments
--------------------------------------

Maple Park Aurora Lincoln
Place Commons Park Place
------------ ------------ ------------
<S> <C> <C> <C>
Assets
- ------
Net investment in
properties............ $15,262,150 11,500,000 2,100,000
Accounts and rents
receivable............ 189,477 174,067 82,674
Other assets............ 20,000 - 25,201
------------ ------------ ------------
Total assets............ $15,471,627 11,674,067 2,207,875
============ ============ ============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................. $ 189,477 177,619 82,674
Security deposits....... 49,224 24,330 -
Mortgages payable....... 8,000,000 11,259,637 2,016,110
------------ ------------ ------------
Total liabilities....... 8,238,701 11,461,586 2,098,784
------------ ------------ ------------
Common Stock (D)........ 8,410 247 127
Additional paid in capital
(net of Offering
Costs)(D)............. 7,224,516 212,235 108,964
------------ ------------ ------------
Total Stockholders'
equity................ 7,232,926 212,481 109,091
------------ ------------ ------------
Total liabilities and
Stockholders' equity.. $15,471,627 11,674,067 2,207,875
============ ============ ============
</TABLE>

F-22

<PAGE> 115

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)

(B) Continued

Pro Forma Adjustments
---------------------------------------------------------------------------
Niles Highland Total
Shopping Calumet Ameritech Sequoia Park Schaumburg Pro Forma
Center Square Outlot Plaza Dominicks Dominicks Adjustments
------------ ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
- ------
Net investment in
properties........... $ 3,280,000 2,108,000 1,050,000 3,010,000 10,691,000 12,800,000 61,801,150
Accounts and rents
receivable........... 121,981 140,000 5,000 97,538 - - 810,737
Other assets........... - - - - - - 45,201
------------ ----------- ----------- ----------- ----------- ------------ -------------
Total assets........... $ 3,401,981 2,248,000 1,055,000 3,107,538 10,691,000 12,800,000 62,657,088
============ =========== =========== =========== =========== ============ =============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ $ 121,981 140,000 5,000 104,880 - - 821,631
Security deposits...... 14,250 - - - - - 87,804
Mortgages payable...... - - - - - 21,275,747
------------ ----------- ----------- ----------- ----------- ------------ -------------
Total liabilities...... 136,231 140,000 5,000 104,880 - - 22,185,182
------------ ----------- ----------- ----------- ----------- ------------ -------------
Common Stock (D)....... 3,797 2,451 1,221 3,491 12,431 14,884 47,060
Additional paid in capital
(net of Offering
Costs)(D)............ 3,261,953 2,105,549 1,048,779 2,999,167 10,678,569 12,785,116 40,424,846
------------ ----------- ----------- ----------- ----------- ------------ -------------
Total Stockholders'
equity............... 3,265,750 2,108,000 1,050,000 3,002,658 10,691,000 12,800,000 40,471,906
------------ ----------- ----------- ----------- ----------- ------------ -------------
Total liabilities and
Stockholders' equity. $ 3,401,981 2,248,000 1,055,000 3,107,538 10,691,000 12,800,000 62,657,088
============ =========== =========== =========== =========== ============ =============
</TABLE>

F-23

<PAGE> 116

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)

Acquisition of Maple Park Place Shopping Center, Bolingbrook, Illinois

On January 9, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $15,262,150.

The Company funded the purchase using (i) the proceeds of a short-term loan
maturing April 7, 1997 in the amount of $8 million from Inland Mortgage
Investment Corporation ("IMIC"), an affiliate of the company (the "Short-
Term Loan"), and (ii) cash and cash equivalents. The Short-Term Loan bears
interest at a rate of 9.0% per annum and requires a loan fee of 1/4%.

Acquisition of Aurora Commons Shopping Center, Aurora, Illinois

On January 24, 1997, the Company acquired this property from an
unaffiliated third party for the purchase price of $11,500,000.

As part of the acquisition, the Company assumed the existing mortgage loan
maturing December 31, 2001, with the balance funded with cash and cash
equivalents. The loan bears interest at a rate of 9% per annum with
monthly payments of principal and interest on the first day of each month.

Acquisition of Lincoln Park Place Shopping Center, Chicago, Illinois

On January 24, 1997, the Company acquired this property from an
unaffiliated third party for the purchase price of $2,100,000.

The Company funded the purchase using the proceeds of a short-term loan
maturing February 3, 1997 in the amount of $2,016,110 from Inland Mortgage
Investment Corporation ("IMIC"), an affiliate of the Company (the "Short-
Term Loan"). The Company did not pay any fees in connection with the
Short-Term Loan, which bears interest at a rate of 9% per annum.

Acquisition of Niles Shopping Center, Niles, Illinois

On April 11, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $3,280,000 on an all cash basis,
funded from cash and cash equivalents.

Probable Acquisitions

The Company anticipates acquiring the following properties from
unaffiliated third parties on an all cash basis, funded from cash and cash
equivalents: Calumet Square, Ameritech Outlot, Sequoia Plaza, Highland Park
Dominicks and Schaumburg Dominicks.

F-24

<PAGE> 117

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)

(C) No pro forma assumptions have been made for the additional payment of
distributions resulting from the additional proceeds raised.

(D) Additional Offering Proceeds of $47,060,000, net of additional Offering
costs of $6,588,094 are reflected as received as of December 31, 1996,
prior to the purchase of the properties. Offering costs consist
principally of registration costs, printing and selling costs, including
commissions.

F-25

<PAGE> 118

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1996
(unaudited)

The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of Mundelein Plaza, Regency Point Shopping
Center, Prospect Heights Plaza, Montgomery-Sears Shopping Center, the Zany
Brainy store, Salem Square, Hawthorn Village Commons, Six Corners Plaza, Spring
Hill Fashion Corner, Crestwood Plaza Shopping Center, Park St. Claire, Lansing
Square Shopping Center, Summit of Park Ridge, Maple Park Place Shopping Center,
Aurora Commons Shopping Center, Lincoln Park Place Shopping Center, Niles
Shopping Center, Calumet Square, Ameritech Outlot, Sequoia Plaza, Highland Park
Dominicks and Schaumburg Dominicks as though they occurred the earlier of
January 1, 1996 or the date operations commenced. Grand and Hunt Club and the
Quarry Outlot were constructed in 1996, and had not commenced significant
operations prior to acquisition, therefore, no operations relating to these
properties are presented on the unaudited Pro Forma Statement of Operations for
December 31, 1996. This unaudited Pro Forma Statement of Operations should be
read in conjunction with the December 31, 1996 Financial Statements and the
notes thereto as filed on Form 10-K.

This unaudited Pro Forma Statement of Operations is not necessarily indicative
of what the actual results of operations would have been for the year ended
December 31, 1996, nor does it purport to represent the future financial
position of the Company. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.

F-26

<PAGE> 119

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1996
(unaudited)

Pro Forma Adjustments
------------------------------------
Acquisitions
1996 Probable
Historical 1996 1997 1997 1996
(A) (B) (C) (D) Pro Forma
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Rental income..... $4,467,903 6,127,326 3,789,329 2,221,142 16,605,700
Additional rental
income.......... 1,336,809 3,198,250 1,156,727 333,523 6,025,309
Interest
income(E)....... 438,188 - - - 438,188
Other income...... 84,834 - - - 84,834
----------- ----------- ----------- ------------ ------------
Total income.... 6,327,734 9,325,576 4,946,056 2,554,665 23,154,031
----------- ----------- ----------- ------------ ------------
Professional services
and general and
administrative
fees............ 183,559 - - - 183,559
Advisor asset
management fee.(I) 238,108 708,222 321,421 296,590 1,564,341
Property operating
expenses........ 1,873,174 3,656,698 1,348,671 427,991 7,306,534
Interest expense.. 597,485 949,958 1,784,433 - 3,331,876
Depreciation (F).. 939,144 1,448,017 863,338 741,200 3,991,699
Amortization (H).. 17,367 11,428 6,457 - 35,252
Acquisition costs
expensed........ 26,676 - - - 26,676
----------- ----------- ----------- ------------ ------------
Total expenses.... 3,875,513 6,774,323 4,342,320 1,465,781 16,439,937
----------- ----------- ----------- ------------ ------------
Net income...... $2,452,221 2,551,253 621,736 1,088,884 6,714,094
=========== =========== =========== ============ ============

Weighted average
common stock shares
outstanding (G). 4,494,620 9,200,620
=========== ============

Net income per weighted
average common stock
outstanding (G). $ .55 .73
=========== ============
</TABLE>

See accompanying notes to pro forma statement of operations.

F-27

<PAGE> 120

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1996
(unaudited)

(A) The 1996 Historical column represents the historical statement of
operations of the Company for the year ended December 31, 1996, as filed
with the SEC on Form 10-K.

(B) Total pro forma adjustments for the year ended December 31, 1996 are as
though the 1996 acquisitions of the following properties occurred on
January 1, 1996 on an all cash basis except for the following:

Regency Point

In the purchase of Regency Point the Company assumed the existing first
mortgage loan of $4,473,200, along with a related interest rate swap
agreement. The first mortgage loan has a floating interest rate of 180
basis points over the 30-day LIBOR rate, which rate is adjusted monthly.
The interest rate swap agreement, in conjunction with the first mortgage,
provides for Bank One, Chicago, to receive from or pay to the Company the
difference between 6.11% and the 30-day LIBOR rate, so that the first
mortgage loan has an effective rate of 7.91% per annum. The pro forma
adjustment for interest expense for 1996 was estimated using the described
loan terms. The related interest rate swap agreement was terminated on
April 18, 1996 resulting in $48,419 proceeds to the Company. The pro forma
adjustment does not give effect to the termination of this agreement.

Hawthorn Village Commons

The Company funded the purchase of Hawthorn Village Commons using: (i) the
proceeds of a short-term loan maturing August 23, 1996 in the amount of
$2.9 million from Inland Mortgage Investment Corporation ("IMIC"), an
Affiliate of the Company (the "Short-Term Loan"), and (ii) cash and cash
equivalents. The Company did not pay any fees in connection with the
Short-Term Loan, which bears interest at a rate of eight percent per annum.

Crestwood Plaza Shopping Center

As part of the December 27, 1996 purchase of Crestwood Plaza, the Company
assumed the existing first mortgage loan of $1,330,253.

F-28

<PAGE> 121

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Lansing Square Shopping Center

The Company funded the purchase using: (i) the proceeds of five long-term
loans totaling $12,850,000 from LaSalle Bank of which approximately
$8,000,000 was used to purchase this property and (ii) cash and cash
equivalents. The Company paid a one point fee in connection with these
long-term loans. The loans have a term of seven years and, prior to the
maturity date, require payments of interest only, at 7.6%, fixed for five
years with the remaining two years at prime plus 1/2%.

Total pro forma adjustments for 1996 acquisitions are as though they were
acquired the earlier of January 1, 1996 or date that operations commenced
(related to Zany Brainy).

Mundelein Regency Prospect Montgomery- Zany
Plaza Point Heights Sears Brainy
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Rental income..... $ 163,381 139,271 89,105 163,700 137,489
Additional rental
income.......... 32,975 16,034 83,593 57,012 24,144
----------- ----------- ----------- ----------- -----------
Total income...... 196,356 155,305 172,698 220,712 161,633
----------- ----------- ----------- ----------- -----------
Property operating
expenses........ 53,986 19,046 91,364 66,944 30,331
----------- ----------- ----------- ----------- -----------
Total expenses.... 53,986 19,046 91,364 66,944 30,331
----------- ----------- ----------- ----------- -----------
Net income........ $ 142,370 136,259 81,334 153,768 131,302
=========== =========== =========== =========== ===========
</TABLE>

F-29

<PAGE> 122

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Hawthorn
Salem Village Six Spring
Square Commons Corners Hill Crestwood
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Rental income..... $ 422,146 548,667 790,888 948,906 203,007
Additional rental
income.......... 260,832 270,570 517,804 234,837 69,315
----------- ----------- ----------- ----------- -----------
Total income...... 682,978 819,237 1,308,692 1,183,743 272,322
----------- ----------- ----------- ----------- -----------
Property operating
expenses........ 270,756 293,132 640,772 300,842 78,450
----------- ----------- ----------- ----------- -----------
Total expenses.... 270,756 293,132 640,772 300,842 78,450
----------- ----------- ----------- ----------- -----------
Net income........ $ 412,222 526,105 667,920 882,901 193,872
=========== =========== =========== =========== ===========

Total
1996
Park Lansing Park Pro Forma Acquisitions
St. Claire Square Ridge Adjustments Pro Forma
----------- ----------- ----------- ----------- ------------
Rental income..... $ 178,596 2,001,855 340,315 - 6,127,326
Additional rental
income.......... 62,194 1,332,149 236,791 - 3,198,250
----------- ----------- ----------- ----------- -----------
Total income...... 240,790 3,334,004 577,106 - 9,325,576
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. - - - 708,222 708,222
Property operating
expenses........ 103,386 1,507,941 299,748 - 3,656,698
Interest Expense.. - - - 949,958 949,958
Depreciation...... - - - 1,448,017 1,448,017
Amortization...... - - - 11,428 11,428
----------- ----------- ----------- ----------- -----------
Total expenses.... 103,386 1,507,941 299,748 3,117,625 6,774,323
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 137,404 1,826,063 277,358 (3,117,625) 2,551,253
=========== =========== =========== =========== ===========

</TABLE>

F-30

<PAGE> 123

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Total
Niles 1997
Maple Park Aurora Lincoln Shopping Acquisitions
Place Commons Park Place Center Pro Forma
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Rental income..... 1,844,314 1,341,448 228,218 375,349 3,789,329
Additional rental
income.......... 405,864 534,247 111,997 104,619 1,156,727
----------- ----------- ----------- ----------- -----------
Total income...... 2,250,178 1,875,695 340,215 479,968 4,946,056
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 152,621 115,000 21,000 32,800 321,421
Property operating
expenses........ 444,390 632,131 130,176 141,974 1,348,671
Interest expense.. 720,000 882,983 181,450 - 1,784,433
Depreciation...... 404,905 334,573 42,260 81,600 863,338
Amortization...... 2,857 - 3,600 - 6,457
----------- ----------- ----------- ----------- -----------
Total expenses.... 1,724,773 1,964,687 378,486 256,374 4,324,320
----------- ----------- ----------- ----------- -----------
Net income (loss). 525,405 (88,992) (38,271) 223,594 621,736
=========== =========== =========== =========== ===========

</TABLE>

F-31

<PAGE> 124

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Acquisition of Maple Park Shopping Center, Bolingbrook, Illinois

The Company funded the purchase using (i) the proceeds of a short-term loan
maturing April 7, 1997 in the amount of $8 million from Inland Mortgage
Investment Corporation ("IMIC"), an affiliate of the Company (the "Short-
Term Loan"), and (ii) cash and cash equivalents. The Short-Term Loan bears
interest at a rate of 9.0% per annum and requires a loan fee of 1/4%.

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Maple Park Place
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income.................... $1,844,314 - 1,844,314
Additional rental income......... 405,864 - 405,864
----------- ----------- -----------
Total income..................... 2,250,178 - 2,250,178
----------- ----------- -----------
Advisor asset management fee..... - 152,621 152,621
Property operating expenses...... 444,390 - 444,390
Interest expense................. - 720,000 720,000
Depreciation..................... - 404,905 404,905
Amortization..................... - 2,857 2,857
----------- ----------- -----------
Total expenses................... 444,390 1,280,383 1,724,773
----------- ----------- -----------
Net income (loss)................ $1,807,788 (1,280,383) 525,405
=========== =========== ===========

</TABLE>

F-32

<PAGE> 125

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Acquisition of Aurora Commons Shopping Center, Aurora, Illinois

As part of the acquisition of Aurora Commons Shopping Center, the Company
assumed the existing mortgage loan, maturing December 31, 2001, with the
balance funded with cash and cash equivalents. The loan bears interest at
a rate of 9% per annum with monthly payments of principal and interest on
the first day of each month.

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Aurora Commons
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income.................... $1,314,448 - 1,341,448
Additional rental income......... 534,247 - 534,247
----------- ----------- -----------
Total income..................... 1,875,695 - 1,875,695
----------- ----------- -----------
Advisor asset management fee..... - 115,000 115,000
Property operating expenses...... 659,205 (27,074) 632,131
Interest expense................. - 882,983 882,983
Depreciation..................... - 334,573 334,573
----------- ----------- -----------
Total expenses................... 659,205 1,193,482 1,964,687
----------- ----------- -----------
Net income (loss)................ $1,216,490 (1,193,482) (88,992)
=========== =========== ===========

</TABLE>

F-33

<PAGE> 126

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Acquisition of Lincoln Park Place Shopping Center, Chicago, Illinois

The Company funded the purchase of Lincoln Park Place Shopping Center using
the proceeds of a short-term loan maturing February 7, 1997 in the amount
of $2,016,110 from Inland Mortgage Investment Corporation ("IMIC"), an
affiliate of the Company (the "Short-Term Loan"). The Company did not pay
any fees in connection with the Short-Term Loan, which bears interest at a
rate of 9% per annum.

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Lincoln Park Place
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income.................... $ 228,218 - 228,218
Additional rental income......... 111,997 - 111,997
----------- ----------- -----------
Total income..................... 340,215 - 340,215
----------- ----------- -----------
Advisor asset management fee..... - 21,000 21,000
Property operating expenses...... 130,176 - 130,176
Interest expense................. - 181,450 181,450
Depreciation..................... - 42,260 42,260
Amortization..................... - 3,600 3,600
----------- ----------- -----------
Total expenses................... 130,176 248,310 378,486
----------- ----------- -----------
Net income (loss)................ $ 210,039 (248,310) (38,271)
=========== =========== ===========
</TABLE>

F-34

<PAGE> 127

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Acquisition of Niles Shopping Center, Niles, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Niles Shopping Center
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income.................... $ 375,349 - 375,349
Additional rental income......... 104,619 - 104,619
----------- ----------- -----------
Total income..................... 479,968 - 479,968
----------- ----------- -----------
Advisor asset management fee..... - 32,800 32,800
Property operating expenses...... 141,974 - 141,974
Depreciation..................... - 81,600 81,600
----------- ----------- -----------
Total expenses................... 141,974 114,400 256,374
----------- ----------- -----------
Net income (loss)................ $ 337,995 (114,400) 223,594
=========== =========== ===========

</TABLE>

F-35

<PAGE> 128

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

(D) Total pro forma adjustments for 1997 probable acquisitions are as though
they were acquired the earlier of January 1, 1996 or date that operations
commenced (relating to Highland Park Dominicks and Schaumburg Dominicks).

<TABLE>
<CAPTION> Total 1997
Highland Probable
Calumet Ameritech Sequoia Park Schaumburg Acquisitions
Square Outlot Plaza Dominicks Dominicks Pro Forma
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental income..... 222,072 106,283 361,986 883,976 646,825 2,221,142
Additional rental
income.......... 179,854 18,265 135,404 - - 333,523
----------- ----------- ----------- ----------- ----------- -----------
Total income...... 401,926 124,548 497,390 883,976 646,825 2,554,665
----------- ----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 21,080 10,500 30,100 128,000 106,910 296,590
Property operating
expenses........ 214,748 18,500 164,126 17,680 12,937 427,991
Depreciation...... 52,700 26,250 75,250 320,000 267,000 741,200
----------- ----------- ----------- ----------- ----------- -----------
Total expenses.... 288,528 55,250 269,476 465,680 386,847 1,465,781
----------- ----------- ----------- ----------- ----------- -----------
Net income........ 113,398 69,298 227,914 418,296 259,978 1,088,884
=========== =========== =========== =========== =========== ===========

</TABLE>

F-36

<PAGE> 129

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Probable Acquisition of Calumet Square Shopping Center, Calumet City,
Illinois

This pro forma adjustment reflects the purchase of Calumet Square as if the
Company had acquired the property as of January 1, 1996 and is based on
information provided by the Seller.

Calumet Square
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income............. $ 222,072 - 222,072
Additional rental income.. 179,854 - 179,854
----------- ----------- -----------
Total income.............. 401,926 - 401,926
----------- ----------- -----------
Advisor asset
management fee.......... - 21,080 21,080
Property operating
expenses................ 214,748 - 214,748
Depreciation.............. - 52,700 52,700
----------- ----------- -----------
Total expenses............ 214,748 73,780 288,528
----------- ----------- -----------
Net income (loss)......... $ 187,178 (73,780) 113,398
=========== =========== ===========

</TABLE>

F-37

<PAGE> 130

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Probable Acquisition of Ameritech Outlot, Joliet, Illinois

This pro forma adjustment reflects the purchase of Ameritech as if the
Company had acquired the property as of January 1, 1996 and is based on
information provided by the Seller.

Ameritech Outlot
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income............. $ 106,283 - 106,283
Additional rental income.. 18,265 - 18,265
----------- ----------- -----------
Total income.............. 124,548 - 124,548
----------- ----------- -----------
Advisor asset
management fee.......... - 10,500 10,500
Property operating
expenses................ 18,500 - 18,500
Depreciation.............. - 26,250 26,250
----------- ----------- -----------
Total expenses............ 18,500 36,750 55,250
----------- ----------- -----------
Net income (loss)......... $ 106,048 (36,750) 69,298
=========== =========== ===========

</TABLE>

F-38

<PAGE> 131

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Probable Acquisition of Sequoia Plaza, Milwaukee, Wisconsin

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Sequoia Plaza
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income............. $ 361,986 - 361,986
Additional rental income.. 135,404 - 135,404
----------- ----------- -----------
Total income.............. 497,390 - 497,390
----------- ----------- -----------
Advisor asset
management fee.......... - 30,100 30,100
Property operating
expenses................ 164,126 - 164,126
Depreciation.............. - 75,250 75,250
----------- ----------- -----------
Total expenses............ 164,126 105,350 269,476
----------- ----------- -----------
Net income (loss)......... $ 333,264 (105,350) 227,914
=========== =========== ===========
</TABLE>

F-39

<PAGE> 132

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Probable Acquisition of Dominicks, Highland Park, Illinois

This pro forma adjustment reflects the purchase of Highland Park Dominicks
as if the Company had acquired the property as of May 1, 1996, the date
operations commenced and is based on information provided by the Seller.

<TABLE>
<CAPTION>
Highland Park Dominicks
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income............. $ 883,976 - 883,976
Additional rental income.. - - -
----------- ----------- -----------
Total income.............. 883,976 - 883,976
----------- ----------- -----------
Advisor asset
management fee.......... - 128,000 128,000
Property operating
expenses................ 17,680 - 17,680
Depreciation.............. - 320,000 320,000
----------- ----------- -----------
Total expenses............ 17,680 448,000 465,680
----------- ----------- -----------
Net income (loss)......... $ 866,296 (448,000) 418,296
=========== =========== ===========

</TABLE>

F-40

<PAGE> 133

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

Probable Acquisition of Dominicks, Schaumburg, Illinois

This pro forma adjustment reflects the purchase of Schaumburg Dominicks as
if the Company had acquired the property as of June 1, 1996, the date
operations commenced and is based on information provided by the Seller.

Schaumburg Dominicks
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
<S> <C> <C> <C>
Rental income............. $ 646,825 - 646,825
Additional rental income.. - - -
----------- ----------- -----------
Total income.............. 646,825 - 646,825
----------- ----------- -----------
Advisor asset
management fee.......... - 106,910 106,910
Property operating
expenses................ 12,937 - 12,937
Depreciation.............. - 267,000 267,000
----------- ----------- -----------
Total expenses............ 12,937 373,910 386,847
----------- ----------- -----------
Net income (loss)......... $ 633,888 (373,910) 259,978
=========== =========== ===========
</TABLE>

F-41

<PAGE> 134

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)

(E) No pro forma adjustment has been made relating to interest income which
would have been earned on the additional Offering Proceeds raised.

(F) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years.

(G) The pro forma weighted average common stock shares for the year ended
December 31, 1996 was calculated by estimating the additional shares sold
to purchase each of the Company's properties on a weighted average basis.

(H) Loan fees are amortized over the term of the related loan.

(I) Advisor Asset Management Fees are calculated as 1% of the Average Invested
Assets.

F-42

<PAGE> 135

Independent Auditors' Report

The Board of Directors
Inland Real Estate Corporation:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Maple Park Place for the year ended
December 31, 1996. This Historical Summary is the responsibility of the
management of the Inland Real Estate Corporation. Our responsibility is to
express an opinion on the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Registration Statement on Form S-11 of Inland Real Estate
Corporation, as described in note 2. It is not intended to be a complete
presentation of Maple Park Place's revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Maple Park Place for the year ending December 31, 1996, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 8, 1997

F-43

<PAGE> 136

Maple Park Place
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $1,844,314
Operating expense and real estate
tax recoveries................................ 405,223
Other income.................................... 641
-----------
Total Gross Income.............................. 2,250,178
-----------
Direct operating expenses:
Real estate taxes............................... 189,477
Operating expenses.............................. 104,640
Management fees................................. 77,853
Utilities....................................... 49,355
Insurance....................................... 23,065
-----------
Total direct operating expenses................. 444,390
-----------
Excess of gross income over direct
operating expenses.............................. $1,805,788
===========
</TABLE>

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

F-44

<PAGE> 137

Maple Park Place
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

1. Business

Maple Park Place (Maple Park) is located in Bolingbrook, Illinois. It
consists of approximately 220,000 square feet of gross leasable area and
was 100% leased and occupied at December 31, 1996. Inland Real Estate
Corporation has signed a sale and purchase agreement for the purchase of
Maple Park from an unaffiliated third party (Seller).

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Registration Statement on Form S-11 of Inland Real Estate
Corporation and is not intended to be a complete presentation of Maple
Park's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Maple Park to
make estimates and assumptions that affect the reported amounts of the
revenues and expenses during the reporting period. Actual results may
differ from those estimates.

3. Gross Income

Maple Park leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which Maple Park is reimbursed for common
area, real estate, and insurance costs. In addition, Maple Park collects
common area and insurance costs from a tenant of the parcel located
adjacent to Maple Park. Operating expenses and real estate tax recoveries
reflected in the Historical Summary include amounts for 1996 expenses for
which the tenants have not yet been billed. Certain leases contain renewal
options for various periods at various rental rates.

Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. Related adjustments increased base rental income by $43,819
for the year ended December 31, 1996.

F-45

<PAGE> 138

Maple Park Place
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1996 are as follows:

Year Amount

1997 $ 1,773,056
1998 1,741,306
1999 1,682,846
2000 1,500,349
2001 1,434,626
Thereafter 20,758,807
------------
$28,890,990
============

4. Direct Operating Expenses

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

Maple Park has not received its final real estate tax bill for 1996. Real
estate tax expense is estimated based upon bills for 1995. The difference
between this estimate and the final bill is not expected to have a material
impact on the Historical Summary.

Maple Park is managed pursuant to the terms of a management agreement for
an annual fee of 3.75% of rental income (as defined), less a deduction of
$10,000 for unleased space during the year, plus a fixed amount of $20,000
for the salary of the property manager. Subsequent to the sale of Maple
Park (note 1), the current management agreement will cease. Any new
management agreement may cause future management fees to differ from the
amounts reflected in the Historical Summary.

F-46

<PAGE> 139

Board of Directors
Inland Real Estate Corporation
Oak Brook, Illinois

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Aurora Commons Partnership (An
Illinois Limited Partnership) D/B/A Aurora Commons Shopping Center as of
December 31, 1996. This Historical Summary is the responsibility of the
management of the partnership. Our responsibility is to express an opinion on
the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Registration Statement and Form S-11 of Inland Real Estate
Corporation as described in the notes. It is not intended to be a complete
presentation of Aurora Commons Partnership D/B/A Aurora Commons Shopping
Center's revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 3 for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.

Warady & Davis LLP
January 22, 1997

F-47

<PAGE> 140

Aurora Commons Partnership
D/B/A Aurora Commons Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 1996

REVENUES
Minimum Rent.................................. $ 1,145,656
Percentage Rent............................... 195,792
------------
1,341,448

Tenant Reimbursements
Real Estate Taxes............................. 275,310
Common Area................................... 224,494
Other......................................... 34,443
------------
Total Tenant Reimbursements.................. 534,247
------------
Gross Revenues............................. 1,875,695

Costs and Other (Income) Expenses
Common Area Expenses............................ 209,951
General Expenses................................ 49,224
Management Fees................................. 111,480
Real Estate Taxes and Contesting Fees........... 288,550
------------
Total Direct Operating Expenses............... 659,205
------------
Excess of Gross Revenue over
Direct Operating Expenses....................... $ 1,216,490
============

See accompanying notes.

F-48

<PAGE> 141

Aurora Commons Partnership
D/B/A Aurora Commons Shopping Center
Notes to Financial Statements

Partnership Activity

The Partnership was established to construct, develop and operate a shopping
center located in Aurora, Illinois. The Center has a total gross leasable area
of approximately 227,000 square feet on 18 acres of which approximately 124,500
square feet was owned by the Partnership and was approximately 98% occupied at
December 31, 1996. On January 24, 1997, the Partnership was sold to Inland
Real Estate Corporation, an unaffiliated third party.

Note 1 - Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist in
understanding the Partnership's Historical Summary. The Historical Summary and
notes are representations of management who is responsible for their integrity
and objectivity.

Basis of Preparation

The Historical Summary has been prepared for the purpose of complying with Rule
3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Real Estate Corporation
and is not intended to be a complete presentation of Aurora Commons
Partnership's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management to make estimates
and assumptions that affect the reported amounts of the revenues and expenses
during the reporting period.

Note 2 - Leasing Arrangements

The Partnership leases shopping center space to tenants under noncancelable
operating leases requiring fixed and contingent rentals based on sales in
excess of stipulated minimum levels. Real estate taxes and tenant share of
various other expenses are included in tenant reimbursements in the
accompanying Historical Summary.

The following is a schedule of future minimum rentals under these leases at
December 31, 1996 not including renewal option increases or any re-leasings:

Year Ending December 31,
1997................................ $ 1,147,010
1998................................ 1,038,804
1999................................ 916,509
2000................................ 664,033
2001................................ 554,041
Subsequent to 2001........................... 3,416,591
------------
Aggregate Future Minimum Rentals............. $ 7,736,988
============

F-49

<PAGE> 142
Aurora Commons Partnership
D/B/A Aurora Commons Shopping Center
Notes to Financial Statements

Note 2 - Leasing Arrangements (Continued)

Base rentals are reported as income over the lease term as they become
receivables under the provision of the leases. However, when rentals vary from
a straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $9,606 for the year
ended December 31, 1996.

Note 3 - Direct Operating Expenses

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

The Partnership has not received its final real estate tax bill for 1996. Real
estate tax expense is based on 1995 tax bills. The difference between this
estimate and the final bill is not expected to have a material impact on the
Historical Summary. Tenant reimbursements for real estate taxes, common area
and other expenses are based on estimated expenses to be recovered. The
difference between this estimate and the final reconciled recoveries is not
expected to have a material impact on the Historical Summary.

Note 4 - Related Party Transactions

A Company under the control of Joseph J. Freed has provided management services
to the Partnership. Management fees of $111,480 for the year ended December
31, 1996 have been included in the Historical Summary.

Subsequent to the sale of Aurora Commons, as noted above, the current
management agreement will cease. Any new management agreement may cause future
management fees to differ from the amounts reflected in the Historical Summary.

F-50

<PAGE> 143

Board of Directors
Inland Real Estate Corporation
Oak Brook, Illinois

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Clark & Diversey Property Limited
Partnership (An Illinois Limited Partnership) D/B/A Lincoln Park Place as of
December 31, 1996. This Historical Summary is the responsibility of the
management of the partnership. Our responsibility is to express an opinion on
the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Registration Statement and Form S-11 of Inland Real Estate
Corporation as described in the notes. It is not intended to be a complete
presentation of Clark & Diversey Property Limited Partnership D/B/A Lincoln
Park Place's revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses as
described in Note 3 for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.

Warady & Davis LLP
January 24, 1997

F-51

<PAGE> 144

Clark & Diversey Property Limited Partnership
D/B/A Lincoln Park Place
Historical Summary of Gross Income and Direct Operating Expenses
For the year ended December 31, 1996

REVENUES
Minimum Rent.................................. $ 228,218

Tenant Reimbursements
Real Estate Taxes............................. 105,000
Common Area................................... 3,475
Other......................................... 3,522
------------
Total Tenant Reimbursements.................. 111,997
------------
Gross Revenues............................. 340,215

Costs and Other (Income) Expenses
Common Area Expenses............................ 3,253
General Expenses................................ 4,746
Management Fees................................. 17,177
Real Estate Taxes and Contesting Fees........... 105,000
------------
Total Direct Operating Expenses............... 130,176
------------
Excess of Gross Revenue over
Direct Operating Expenses....................... $ 210,039
============

See accompanying notes.

F-52

<PAGE> 145

Clark & Diversey Property Limited Partnership
D/B/A Lincoln Park Place
Notes to Financial Statements

Partnership Activity

The Partnership operates 10,678 square feet of street front retail space
located in Chicago, Illinois. The center is 100% occupied and draws customers
from the surrounding Chicagoland area. On January 24, 1997 the Partnership was
sold to Inland Real Estate Corporation, an unaffiliated third party.

Note 1 - Summary of Significant Accounting Policies

Basis of Preparation

The Historical Summary has been prepared for the purpose of complying with Rule
3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Real Estate Corporation
and is not intended to be a complete presentation of Clark & Diversey Property
Limited Partnership's revenues and expenses. The Historical Summary has been
prepared on the accrual basis of accounting and requires management to make
estimates and assumptions that affect the reported amounts of the revenues and
expenses during the reporting period.

Note 2 - Leasing Arrangements

The following is a schedule of future minimum rentals under these leases at
December 31, 1996 not including renewal option increases or any re-leasings:

Year Ending December 31
1997................................ $ 235,633
1998................................ 239,219
1999................................ 222,724
2000................................ 140,250
2001................................ 35,063
Subsequent to 2001........................... -
------------
Aggregate Future Minimum Rentals............. $ 872,889
============

F-53

<PAGE> 146

Clark & Diversey Property Limited Partnership
D/B/A Lincoln Park Place
Notes to Financial Statements

Note 2 - Leasing Arrangements (Continued)

Note 3 - Direct Operating Expenses

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

The Partnership has not received its final real estate tax bill for 1996. Real
estate tax expense is based on 1996 assessed valuation. The difference between
this estimate and the final bill is not expected to have a material impact on
the Historical Summary. Tenant reimbursements for real estate taxes, common
area and other expenses are based on estimated amounts to be recovered. The
difference between this estimate and the final reconciled recoveries is not
expected to have a material impact on the Historical Summary.

Note 4 - Related Party Transactions

A Company under the control of Joseph J. Freed has provided management services
to the Partnership. Management fees of $17,177 for the year ended December 31,
1996 have been included in the Historical Summary.

Subsequent to the sale of Clark & Diversey Property Limited Partnership, as
noted above, the current management agreement will cease. Any new management
agreement may cause future management fees to differ from the amounts reflected
in the Historical Summary.

F-54

<PAGE> 147

Independent Auditors' Report

The Board of Directors
Inland Real Estate Corporation:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Niles Shopping Center for the year
ended December 31, 1996. This Historical Summary is the responsibility of the
management of Inland Real Estate Corporation. Our responsibility is to express
an opinion on the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Registration Statement on Form S-11 of Inland Real Estate
Corporation, as described in note 2. The presentation is not intended to be a
complete presentation of Niles Shopping Center's revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Niles Shopping Center for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
March 13, 1997

F-55

<PAGE> 148

Niles Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

Gross income:
Base rental income.............................. $ 375,349
Operating expense and real estate
tax recoveries................................ 104,619
-----------
Total Gross Income.............................. 479,968
-----------
Direct operating expenses:
Real estate taxes............................... 121,981
Operating expenses.............................. 11,932
Insurance....................................... 6,808
Utilities....................................... 1,253
-----------
Total direct operating expenses................. 141,974
-----------
Excess of gross income over direct
operating expenses.............................. $ 337,995
===========

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

F-56

<PAGE> 149

Niles Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

1. Business

Niles Shopping Center (Niles Center) is located in Niles, Illinois. It
consists of approximately 26,092 square feet of gross leasable area and was
100% occupied at December 31, 1996. Inland Real Estate Corporation has
signed a sale and purchase agreement for the purchase of Niles Center from
an unaffiliated third party (Seller).

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Registration Statement on Form S-11 of Inland Real Estate
Corporation and is not intended to be a complete presentation of Niles
Center's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management of Niles Center
to make estimates and assumptions that affect the reported amounts of the
revenues and expenses during the reporting period. Actual results may
differ from those estimates.

3. Gross Income

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

Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments increased base rental income by $28,244 for the
year ended December 31, 1996.

F-57

<PAGE> 150

Niles Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1996 are approximately as follows:

Year Amount
---- ------
1997 $ 387,032
1998 368,175
1999 352,750
2000 318,930
2001 279,197
Thereafter 199,925
------------
$ 1,906,009
============

4. Direct Operating Expenses

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

Niles Center has not received its final real estate tax bill for 1996.
Real estate tax expense is estimated based upon the 1995 bill. The
difference between this estimate and the final bill is not expected to
have a material impact on the Historical Summary.

F-58

<PAGE> 151

Independent Auditors' Report

The Board of Directors
Inland Real Estate Corporation:

We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Sequoia Shopping Center for the year
ended December 31, 1996. This Historical Summary is the responsibility of the
management of Inland Real Estate Corporation. Our responsibility is to express
an opinion on the Historical Summary based on our audit.

The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Registration Statement on Form S-11 of Inland Real Estate
Corporation, as described in note 2. The presentation is not intended to be a
complete presentation of Sequoia Shopping Center's revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Sequoia Shopping Center for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
April 10, 1997

F-59
<PAGE> 152

Sequoia Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

Gross income:
Base rental income.............................. $ 361,986
Operating expense and real estate
tax recoveries................................ 135,404
-----------
Total Gross Income.............................. 497,390
-----------
Direct operating expenses:
Real estate taxes............................... 104,880
Operating expenses.............................. 32,526
Management fees................................. 16,094
Insurance....................................... 5,252
Utilities....................................... 5,374
-----------
Total direct operating expenses................. 164,126
-----------
Excess of gross income over direct
operating expenses.............................. $ 333,264
===========

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

F-60

<PAGE> 153

Sequoia Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

1. Business

Sequoia Shopping Center (Sequoia) is located in Milwaukee, Wisconsin. It
consists of approximately 35,000 square feet of gross leasable area and was
93% leased at December 31, 1996. Inland Real Estate Corporation has signed
a sale and purchase agreement for the purchase of Sequoia from an
unaffiliated third party (Seller).

2. Basis of Presentation

The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Registration Statement on Form S-11 of Inland Real Estate
Corporation and is not intended to be a complete presentation of Sequoia's
revenues and expenses. The Historical Summary has been prepared on the
accrual basis of accounting and requires management of Sequoia to make
estimates and assumptions that affect the reported amounts of the revenues
and expenses during the reporting period. Actual results may differ from
those estimates.

3. Gross Income

Sequoia leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Sequoia is reimbursed for common area, real
estate, and insurance costs. Operating expenses and real estate tax
recoveries reflected in the Historical Summary include amounts for 1996
expenses for which the tenants have not yet been billed.

F-61

<PAGE> 154

Sequoia Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1996

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1996 are approximately as follows:

Year Amount
---- ------
1997 $ 342,684
1998 332,688
1999 264,909
2000 252,985
2001 110,684
Thereafter 147,092
------------
$ 1,451,042
============

4. Direct Operating Expenses

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

Sequoia Center has not received its final real estate tax bill for 1996.
Real estate tax expense is estimated based upon bills for 1995. The
difference between this estimate and the final bill is not expected to
have a material impact on the Historical Summary.

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

F-62
<PAGE> 155
EXHIBIT A
PRIOR PERFORMANCE TABLES

The prior performance tables contain information concerning public
real estate limited partnerships sponsored by Affiliates of the Advisor. This
information has been summarized, in part, in narrative form under "Prior
Performance of the Company's Affiliates." The purpose of the tables is to
provide information on the performance of those partnerships in evaluating the
experience of the Affiliates of the Advisor as sponsors of such programs.
However, the inclusion of these tables does not imply that the Company will
make investments comparable to those reflected in the tables or that investors
in the Company will experience return comparable to those experienced in the
programs referred to in these tables. Persons who purchase Shares in the
Company will not thereby acquire any ownership in any of the partnerships to
which these tables relate. The tables consist of:

Table I Experience in Raising and Investing Funds

Table II Compensation to IREIC and Affiliates

Table III Operating Results of Prior Programs

Table IV Results of Completed Programs

Table V Sales or Disposals of Properties

Table VI Acquisition of Properties by Programs*

* Prospective investors in the Company may obtain copies of Table VI by
contacting the Advisor.

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

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

In addition, with respect to private limited partnerships, an
objective was the generation of tax loss deductions which generally will be
used to offset taxable income from other sources.

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

A-1
<PAGE> 156
TABLE I

EXPERIENCE IN RAISING AND INVESTING FUNDS

Table I presents information on a dollar and percentage basis showing
the experience of Inland Real Estate Investment Corporation (IREIC), of which
the Advisor is a wholly owned subsidiary, in raising and investing funds in
prior partnerships where the offering closed in the three years prior to
December 31, 1996. The Table particularly focuses upon the dollar amount
available for investment in properties expressed as a percentage of total
dollars raised.

Since 1986, Inland Real Estate Investment Corporation has organized
and completed the offerings of four public partnerships which have primarily
invested in existing residential real property and three public partnerships
which have invested in undeveloped land. All public partnership offerings
closed prior to the three years ended December 31, 1996.

A-2
<PAGE> 157
TABLE II

COMPENSATION TO IREIC AND AFFILIATES (A)

Table II summarizes the amount and type of compensation paid to IREIC
during the three years ended December 31, 1996 in connection with prior
partnerships.

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

A-3
<PAGE> 158
TABLE II

COMPENSATION TO IREIC AND AFFILIATES (A)
(000'S OMITTED)

<TABLE>
<CAPTION>
Public
Programs
--------
7 Programs
- ---------------------------------------------------------------------------------------------------
<S> <C>
Date offering commenced -
Dollar amount raised $ 181,706
===========

Amounts paid or payable to general partner or affiliates from proceeds
of offerings:
Selling commissions and underwriting fees (B) $ 6,058
Other offering expenses (C) 2,474
Acquisition cost and expense (D) 11,035
===========

Dollar amount of cash available (deficiency) from operations before
deducting (adding) payments to (from) general partner or
affiliates (E) $ 15,399
===========

Amounts paid to (received from) general partner or affiliates related
to operations:
Property management fees (F) $ 1,013
Partnership subsidies received (G) (280)
Accounting services 312
Data processing service 220
Legal services 192
Other administrative services 825
Property upgrades 464
Property operating expenses 3

Dollar amount of property sales and refinancings before payments to general
partner and affiliates (H):
Cash $ 16,735
Equity in notes and undistributed sales proceeds 8,858

Dollar amounts paid or payable to general partner or affiliates from sales and
refinancings (I):
Sales commissions $ 467
Property upgrade 77
Mortgage brokerage fee 0
Participation in cash distributions 0
</TABLE>

A-4
<PAGE> 159
TABLE II--(CONTINUED)

COMPENSATION TO IREIC AND AFFILIATES
(000'S OMITTED)

NOTES TO TABLE II

(A) The figures in this Table II relating to proceeds of the offerings are
cumulative and are as of December 31, 1996 and the figures relating to
cash available from operations are for the three years ending December
31, 1996. The dollar amount raised represents the cash proceeds
collected by the partnerships. Amounts paid or payable to IREIC or
affiliates from proceeds of the offerings represent payments made or to
be made to IREIC and affiliates from investor capital contributions.

(B) The total amount of selling commissions paid to an affiliate of the
general partner include $2,711,791, which was in turn paid to third party
soliciting dealers.

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

(D) Represents initial cash down payments and future principal payments and
prepaid items and fees paid to IREIC and its affiliates in connection
with the acquisition of properties less amounts paid to unaffiliated
third parties to acquire such properties. Cash down payments include
amounts received at closing.
<TABLE>
<CAPTION>
Public
Programs
--------
7 Programs
- --------------------------------------------------------------------------------------------------
<S> <C>
Acquisition fees $ 10,922
Reimbursement (at cost) for upgrades and acquisition due diligence 113
Partnership down payments 44,585
Inland down payments (44,585)
----------

Acquisition cost and expense $ 11,035
==========
</TABLE>

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

(F) An Affiliate of the Advisor provides property management services for all
properties acquired by the partnerships. Management fees have not
exceeded 6% of the gross receipts from the properties managed. With
respect to Inland Capital Fund, L.P., Inland Land Appreciation Fund II,
L.P. and Inland Land Appreciation Fund, L.P., IREIC receives an annual
asset management fee equal to one-quarter of 1% of the original cost to
the partnership of undeveloped land, limited to a cumulative total over
the life of the partnership of 2% of the land's original cost to the
partnership.

(G) The amounts shown in the table represents supplemental capital
contributions from IREIC in accordance with the terms of the partnership
agreements.

A-5
<PAGE> 160
TABLE II--(CONTINUED)

COMPENSATION TO IREIC AND AFFILIATES
(000'S OMITTED)

NOTES TO TABLE II

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

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

A-6
<PAGE> 161
TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS

Table III presents operating results for limited partnership the
offerings of which closed during each of the five years ended prior to December
31, 1996. The operating results consist of:

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

A-7
<PAGE> 162
TABLE III--(CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
(000'S OMITTED, EXCEPT FOR AMOUNTS PRESENTED PER $1,000 INVESTED)

<TABLE>
<CAPTION>
Inland Capital
Fund, L.P.
----- ----

1996 1995 1994 1993 1992 1991
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues . . . . . . . . . . . . . . . $ 411 457 744 564 104 0
Profit on sale of properties . . . . . . . . 0 229 0 0 0 0

Less:
Operating expenses . . . . . . . . . . . 145 146 64 4 1 0
Interest expense . . . . . . . . . . . . 0 0 0 0 0 0
Partnership expenses . . . . . . . . . . 170 167 175 86 1 0
Depreciation and amortization . . . . . . 2 5 4 3 3 1

Net income (loss)-GAAP basis . . . . . . . . $ 94 368 501 471 99 (1)
=====================================================
Taxable income (loss) (A):
Allocated to investors from operations . 93 137 495 466 100 (1)
Allocated to general partner from
operations . . . . . . . . . . . . . . 1 1 5 5 1 0
-----------------------------------------------------
Total from operations . . . . . . . . . . . . 94 138 500 471 101 (1)

From gain on sale:
Capital (allocated to investors) . . . . 0 231 0 0 0 0
Capital (allocated to general partner) . 0 0 0 0 0 0
Ordinary (recapture) . . . . . . . . . . 0 0 0 0 0 0
-----------------------------------------------------
$ 94 369 500 471 101 (1)
=====================================================
Cash available (deficiency) from
operations (F) . . . . . . . . . . . . . 130 172 633 397 94 0
Cash available from sales (B) . . . . . . . . 0 646 0 0 0 0
Cash (deficiency) from refinancings . . . . . 0 0 0 0 0 0
-----------------------------------------------------
Total cash available before distributions
and special items . . . . . . . . . . . . 130 818 633 397 94 0

Less distributions to investors:
From operations . . . . . . . . . . . . . 0 0 0 0 0 0
From sales and refinancings . . . . . . . 0 646 0 0 0 0
From return of capital . . . . . . . . . 0 0 0 0 0 0
From supplemental capital contribution
(return on capital) . . . . . . . . . 0 0 0 0 0 0
</TABLE>

A-8
<PAGE> 163
TABLE III--(CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
(000'S OMITTED, EXCEPT FOR AMOUNTS PRESENTED PER $1,000 INVESTED)

<TABLE>
<CAPTION>
Inland Capital
Fund, L.P.
---------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Less distributions to general partner:
From operations . . . . . . . . . . . . . 0 0 0 0 0 0
From sales and refinancings . . . . . . . 0 0 0 0 0 0
----------------------------------------------------------
Cash available after distributions
before special items . . . . . . . . . . 130 172 633 397 94 0

Special items:
Fixed asset additions (C) . . . . . . . . 0 0 0 0 0 0
Advances (repayments) from (to)
general partner or affiliates . . . . (20) 23 2 1 (85) 85
Repurchase of units (G) . . . . . . . . . (20) 0 (2) 0 0 0
Use of partnership reserves . . . . . . . 0 0 2 0 0 0
Use of cash available for offering
purposes . . . . . . . . . . . . . . . 0 0 0 0 0 0
----------------------------------------------------------
Cash available after distributions
and special items . . . . . . . . . . . . $ 90 195 635 398 9 85
==========================================================
</TABLE>

A-9
<PAGE> 164
TABLE III--(CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
(000'S OMITTED, EXCEPT FOR AMOUNTS PRESENTED PER $1,000 INVESTED)

<TABLE>
<CAPTION>
Inland Capital
Fund, L.P.
---------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tax and distribution data per $1,000
invested (D):
Federal income tax results:
Ordinary income (loss):
From operations . . . . . . . . . . . 3 4 15 14 3 0
From recapture . . . . . . . . . . . . 0 0 0 0 0 0
Capital gain . . . . . . . . . . . . . 0 7 0 0 0 0

Cash distributions to investors:
Source (on GAAP basis):
Investment income . . . . . . . . . . 0 0 0 0 0 0
Return of capital . . . . . . . . . . 0 20 0 0 0 0
Supplemental capital contributions
(return on capital) . . . . . . . . 0 0 0 0 0 0
Source (on cash basis):
Sales . . . . . . . . . . . . . . . . 0 20 0 0 0 0
Refinancings . . . . . . . . . . . . . 0 0 0 0 0 0
Operations . . . . . . . . . . . . . . 0 0 0 0 0 0
</TABLE>

A-10
<PAGE> 165
TABLE III--(CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
(000'S OMITTED, EXCEPT FOR AMOUNTS PRESENTED PER $1,000 INVESTED)

Percent of properties remaining
unsold (E) . . . . . . . . . . . . . . . 98.43%
======
</TABLE>

A-11
<PAGE> 166

OPERATING RESULTS OF PRIOR PROGRAMS
(000'S INCLUDED)

NOTES TO TABLE III

(A) "Taxable income (loss)" represents the aggregate amounts shown on
the partnership's tax returns for such years. One of the principal
differences between the tax basis of reporting and generally
accepted accounting principles (GAAP) is that depreciation is based
upon the rates established by the Accelerated Cost Recovery System
(ACRS) for property placed in service after January 1, 1981. Use of
ACRS usually results in a higher charge against operations than
would be the result if the depreciation rate was based upon the
economic useful life as required by GAAP. Further, under GAAP, to
the extent that interest rates on notes received in connection with
the sale of a property are deemed to be below market interest rates
at the date of sale, such notes would be required to be discounted
based upon market interest rates.

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

(C) Fixed asset additions represent betterments and improvements to
properties which have been paid for from the operations of the
respective properties.

(D) Tax data per $1,000 is based on the income (loss) allocated to
investors for federal income tax purposes. Tax and distribution
data per $1,000 invested is based on total capital raised.

(E) Percent of properties remaining unsold represents original total
acquisition costs of properties retained divided by original total
acquisition cost of all properties in the program, plus the total of
uninvested offering proceeds (if any). (F) "Cash Available
(Deficiency) from Operations," represents all cash revenues and
funds received by the partnerships, including but not limited to
operating income less operating expenses, and interest income.
These amounts do not include payments made by the partnerships from
offering proceeds nor do they include proceeds from sales or
refinancings. These amounts also exclude advances from or
repayments to IREIC and affiliates which are disclosed elsewhere in
the table and include principal payments on long-term debt. For
example:

<TABLE>
<CAPTION>
Inland Capital Fund, L.P.
------ ------- ----- ----

1996 1995 1994 1993 1992 1991
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by operating activities
per the Form 10-K annual report or
10-Q quarterly report . . . . . . . . . . $110 195 635 398 9 85
Payments to (from) general partner
and affiliates . . . . . . . . . . . . . 20 (23) (2) (1) 85 (85)
Principal payments on long-term debt. . . . 0 0 0 0 0 0
Payments for deferred loan fees . . . . . . . 0 0 0 0 0 0
----------------------------------------------------------
$ 130 172 633 397 94 0
==========================================================
</TABLE>

A-12
<PAGE> 167
TABLE III--(CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
(000'S INCLUDED)

NOTES TO TABLE III

(G) Each entity established a unit repurchase program which provides
limited liquidity to eligible investors who have suffered severe
adverse financial conditions or who have died or become legally
incapacitated. These funds were utilized by the partnerships to
repurchase units, on a limited basis, for pre-determined amounts
pursuant to the terms of the prospectus.

A-13
<PAGE> 168
TABLE IV

RESULTS OF COMPLETED PROGRAMS

Table IV is a summary of operating and disposition results of prior
public partnerships sponsored by Affiliates of the Advisor, which during the
five years ended prior to December 31, 1996 have sold their properties and
either hold notes with respect to such sales or have liquidated. No public
partnership has disposed of all its properties during the five years ended
prior to December 31, 1996.

A-14
<PAGE> 169
TABLE V

SALES OR DISPOSALS OF PROPERTIES

Table V presents information on the results of the sale or disposals
of public partnership properties during the three years ended prior to December
31, 1996. Since 1994, partnerships sponsored by Affiliates of the Advisor have
sold 11 properties in whole or in part. The table provides certain information
to evaluate property performance over the holding period such as:

-- Sales proceeds received by the partnerships in the form of cash
down payments at the time of sale after expenses of sale and
secured notes received at sale;

-- Cash invested in properties;

-- Cash flow (deficiency) generated by the property;

-- Taxable gain (ordinary and total); and

-- Terms of notes received at sale.

A-15
<PAGE> 170
TABLE V (CONTINUED)

SALES OR DISPOSALS OF PROPERTIES (A)
(000'S OMITTED)

<TABLE>
<CAPTION>
Selling Price, net of closing costs
----------------------------------------------------------
Cash Selling
Received, Commissions Secured
net of paid or Mortgage Notes Net
Date Date of Closing payable to at Time Received Selling
Acquired Sale Costs (B) Inland of Sale at Sale(C) Price
-------- -------- --------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Land II 10 Acres of Parcel #22 . . . . . 10/30/92 01/06/94 166 0 0 0 166
Land II .258 Acres of Parcel #6 . . . . . 04/16/91 10/01/94 10 0 0 0 10
Land II 11 Acres of Parcel #15 . . . . . 09/04/91 12/01/94 274 0 0 0 274
Growth Fund I-Country Club, 31 Units . . 12/30/85 Var 94 2,432 0 0 0 2,432
Land I 35.88 Acres of Parcel #23 . . . . 05/08/90 Var 94 1,149 0 0 156 1,305
Monthly Income Fund I-
Schaumburg Terrace, 22 Buildings . . 06/24/88 Var 94 701 0 0 4,912(F) 5,613
Land I 3.44 Acres of Parcel #23 . . . . . 05/08/90 Var 95 139 0 0 0 139
Monthly Income Fund I-
Schaumburg Terrace, 16 Buildings . . 06/24/88 Var 95 409 0 0 3,790(F) 4,199
Land II 60 Acres of Parcel #23 . . . . . 10/30/92 Var 95 4,196 0 0 0 4,196
Land II Parcel #25 . . . . . . . . . . . 01/28/93 10/31/95 3,292 0 0 0 3,292
Capital Fund Parcel #10A . . . . . . . . 09/16/94 04/21/95 286 0 0 0 286
Capital Fund 17.742 Acres of Parcel #2 . 11/09/93 08/02/95 361 0 0 0 361
Land I 27.575 Acres of Parcel #4 . . . . 04/18/89 08/25/95 542 0 9 0 542
Land II 5.538 Acres of Parcel #22 . . . . 10/30/92 01/05/96 154 0 0 0 154
Land I 4.629 Acres of Parcel #24 . . . . 05/23/90 04/01/96 53 0 0 0 53
Land II .87 Acres of Parcel #8 . . . . . 06/14/91 04/03/96 10 0 0 0 10
Land I 3.52 Acres of Parcel #1 . . . . . 01/19/89 12/24/96 501 0 0 0 501
Land I 10.53 Acres of Parcel #15 . . . . 01/03/90 Var 96 533 0 0 0 533
Land II 8.25 Acres of Parcel #23 . . . . 10/30/92 Var 96 1,527 0 0 0 1,527
</TABLE>

<TABLE>
<CAPTION>
Cost of Properties including closing
costs and other cash expenditures
----------------------------------
Original Partnership
Mortgage Capital
Financing Invested(D) Total
-------- ---------- -------
<S> <C> <C> <C>
Land II 10 Acres of Parcel #22 . . . . . 0 105 105
Land II .258 Acres of Parcel #6 . . . . . 0 4 4
Land II 11 Acres of Parcel #15 . . . . . 0 122 122
Growth Fund I-Country Club, 31 Units . . 658 843 1,501
Land I 35.88 Acres of Parcel #23 . . . . 0 971 971
Monthly Income Fund I-
Schaumburg Terrace, 22 Buildings . . 0 5,019 5,019
Land I 3.44 Acres of Parcel #23 . . . . . 0 98 98
Monthly Income Fund I-
Schaumburg Terrace, 16 Buildings . . 0 3,683 3,683
Land II 60 Acres of Parcel #23 . . . . . 0 2,900 2,900
Land II Parcel #25 . . . . . . . . . . . 0 1,730 1,730
Capital Fund Parcel #10A . . . . . . . . 0 221 221
Capital Fund 17.742 Acres of Parcel #2 . 0 196 196
Land I 27.575 Acres of Parcel #4 . . . . 0 231 231
Land II 5.538 Acres of Parcel #22 . . . . 0 60 60
Land I 4.629 Acres of Parcel #24 . . . . 0 23 23
Land II .87 Acres of Parcel #8 . . . . . 0 10 10
Land I 3.52 Acres of Parcel #1 . . . . . 0 281 281
Land I 10.53 Acres of Parcel #15 . . . . 0 265 265
Land II 8.25 Acres of Parcel #23 . . . . 0 1,104 1,104
</TABLE>

A-16
<PAGE> 171
TABLE V (CONTINUED)

SALES OR DISPOSALS OF PROPERTIES (A)
(000'S OMITTED)

<TABLE>
<CAPTION>
Excess
(deficiency)
of property
operating Amount of
cash subsidies Total
receipts included in Taxable Ordinary
over cash operating Gain Income Capital
expenditures(E) cash receipts from Sale from Sale Gain
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land II 10 Acres of Parcel #22 . . . 0 0 61 0 61
Land II .258 Acres of Parcel #6 . . . 0 0 6 0 6
Land II 11 Acres of Parcel #15 . . . 1 0 152 0 152
Growth Fund I-Country Club, 31 Units 775 0 1,223 0 1,223
Land I 35.88 Acres of Parcel #23 . . 4 0 360 360 0
Monthly Income Fund I-Schaumburg
Terrace, 22 Buildings . . . . . 1,556 0 1,609 0 1,609
Land I 3.44 Acres of Parcel #23 . . . 0 0 33 33 0
Monthly Income Fund I-Schaumburg
Terrace, 16 Buildings . . . . . 1,152 0 1,398 0 1,398
Land II 60 Acres of Parcel #23 . . . (80) 0 1,100 1,100 0
Land II Parcel #25 . . . . . . . . . 60 0 1,562 0 1,562
Capital Fund Parcel #10A . . . . . . (9) 0 67 67 0
Capital Fund 17.742 Acres
of Parcel #2 . . . . . . . . . . 1 0 164 0 164
Land I 27.575 Acres of Parcel #4 . . 14 0 311 0 311
Land II 5.538 Acres of Parcel #22 . . 0 0 94 0 94
Land I 4.629 Acres of Parcel #24 . . 0 0 30 0 30
Land II .87 Acres of Parcel #8 . . . 0 0 0 0 0
Land I 3.52 Acres of Parcel #1 . . . 0 0 220 0 220
Land I 10.53 Acres of Parcel #15 . . 0 0 268 0 268
Land II 8.25 Acres of Parcel #23 . . 0 0 423 0 423
</TABLE>

A-17
<PAGE> 172
TABLE V - (CONTINUED)

SALES OR DISPOSALS OF PROPERTIES
(000'S OMITTED)

NOTES TO TABLE V

(A) The table includes all sales of properties by the partnerships
during the three years ended December 31, 1996. All sales
have been made to parties unaffiliated with the partnership.

(B) Consists of cash payments received from the buyers and the
assumption of certain liabilities by the buyers at the date
of sale, less expenses of sale.

(C) The stated principal amount of the notes is shown in the
table under "Secured Notes Received at Sale." All sales
with notes received at sale are being reported for tax
purposes on the installment basis.

(D) Amounts represent the dollar amount raised from the offerings
of limited partnership units, less sales commissions and
other offering expenses.
(E) Represents "Cash Available (Deficiency) from Operations
(including subsidies)" as adjusted for applicable "Fixed
Asset Additions" through the year of sale.

(F) As of December 31, 1995, the Partnership has sold all of the
thirty-eight six-unit condominium buildings comprising
the Schaumburg Terrace condominium complex to
unaffiliated third parties. The partnership received
$249,596 from one all cash sale in 1994. In addition,
the Partnership received $823,518 in down payment
proceeds, and provided mortgage loans totaling $8,701,439 to
the purchasers for the thirty-seven additional sales. The
principal balances of these loans range from approximately
$211,000 to $256,000. These loans require monthly
principal and interest payments totaling $67,763 with an
interest rate of 8.625% per annum for ten years (based on a
thirty year amortization) and payment of all remaining
principal at the end of that period.

A-18
<PAGE> 173
PROSPECTUS

INLAND REAL ESTATE CORPORATION

$10.00 PER SHARE MINIMUM INITIAL PURCHASE - 300 SHARES
(100 SHARES FOR TAX-EXEMPT ENTITIES)

Inland Real Estate Corporation f/k/a Inland Monthly Income Fund III,
Inc., (the "Company"), a Maryland corporation, is an infinite-life real estate
investment trust (a "REIT"), formed in 1994 to invest in Neighborhood Retail
Centers located primarily within a 150-mile radius of its headquarters in Oak
Brook, Illinois as well as single-user retail properties located throughout the
United States. As of the date of this Prospectus, the Company owns 11
properties, including nine Neighborhood Retail Centers and two single-user
retail properties. The Company intends to use the Net Proceeds of this
Offering (after funding of appropriate working capital reserves) to acquire
additional properties. See "Investment Objectives and Policies" and "Real
Property Investments."

Of the 11,375,000 shares of the Company's common stock, $.01 par value
per share (the "Shares") offered by means of this Prospectus, 10,000,000 Shares
are being offered on a "best efforts" basis (the "Offering"); 1,000,000 Shares
are available only to Stockholders who are participating in the Company's
Distribution Reinvestment Program (the "DRP"); and 375,000 Shares may be issued
upon the exercise of warrants granted to the Dealer Manager. In addition,
375,000 warrants are being offered by means of this Prospectus. See
"Description of Securities - - Soliciting Dealer Warrants." The Company's
day-to-day operations will be managed by Inland Real Estate Advisory Services,
Inc. (the "Advisor"). Capitalized terms used in this Prospectus and not
defined in the text are defined in the "Glossary."

AN INVESTMENT IN THE COMPANY INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 16. THESE RISKS INCLUDE:
- There is currently no public trading market for the Shares and
therefore the offering price of the Shares may not be indicative of
the price that the Shares may trade at if they were listed on an
exchange or of the proceeds that a Stockholder may receive if the
Company was liquidated or dissolved. An investment in the Shares is,
therefore, suitable only for those able to make a long-term
investment. (PAGE 16)
- The Offering is not conditioned upon the Company raising a minimum
amount of proceeds. Therefore, the Company may not raise proceeds
sufficient to apply to any use other than payment of organization and
offering expenses associated with the Offering. (PAGE 16)
- As of the date of this Prospectus, the Company owned nine Neighborhood
Retail Centers and two single-user retail properties and had
approximately $11,200,000 available for acquisition of additional
properties. The Company also intends to use the Net proceeds of this
Offering (after funding of appropriate working capital reserves) to
acquire additional properties. Although the Company intends to
purchase properties, whenever possible, on an all cash basis, the
Company utilized financing to acquire seven of its 11 properties. The
Company has not specified any additional properties in which to
invest. (PAGE 16)
- The Company relies on the Advisor and its Affiliates for the daily
operation of the Company and the management of its assets. The
Company will pay the Advisor and its Affiliates substantial fees for
rendering such services. (PAGE 20)
- No person may own more than 9.8% of the Shares. (PAGE 24)
- Affiliates of the Advisor are engaged in similar real estate
activities which subject them to various conflicts of interest in
their management of the operations of the Company. Such conflicts
include competition for the time and services of Affiliates of the
Advisor, receipt by the Advisor and its Affiliates of compensation
from the Company for their various services and the possibility that
the Company may do business with entities that have pre-existing
relationships with the Advisor or its Affiliates which result in a
conflict between the ongoing business relationship of the Advisor or
its Affiliates and the Company's current interests. (PAGE 19)
- The Company has incurred indebtedness secured by certain of its
properties and may incur additional indebtedness on its existing
properties or properties to be acquired in the future. Defaults on
such indebtedness could cause the Company to lose its investment in
such properties. (PAGE 17)
- Stockholders have no preemptive rights, and, therefore, further
issuance(s) of Shares by the Company may dilute the interests of
investors purchasing in this Offering. (PAGE 20)
<TABLE>
<CAPTION>
====================================================================================================================================
Selling Proceeds to
Price to Public Commissions (1) Company (2)(3)

<S> <C> <C> <C>
Per Share $ 10.00 $ .70 $ 9.30
Minimum Purchase 300 Shares $ 3,000 $ 210 $ 2,790
Total Maximum if 11,000,000 Shares Sold(4) $ 109,050,000 $ 7,000,000 $ 102,050,000
====================================================================================================================================
</TABLE>

The date of this Prospectus is July 24, 1996. (cover page continued)

<PAGE> 174

(1) 10,000,000 of the Shares are being offered on a "best efforts" basis.
The Company will pay Inland Securities Corporation, an Affiliate of
the Advisor (the "Dealer Manager") selling commissions equal to up to
seven percent (7%) of the Gross Offering Proceeds and will issue a
warrant to purchase one Share during the Exercise Period at $12.00 per
share for every 40 Shares sold (the "Soliciting Dealer Warrants"), all
or a part of which compensation may be retained or reallowed to the
Soliciting Dealers unless prohibited by either federal or state
securities laws. See "Description of Securities - Soliciting Dealer
Warrants" regarding additional terms of the Soliciting Dealer
Warrants. The Dealer Manager also will receive a marketing
contribution and due diligence expense allowance fee equal to 2.5% of
the Gross Offering Proceeds, some portion of which may be reallowed to
Soliciting Dealers. Certain volume discounts may be given on orders
of 25,000 Shares or more and Soliciting Dealers may, in their
discretion, request that the Company pay them less than the maximum
permitted compensation in respect of the sale of Shares in which event
the amounts not paid as commissions will be retained by the Company.

(2) Before deducting Organization and Offering Expenses which will be
charged to the Company, estimated at $5,771,500 if 11,000,000 Shares
(the "Maximum Offering") are sold. If the aggregate of all
Organization and Offering Expenses, including selling commissions and
the marketing contribution and due diligence expense allowance fee,
exceeds 15% of the Gross Offering Proceeds, the Advisor will pay such
excess expenses.

(3) Participation in the DRP is limited to those investors who purchased
Shares in the Prior Offering or who purchase Shares pursuant to this
Offering. Participants may purchase Shares net of selling commissions
and the marketing contribution and due diligence expense allowance fee
($9.05 per Share). All Shares issued pursuant to the DRP will be
registered.

(4) In addition, assuming all 375,000 warrants are issued to the Dealer
Manager, $300 of additional proceeds will be raised; assuming these
warrants are exercised at the warrant price of $12.00, a total of
$4,500,000 will be raised. No commission will be paid in connection
with the issuance of the warrants or the Shares thereunder.
The Shares included in the Offering will be sold by the Dealer Manager
and other securities dealers (the "Soliciting Dealers") who are members of the
National Association of Securities Dealers, Inc. (the "NASD"). The Offering
will terminate on or before July 23, 1998. Subscription proceeds received from
investors will be held in escrow by the Escrow Agent, pending release to the
Company. As no minimum offering amount has been specified, subscription
proceeds are expected to be released to the Company as subscriptions are
accepted. All subscriptions will be accepted or rejected within ten days (and
generally within 24 hours) after receipt by the Company.
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 OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.

THE COMPANY IS NOT A MUTUAL FUND OR AN INVESTMENT COMPANY WITHIN THE
MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND, THEREFORE,
INVESTORS WILL NOT HAVE THE BENEFIT OF THE PROTECTIONS PROVIDED BY THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED.

THE USE OF FORECASTS IN THIS OFFERING IS PROHIBITED. ANY
REPRESENTATIONS TO THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE
AMOUNT OR CERTAINTY OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCES
WHICH MAY FLOW FROM AN INVESTMENT IN THE COMPANY IS PROHIBITED.

<PAGE> 175

(end of cover page)

<PAGE> 176

TABLE OF CONTENTS

Page
----
<S> <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ORGANIZATIONAL CHART . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Investment Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Company Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Risks of Real Estate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Tax Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ERISA Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

ESTIMATED USE OF PROCEEDS OF OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

WHO MAY INVEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Nonsubordinated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Subordinated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Competition for the Time and Service of the Advisor and Affiliates . . . . . . . . . . 37
Process for Resolution of Conflicting Opportunities . . . . . . . . . . . . . . . . . 38
Acquisition from Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
The Company may Purchase Properties from Persons with whom Affiliates of the
Advisor have Prior Business Relationships . . . . . . . . . . . . . . . . . . . 38
Property Management Services are being Rendered by an Affiliate of the Advisor . . . . 39
Receipt of Commissions, Fees and Other Compensation by the Advisor and its
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Non-Arm's-Length Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Legal Counsel for the Company and the Advisor is the Same Law Firm . . . . . . . . . . 39
Inland Securities Corporation is Participating as Dealer Manager in the Sale of the
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
The Advisor may have Conflicting Fiduciary Obligations in the Event the Company
Acquires Properties with Affiliates . . . . . . . . . . . . . . . . . . . . . . 40
FIDUCIARY RESPONSIBILITY OF DIRECTORS
AND THE ADVISOR; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Limitation of Liability and Indemnification . . . . . . . . . . . . . . . . . . . . . 41
Defenses Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

PRIOR PERFORMANCE OF THE COMPANY'S AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . 42
Prior Investment Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>

iii
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<TABLE>
<S> <C>
Summary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Publicly Registered Limited Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Private Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Private Placement Real Estate Equity Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Private Placement Mortgage and Note Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Loan Modifications and Work-Outs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Effects of Property Exchanges on Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Committees of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
The Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
The Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
The Management Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Independent Director Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Types of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Acquisition Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Description of Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Property Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Sale or Disposition of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Change in Investment Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Certain Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Return of Uninvested Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Additional Offerings and Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Other Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

REAL PROPERTY INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
The Walgreens/Decatur Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
The Eagle Crest Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Montgomery-Goodyear Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
The Hartford/Naperville Plaza Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Nantucket Square Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Antioch Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
The Mundelein Plaza Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Regency Point Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>

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<TABLE>
<S> <C>
Prospect Heights Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Montgomery-Sears Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
The Zany Brainy Store . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 98
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Impact of Recent Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Taxation of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Taxation of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Other Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Soliciting Dealer Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Issuance of Additional Securities and Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . 118
Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

SUMMARY OF THE ORGANIZATIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Certain Article and Bylaw Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Stockholder Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Stockholder Lists; Inspection of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Amendment of the Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Dissolution or Termination of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Advance Notice of Director Nominations and New Business . . . . . . . . . . . . . . . . . . . . . . . 122
Restrictions on Certain Conversion Transactions and Roll-Ups . . . . . . . . . . . . . . . . . . . . . 122
Limitation on Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Restrictions on Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Restrictions on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Escrow Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Advisor Capital Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Subscription Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Determination of Investor Suitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
</TABLE>

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<TABLE>
<S> <C>
Volume Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

HOW TO SUBSCRIBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

SALES LITERATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

DISTRIBUTION REINVESTMENT AND SHARE REPURCHASE PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Distribution Reinvestment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Share Repurchase Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

REPORTS TO STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-i

PRIOR PERFORMANCE TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

DISTRIBUTION REINVESTMENT PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
</TABLE>

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PROSPECTUS SUMMARY

The following is a summary intended solely to supply pertinent facts
and highlights from the material contained in the body of the Prospectus. More
detailed information may be found in the remainder of the Prospectus.

THE COMPANY As of the date of this Prospectus, the
Company owns and operates nine Neighborhood
Retail Centers (as hereinafter defined) and
two single-user retail properties. The
Company intends to acquire additional
existing Neighborhood Retail Centers which
will be located primarily within an
approximate 150-mile radius of its
headquarters in Oak Brook, Illinois, a
Chicago suburb, where the Advisor maintains
its acquisition and property management
headquarters. The Company also may acquire
single-user retail properties located
throughout the United States. Certain of the
single-user retail properties may be acquired
in sale and leaseback transactions in which
creditworthy tenants enter into triple-net
leases with the Company. See "Real Property
Investments." As of the date of this
Prospectus, the Company had approximately
$11,200,000 available for acquisition of
additional properties. See "Real Property
Investments."

The Company's primary business objective is
to enhance the performance and value of its
properties through management strategies
designed to address the needs of an evolving
retail marketplace. Key elements of the
Company's strategy are:

Acquisitions:

- Selectively acquire well-located
Neighborhood Retail Centers, as well
as single-user retail properties,
net leased by creditworthy tenants.

- Whenever possible, acquire
properties on an all-cash basis,
which provides the Company with a
competitive advantage over potential
purchasers who must secure
financing. If it is in the best
interest of the Company, the Company
will, in certain instances, acquire
properties subject to existing
indebtedness. The Company utilized
financing to acquire seven of the 11
properties owned by it as of the
date of this Prospectus. The
financing for five of the properties
was obtained from an Affiliate and
was retired within 90 days of the
date of acquisition. See "Real
Property Investments."

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<PAGE> 181

Operations:

- Actively manage costs and minimize
operating expenses by centralizing
all management, leasing, marketing,
financing, accounting, renovation
and data processing activities.

- Improve rental income and cash flow
by aggressively marketing rentable
space.

- Emphasize regular maintenance and
periodic renovation to meet the
needs of tenants and to maximize
long-term returns.

- For Neighborhood Retail Centers,
maintain a diversified tenant base,
consisting primarily of retail
tenants providing consumer goods and
services.

- Subsequent to the acquisition of the
properties, incur mortgage
indebtedness, when favorable
financing terms are available, to
allow the Company to acquire
additional properties and increase
the Company's cash flow.

The Company is a Maryland corporation which
filed an election with its tax return to be
treated as a real estate investment trust
("REIT") for the year ended December 31,
1995. See, generally "Federal Income Tax
Considerations." The Company is located at
2901 Butterfield Road, Oak Brook, Illinois
60521 (708) 218-8000.

SHARES OUTSTANDING 5,078,509.15 Shares (including 78,509.15
BEFORE OFFERING Shares issued under the Company's Dividend
Reinvestment Program (the "DRP") and 20,000
Shares purchased by the Advisor) as of the
date of this Prospectus. The Company sold
5,000,000 Shares (net of 3,000 Shares
repurchased by the Company as of the date
of this Prospectus pursuant to the Share
Repurchase Program) in a "best efforts"
offering that commenced on October 14, 1994
and was completed on July 22, 1996, at a price
of $10 per Share (the "Prior Offering").
See "Principal Stockholders."

SHARES OUTSTANDING After giving effect to the Offering and
POST OFFERING assuming the sale of the Maximum Offering, the
Company will have 15,078,509.15 Shares
outstanding (not taking into account issuance
of Shares under the Company's DRP or
Shares issuable upon exercise of the Soliciting
Dealer Warrants or upon exercise of options
granted under the Company's Stock Option Plan).

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<PAGE> 182

TERMS OF THE OFFERING The Company is offering 11,375,000 shares of common
stock, $.01 par value per share (the "Shares"), of which
10,000,000 Shares are being offered on a "best efforts"
basis; 1,000,000 Shares which may be issued to
Stockholders who are participating in the Company's DRP;
and 375,000 Shares which may be issued upon the exercise
of warrants granted to the Dealer Manager. The Company
is offering 10,000,000 Shares for sale on a "best
efforts" basis, which means that the securities dealers
participating in the Offering are under no obligation to
purchase any of these Shares and, therefore, no specified
amount is guaranteed to be raised. Subscribers for Shares
must initially purchase a minimum of 300 Shares ($3,000),
except that, a minimum of 100 Shares ($1,000) may be
purchased by Tax-Exempt Entities (as defined herein).
Minimum investment standards for Tax-Exempt Entities may
be higher in certain states. See "Who May Invest." The
Offering is being made by Inland Securities Corporation
(the "Dealer Manager") and other securities dealers (the
"Soliciting Dealers") who are members of the National
Association of Securities Dealers, Inc. (the "NASD"). The
Offering will terminate no later than July 23, 1998 (the
"Termination Date").

Subscribers' funds will be forwarded to LaSalle National
Bank, N.A., as escrow agent. Subscription proceeds are
expected to be released to the Company as subscriptions
are accepted. All subscriptions will be accepted or
rejected within ten days (and generally within 24 hours)
after receipt by the Company. See "Plan of
Distribution--General" and "--Escrow Conditions."

RISK FACTORS Investment in the Shares involves risks which are
described in detail in the "Risk Factors" section of the
Prospectus, which begins on page 16. The following is a
summary of the risks which the Company believes are most
relevant to an investment in the Shares.

Investment Risks:
- There is currently no public trading market for
the Shares and therefore the offering price of the
Shares may not be indicative of the price that the
Shares may trade at if they were listed on an exchange
or of the proceeds that a Stockholder may receive if
the Company was liquidated or dissolved; therefore,
the Shares constitute an illiquid investment.

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<PAGE> 183

- As of the date of this Prospectus, the Company owned nine
Neighborhood Retail Centers and two single- user retail
properties, and had approximately $11,200,000 available
for additional acquisitions. The Company has not
specified any additional properties for acquisition.
- The Eagle Crest Shopping Center and the Walgreens/Decatur
property were acquired by the Company from Inland
Property Sales, Inc., an Affiliate. Acquisitions from
Affiliates may be on terms less favorable to the Company
than arm's-length transactions and may result in
concessions as to price or otherwise which will have a
negative effect on the value of the Shares. The Company
will compete for the acquisition of properties with many
other entities engaged in real estate investment
activities, some of which have greater resources than the
Company, which may result in the Company being unable to
acquire certain desirable properties and have an adverse
impact on Share value.

- Acquisition of Neighborhood Retail Centers (but not
single-user retail properties) is primarily limited to
the approximate 150-mile radius surrounding the Advisor's
headquarters in Oak Brook, Illinois. Adverse economic
conditions affecting that area could adversely affect the
Company's ability to acquire, lease and dispose of such
properties, the amount of Distributions paid and the
value of the Shares.

- If the Company defaults on any secured indebtedness, the
lender may foreclose and the Company could lose its
investment in the properties securing such loan and the
value of the Shares would decrease.

- To satisfy certain requirements for qualification as a
REIT for federal income tax purposes, no person may own,
or be deemed to own by virtue of the attribution
provisions of the Code (as defined herein), more than
9.8% of the Shares. Such limitations may have an
anti-takeover effect and may further limit the liquidity
and value of the Shares.

- Although the Company has a working capital reserve of
approximately $590,500 (equal to 1% of the gross offering
proceeds from the Company's Prior Offering) and intends
to supplement its working capital with an additional 1%
of the Gross Offering Proceeds from this Offering, these
amounts may be insufficient to meet the unanticipated
cash needs of the Company and the Company may have to
obtain financing from either affiliated or unaffiliated
sources. Additional financing likely would decrease the
cash available to pay Distributions.

4
<PAGE> 184

- Under certain circumstances, the Company may borrow funds
to maintain operations of one or more of the Company's
properties or enable it to maintain its REIT status.
Borrowing increases the Company's business risks since
debt service increases the expenses of operations and
decreases cash available to pay Distributions.

Company Risks:

- Two of the 11 properties owned by the Company as of the
date of this Prospectus have been acquired from an
Affiliate. Acquisitions from Affiliates may be on terms
less favorable to the Company than properties acquired in
arm's-length transactions and may result in concessions
as to price or otherwise which could have a negative
effect on the value of the Shares.

- Conflicts of interest between the Company and its
Affiliates, such as competition for the time and services
of the Advisor and its Affiliates, receipt by the Advisor
and its Affiliates of compensation from the Company for
their various services and the possibility that the
Company may do business with entities that have
pre-existing relationships with the Advisor or its
Affiliates which results in a conflict between the
ongoing business relationship of the Advisor or its
Affiliates and the Company's current interests. Such
conflicts may have an adverse effect on operations and
thus, on the value of the Shares.

- The success of the Company will depend to a large extent
on the quality of management provided by the Advisor and
its Affiliates. Since January 1, 1985, Affiliates of the
Advisor have sponsored 77 programs. Certain programs
sponsored or managed by Affiliates of the Advisor have
experienced setbacks during the course of business,
including commercial tenant defaults or move-outs,
unfavorable changes in the tax laws and higher than
expected vacancies as apartment markets weakened. These
negative events have had the effect of reducing the
benefits which investors in those programs would have
received. The degree of impact these negative events
have had on the ability of the affected programs to
attain their original investment objectives varies by
program. See "Prior Performance of the Company's
Affiliates" and "Prior Performance Tables."

- The Advisor and its Affiliates will receive substantial
fees and payments for services rendered to the Company
whether or not Stockholders receive Distributions.

- The Directors may authorize the issuance of shares or
other securities in addition to Shares issued pursuant to
this Offering, thereby resulting in dilution of the
equity of the Stockholders.

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<PAGE> 185

Stockholders have no preemptive rights, and, therefore,
issuances of Shares by the Company may dilute the
interests of investors purchasing in this Offering.

- The Company's Articles, in most cases, require a vote of
only a majority of the Stockholders on those matters on
which Stockholders are required to vote. Therefore, all
Stockholders, including those not voting with the
majority, will be bound by the vote of the Stockholders
owning a majority of the outstanding Shares.

Risks of Real Estate Ownership:

- All equity real estate investments are subject to some
degree of general economic risks, including lease
defaults, which could adversely affect income, cash
available for Distributions and property value.
Stockholders can expect to bear this risk in proportion
to the number of Shares held.

- Adverse trends for the property types to be acquired by
the Company or adverse economic developments in general
or within the Chicago metropolitan area in particular
could have an adverse effect on the Company's operations
and the value of the Shares could decrease.

- Future violation of environmental and other governmental
regulations could result in substantial expenditures by,
or damages to, the Company and decrease the cash
available to pay Distributions.

- Unanticipated renovation or remodeling costs incurred to
re-lease the Company's properties could reduce the cash
available to pay Distributions.

Tax Risks:

The Company's ability to qualify as a REIT involves the
application of technical and highly complex provisions of
the Internal Revenue Code of 1986, as amended (the
"Code") to various factual matters and circumstances
which are often not within the Company's control. The
Company's qualification as a REIT depends upon its
ability to meet, through actual operations, various tests
imposed by the Code, and there can be no assurance that
operating results will allow the Company to satisfy the
Code requirements. In addition, the actions and
transactions the Company will undertake to maintain its
REIT status may not produce the highest economic profit.
For example, the Company

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<PAGE> 186

does not intend to sell any property as inventory
property even if so structuring sales would produce
higher profit.

- If the Company loses its REIT status, its Distributions
will not be deductible, thereby increasing its tax
liability and substantially reducing the funds available
for distribution to Stockholders. Such federal income
tax liability could force the Company to borrow funds,
liquidate certain of its investments or take other
steps which could adversely affect its operations and
the value of the Shares.
- Shefsky Froelich & Devine Ltd. ("Counsel") has rendered
its opinion that as of July 17, 1996, and, based on
certain representations of the Company as described
throughout the Prospectus regarding the operations of the
Company, the Company has been organized in conformity
with the requirements for qualifications as a REIT
beginning with its taxable year ending December 31, 1995,
and that its prior, current and anticipated methods of
operation has enabled and will enable the Company to
satisfy the REIT Requirements, and that distributions to
certain qualified organizations will not produce
unrelated business taxable income ("UBTI") so long as the
Company is not a "Pension-Held REIT." See "Federal
Income Tax Considerations" and "ERISA Considerations."
The Company's ability to maintain its REIT status will
depend upon its ability (based on its actual operating
results) to meet the REIT Requirements, and Counsel will
not review compliance with the REIT Requirements on a
continuing basis after the initial effectiveness date of
the Registration Statement or issue any opinions in the
future unless expressly requested to do so. The opinion
of Counsel represents its legal judgment based on the law
in effect as of the date of this Prospectus, is not
binding on the Internal Revenue Service (the "Service")
and could be subject to modification or withdrawal based
on future legislative, judicial or administrative changes
to the federal income tax laws (or the interpretation
thereof) which could be applied retroactively.
Stockholders could sustain a decrease in the value of
their Shares if such changes occur.

ERISA Risks:

In deciding whether to purchase Shares, each fiduciary of
an employee benefit plan subject to ERISA, in
consultation with its advisors, should carefully consider
its fiduciary responsibilities under ERISA, the
prohibited transaction rules of ERISA and the Code, the
UBTI consequences and the effect of the "plan asset"
regulations issued by the Department of Labor. See
"ERISA Considerations."

7
<PAGE> 187

Should the Company be unable to effectively manage the
impact of these risks, the Company's ability to meet its
investment objectives will be impaired and, therefore,
the benefits to the Stockholders from their investment in
the Company will be reduced. See "Risk Factors" and
"Prior Performance of the Company's Affiliates."

INVESTMENT OBJECTIVES The Company's investment objectives are to:
AND POLICIES

- Provide regular Distributions to Stockholders in
amounts which may exceed the Company's taxable
income, particularly in the early years of the
Company's operations, given the non-cash nature of
depreciation expense and, to such extent, will
constitute a tax-deferred return of capital. In
order for the Company to maintain its REIT status,
the Company must make Distributions equal to not less
than 95% of the its REIT taxable income. To the
extent Distributions to Stockholders exceed taxable
income, such Distributions would constitute a return
of capital and would be sheltered from current
taxation for taxable Stockholders. This return of
capital, however, will reduce a Stockholder's tax
basis in his Shares, which will result in more
taxable gain upon sale or exchange of Shares than
would have occurred absent a return of capital.
Depreciation deductions, however, will decrease the
Company's tax basis in its properties, thereby
increasing the Company's taxable income when the
properties are sold, thereby increasing the amount of
Distributions needed to maintain compliance with the
REIT Requirements. As long as the Company qualifies
as a REIT, it generally will not be taxed to the
extent of the Distributions it pays to Stockholders;

- Provide a hedge against inflation by entering into
leases which provide for scheduled rent escalations
or participation in the growth of tenant sales
designed to provide increased Distributions and
capital appreciation through increases in the value
of the Company's properties; and

- Preserve Stockholders' capital by selectively
acquiring well-located Neighborhood Retail Centers
and single-user retail properties on an all-cash
basis, whenever possible. If it is in the best
interest of the Company, the Company will, in certain
instances, utilize borrowing to acquire properties.
As of the date of this Prospectus, the Company
utilized financing in connection with acquisition of
seven of its 11 properties. See "Real Property
Investments."

There can be no assurance the aforementioned objectives
will be achieved.

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<PAGE> 188

To the extent possible, it will be the policy of the
Company to avoid the fluctuations in Distributions which
might result if Distributions were based on actual cash
received during the Distribution period. To implement
this policy, the Company may use income earned during
prior periods, or income earned subsequent to the
Distribution declaration date but prior to the payment
date, in order to distribute annualized Distributions
consistent with the Distribution level established from
time to time by the Board. The Company's ability to
implement this policy will be dependent upon the
availability of Cash Flow and the applicable REIT rules.
It will be the general policy of the Company, subject to
the applicable REIT rules (including the Distribution
requirements), to reinvest that portion of the proceeds
from the sale, financing, refinancing or other
disposition of its properties that represents the initial
investment into additional properties. Through September
30, 1995, the Company paid Distributions to its
Stockholders on a quarterly basis. Commencing in
October, 1995, the Company began, and has continued, to
pay Distributions to the Stockholders on a monthly basis,
with daily record and Distribution declaration dates.
However, the Company reserves a right, at any time, to
revert to paying Distributions on a quarterly basis. The
properties owned by the Company are currently generating
sufficient cash flow to cover operating expenses of the
Company plus pay a monthly Distribution of 8% per annum
on weighted average shares.

It is the Company's intention, whenever possible, to
acquire properties free and clear of permanent mortgage
indebtedness by paying the entire purchase price of each
property in cash or for shares of the Company's stock.
However, if it is determined to be in the Company's best
interests, the Company will, in certain instances,
utilize borrowing to acquire properties. On properties
purchased on an all-cash basis, the Company may later
incur mortgage indebtedness by obtaining loans secured by
selected properties, if favorable financing terms are
available. The proceeds from such loans would be used
primarily to acquire additional properties to increase
Cash Flow. The Company may also incur indebtedness to
finance improvements to the properties it acquires. The
Company anticipates that aggregate borrowings related to
all of the Company's properties will not exceed 50% of
their combined fair market values. Notwithstanding the
foregoing, the maximum amount of borrowings in relation
to Net Assets shall not exceed 300% of Net Assets without
approval of a majority of the Stockholders. The Company
does not anticipate that it will incur debt to fund
Distributions to Stockholders, unless necessary to
maintain its status as a REIT. See "Investment Objectives
and Policies--Borrowing" and "Summary of the
Organizational Documents--Restrictions on Borrowing."

9
<PAGE> 189

Affiliates of the Advisor have extensive experience in
the acquisition and management of properties similar to
the properties contemplated to be acquired by the
Company. However, there is no assurance that the
Company's investment objectives will be achieved because,
among other reasons, the Company has acquired only nine
Neighborhood Retail Centers and two single-user retail
properties as of the date of this Prospectus. The Company
has not specified any additional properties. Due to
competition for suitable properties, the Company may not
be able to acquire other properties meeting its
investment criteria. See "Risk Factors-- Investment
Risks-- Partially Specified Fund," "Risk Factors--Risks
of Real Estate Ownership--Competition with Others for the
Acquisition of Properties," "Prior Performance of the
Company's Affiliates" and "Real Property Investments."

Proceeds of the Offering will be used to buy properties
and to pay expenses of the Offering and Acquisition
Expenses, with the balance (but not less than 1% of Gross
Offering Proceeds) being applied to working capital
reserves. See "Estimated Use of Proceeds of the
Offering."

THE ADVISOR Inland Real Estate Advisory Services, Inc., a wholly
owned subsidiary of Inland Real Estate Investment
Corporation, a Delaware corporation ("IREIC") is the
Advisor. The Advisor is an Illinois corporation with its
principal place of business located at 2901 Butterfield
Road, Oak Brook, Illinois 60521 (708) 218-8000. IREIC,
as of June 30, 1995, had an audited net worth in excess
of $91,600,000, much of which is illiquid. Limited
partnerships for which IREIC is a general partner own in
excess of 10,500,000 square feet of commercial property
in Chicago and nationwide. See "Management."

COMPENSATION TO BE The Advisor and its Affiliates will be paid substantial
PAID TO THE ADVISOR amounts for managing the business of the Company. The
AND ITS AFFILIATES most significant items of compensation are:

Offering Stage: Selling commissions to the Dealer
Manager up to 7% of the Gross Offering Proceeds, which
may be retained or reallowed to Soliciting Dealers; and a
marketing contribution and due diligence expense
allowance fee to the Dealer Manager equal to 2.5% of the
Gross Offering Proceeds (the "Marketing Contribution and
Due Diligence Expense Allowance Fee"), of which such
compensation may be retained or reallowed to Soliciting
Dealers. The selling commissions and the Marketing
Contribution and Due Diligence Expense Allowance Fees for
the year ended December 31, 1995 totalled $1,719,355, of
which $102,084 was unpaid at December 31, 1995.
Approximately $1,551,000 of such amount had been
reallowed to Soliciting Dealers as of December 31, 1995.
Soliciting Dealers also receive one Soliciting Dealer
Warrant for each 40 Shares sold by such Soliciting Dealer
during the Offering. Each Soliciting Dealer Warrant will
entitle the holder to purchase one Share from the Company
at a price of $12 during the Exercise Period.

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<PAGE> 190

See "Compensation Table" and "Description of
Securities--Soliciting Dealer Warrants."

Acquisition Stage: Reimbursement for actual
out-of-pocket acquisition expenses are anticipated to be
up to 0.5% of Gross Offering Proceeds. See "Compensation
Table."

Operational Stage: An annual Advisor Asset Management
Fee of not more than 1% of the Average Invested Assets is
paid quarterly. An Affiliate of the Advisor will also
receive a Property Management Fee equal to not more than
4.5% of the gross revenues of each of the Company's
properties (90% of the fee typically charged by a third
party), paid monthly. Payment of the Advisor Asset
Management Fee is subordinated to the payment of
Distributions in an amount equal to a non-compounded
return equal to 8% per annum on Invested Capital (the
"Current Return"). For the year ended December 31, 1995,
the Company had not incurred or paid an Advisor Asset
Management Fee. The Company incurred and paid Property
Management Fees of $46,791 for the year ended December
31, 1995. See "Compensation Table" and "Management's
Discussion and Analysis of Financial Condition and
Results of Operations of the Company."

Liquidation Stage: A Property Disposition Fee equal to
the lesser of: (i) 3% of the sale price of a property;
or (ii) 50% of the commission customarily paid to third
parties; and after receipt by the Stockholders of a
cumulative, non-compounded 8% per annum return of
Invested Capital (the "Cumulative Return") and a return
of their Invested Capital, an Incentive Advisory Fee
equal to 15% of the net proceeds from the sale of a
property. In the event the Company's Shares are listed
on a national stock exchange or included for quotation
on a national market system and the Advisor is merged
into the Company, the Advisor will receive Shares and the
Company will no longer be obligated to pay fees to the
Advisor. See "Compensation Table."

There may be a number of other incidental fees for
services or expense reimbursement that the Advisor and
its Affiliates may receive during the operational and
liquidation stages of the Company. See, generally,
"Compensation Table" and "Management--Other Services."

REAL PROPERTY As of the date of this Prospectus, the Company owned nine
INVESTMENTS Neighborhood Retail Centers and two single-user retail
properties. The Company utilized $31,973,000 to acquire
these properties. Two of the properties are encumbered
by outstanding indebtedness of approximately $5,221,000,
as of the date of this Prospectus. The Company has
approximately $11,200,000 available for investment in
additional properties. The Company has not specified any
additional properties.

<PAGE> 191

The terms of each of the Company's acquisitions have been
approved by a majority of the Directors (including a
majority of the Independent Directors) as being fair and
reasonable to the Company. The acquisition prices of the
properties did not exceed the appraised values of the
properties at the time of acquisition. Two of the
properties were acquired from an Affiliate. There can be
no assurance that the prices paid to the Affiliate for
these properties did not exceed that which would be paid
by an unaffiliated buyer. See "Risk Factors--Company
Risks--Prices Paid for Properties Acquired from
Affiliates may be More than Prices Paid by
Non-Affiliates" and "Real Property Investments."

The Company may invest in general partnerships or joint
venture arrangements with Affiliates as co-owners of a
property. The Company will be able to increase its equity
participation in such entity as additional proceeds of
the Offering are received by the Company with the result
that the Company can ultimately own 100% of the property,
provided however that the affiliated general or joint
venture partner will not be entitled to any profit or
other benefit on such sale of its equity participation to
the Company. See "Investment Objectives and
Policies--Joint Ventures."

PRIOR OFFERINGS The Inland organization, during the past ten years, has
SUMMARY sponsored seven public and 70 private real estate
programs which have raised in excess in $273,317,000. In
excess of 19,500 investors have invested in these
Inland-sponsored programs.

Two of the Inland-sponsored public programs and a
majority of the private programs have investment
objectives similar to those of the Company. Certain
programs sponsored or managed by Affiliates of the
Advisor have experienced setbacks during the course of
business, including commercial tenant defaults or
move-outs, unfavorable changes in the tax laws and higher
than expected vacancies as apartment markets weakened.
These negative events have had the effect of reducing the
benefits which investors in those programs would have
received. The degree of impact these negative events
have had on the ability of the affected programs to
attain their original investment objectives varies by
program. See "Prior Performance of the Company's
Affiliates" and "Prior Performance Tables."

ARTICLES OF Investors should be particularly aware of the following
AMENDMENT AND provisions contained in the Company's Articles of
RESTATEMENT Incorporation, as amended and restated to date (the
"Articles"):

- Limitation on accumulation of shares: In order for
the Company to qualify as a REIT, no more than 50% of
the outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals at any time
during the last half of the Company's taxable year.
To ensure that the Company will not fail to qualify

12
<PAGE> 192

as a REIT under this test, the Articles place
restrictions on the accumulation of Shares by a
single Stockholder. These restrictions may: (i)
discourage a change of control of the Company; (ii)
deter individuals and entities from making tender
offers for Shares, which offers may be attractive to
Stockholders; or (iii) limit the opportunity for
Stockholders to receive a premium for their Shares in
the event an investor is making purchases of Shares
in order to acquire a block of Shares. See
"Description of Securities--Restrictions on
Transfer."

- Voting rights: Each Share is entitled to one vote
and the Articles do not provide for cumulative
voting. Stockholders owning a majority of the
outstanding Shares have the right to: (i) amend the
Articles subject to certain limitations; (ii)
dissolve the Company; (iii) elect or remove the Board
of Directors; and (iv) approve or disapprove the sale
of all or substantially all of the assets of the
Company other than in connection with a dissolution
of the Company. All Stockholders will be bound by the
vote of Stockholders owning a majority of the
outstanding Shares, even if a Stockholder does not
vote with the majority. Stockholders owning in the
aggregate at least 10% of the outstanding Shares may
request the Directors to call a meeting for the
purpose of voting on any of the foregoing.

- Stockholders owning at least two-thirds of the
outstanding Shares must approve certain exchange
offers, mergers, consolidations or similar
transactions commonly known as Roll-Ups, which affect
certain Stockholder rights. Such super-majority
provisions may have the effect of: (i) discouraging
a change in control of the Company; (ii) deterring
individuals and entities from making tender offers
for Shares, which offers may be attractive to
Stockholders; and (iii) limiting the opportunity for
Stockholders to receive a premium for their Shares in
the event an investor is making purchases of Shares
in order to acquire a block of Shares.

- Changes in investment objectives and policies: The
Directors cannot change the investment objectives or
policies of the Company unless an amendment to the
Articles is made, which would require the approval of
Stockholders owning a majority of the outstanding
Shares.

- Distributions: Distributions are payable out of
available cash.

See "Summary of the Organizational Documents" and
"Description of Securities."

DISTRIBUTION The Company provides the following programs to facilitate
REINVESTMENT investment in the Shares and to provide limited liquidity
AND SHARE REPURCHASE for Stockholders until such time as a market for the
PROGRAMS Shares develops:

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<PAGE> 193

- The Distribution Reinvestment Program (the "DRP")
allows Stockholders who purchase Shares pursuant
either to the Prior Offering or to this Offering to
automatically reinvest Distributions by purchasing
additional Shares from the Company, subject to the
limitations on Share ownership imposed by the
Articles. Such purchases will not be subject to
selling commissions or the Marketing Contribution and
Due Diligence Expense Allowance Fee and will be sold
at a price of $9.05 per Share. See "Distribution
Reinvestment and Share Repurchase Programs --
Distribution Reinvestment Program."

- The Share Repurchase Program provides, subject to
certain restrictions, existing Stockholders with
limited, interim liquidity by enabling them to sell
Shares back to the Company at a price of $9.05 per
Share (a reduction of $.95 from the $10 Offering
price, reflecting selling commissions and the
Marketing Contribution and Due Diligence Expense
Allowance Fee). Repurchases will be on a first come,
first served basis, and will be limited in the
following ways: (i) not more than $500,000 worth of
the outstanding Shares will be repurchased in any
given year; and (ii) the funds available for
repurchase will be limited to available proceeds
received by the Company from the sale of Shares under
the Distribution Reinvestment Program. Shares
purchased by the Company are not available for
resale. The Share Repurchase Program will be
terminated by the Company upon the development of a
secondary market for the Company's Shares or upon the
listing of the Company's Shares on a national
securities exchange or inclusion for quotation on a
national market system. See "Distribution
Reinvestment and Share Repurchase Programs -- Share
Repurchase Program."

WHO MAY INVEST The section of the Prospectus titled "Who May Invest"
describes minimum net worth and income requirements, as well
as a detailed explanation of other suitability requirements
which investors must meet prior to subscription. In
particular, investors must have either: (i) a minimum annual
gross income of $45,000 and a net worth (exclusive of home,
home furnishings and automobiles) of $45,000; or (ii) a net
worth (determined with the foregoing exclusions) of
$150,000. Suitability standards may be higher in certain
states. See "Who May Invest."

ANNUAL VALUATIONS Stockholders that are subject to ERISA will be provided with
an annual statement of value reporting the value of each
Share based upon an estimated amount they would receive if
the Company's assets were sold as of the close of the
Company's fiscal year and if such proceeds (without
reduction for selling expenses) and all the other funds of
the Company were distributed in liquidation of the Company;
provided, however, the Net Asset Value of each Share will be
deemed to be $10 per Share for the first three annual
statements of value following termination of the Offering.
There can be no assurance that: (i) such value could or
will
<PAGE> 194

actually be realized by the Company or by Stockholders
upon liquidation (in part because estimates of value do
not necessarily indicate the price at which assets could
be sold, and because no attempt will be made to estimate
the expenses of selling any asset of the Company); (ii)
Stockholders could realize such value if they were to
attempt to sell their Shares; or (iii) such valuation
would comply with the ERISA requirements. Should the
Shares become listed on a national stock exchange or
included for quotation on a national market system, the
Company will no longer provide such valuations. See
"ERISA Considerations."

GLOSSARY OF TERMS For definitions of terms used in this Prospectus that
are not defined in the text, see "Glossary."

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<PAGE> 195

ORGANIZATIONAL CHART

_________ THE INLAND GROUP, INC.____
| |
| |
Inland Commercial Inland Real Estate
Property Management Inc. Investment Corporation
| | |
| |
| Inland Real Estate Inland Securities
Property Management and Advisory Services Inc. Corporation
Related Services | |
|
| |
| Organization, Advisory Securities
and Real Estate Services Sales
| | |

Robert D. Parks |
G. Joseph Cosenza
Roland W. Burris - - - - - - - - - - |
Douglas R. Finlayson
Heidi N. Lawton

Solid lines indicate ownership. Broken lines indicate services.

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<PAGE> 196

RISK FACTORS

Purchase of the Shares offered hereby involves various risk factors in
addition to the factors set forth elsewhere herein. Prospective purchasers
should consider, among others, the following factors:

1. INVESTMENT RISKS

Share Price/Limited Liquidity. The offering price of the Shares was
determined by the Board in the exercise of its business judgment but may not be
indicative of the price that the Shares may trade at if they were listed on an
exchange or of the proceeds that a Stockholder may receive if the Company was
liquidated or dissolved. Further, there is currently no public trading market
for the Shares and no assurance exists that one will develop. An investor may
not be able to liquidate his or her investment on favorable terms, or at all.
However, by 1999, the Company anticipates that the Board of Directors will
determine whether it is in the best interests of the Company to: (i) apply to
have the Shares listed for trading on a national stock exchange or included for
quotation on a national market system, provided the Company meets the then
applicable requirements; and/or (ii) commence a subsequent public offering after
completion of this Offering. The Company does not intend to apply for listing
during the term of this Offering. See "Investment Objectives and
Policies--Additional Offerings and Exchange Listing." Subject to available
funds and the Company's continued qualification as a REIT, the Company may
repurchase Shares from Stockholders. See "Distribution Reinvestment and Share
Repurchase Programs--Share Repurchase Program."

No Minimum Offering. The Offering is not conditioned upon the Company
raising a minimum amount of proceeds and the release of subscription proceeds
from the escrow is not conditioned upon the Company's selling a minimum number
of Shares. As a result, the Company may not raise proceeds sufficient to apply
to any use other than payment of the organization and offering expenses
associated with the Offering.
Partially Specified Fund. As of the date of this Prospectus, the
Company owned nine Neighborhood Retail Centers and two single-user retail
properties. Two of the properties, the Eagle Crest Shopping Center in
Naperville, Illinois, and a Walgreens property in Decatur, Illinois were
purchased from Inland Property Sales, Inc. ("IPS") an Affiliate. These
properties were acquired with the approval of the Directors (including all of
the then Independent Directors). Although this Prospectus describes the
parameters the Company will use to acquire additional properties, as of the date
of this Prospectus, no additional properties have been specified. Accordingly,
no information is available as to the identification, location, operating
histories, lease terms or other relevant economic and financial data of the
other properties to be purchased by the Company with the $11,200,000 available
for investment or with the Net Proceeds of this Offering (after funding of
appropriate working capital reserves). Since the Company has not yet specified
additional properties, there may be a delay between the sale of the Shares and
the Company's purchase of such other properties, which could result in a delay
in the benefits to investors, if any, of an investment in the Company.

The Advisor will evaluate potential additional property acquisitions
and will engage in discussions with sellers for the purchase of properties for
the Company. At such time during the Offering as the Advisor believes a
reasonable probability exists that a property will be acquired on specified
terms (i.e., upon completion of due diligence, which includes review of the
title insurance commitment, appraisal and environmental analysis), the Company
will issue a supplement to this Prospectus setting forth certain details
concerning the proposed acquisition. Investors should be aware, however, that
acquisitions at this

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stage require negotiation of final binding agreements and there can be no
assurance that any such properties will be acquired on the same terms as
described in any supplements or other disclosure prepared with respect thereto.
In addition, any properties which are identified by the Company prior to the
termination of the Offering may not be acquired unless sufficient Shares are
sold. In the event any properties which are disclosed to Stockholders as
potential acquisitions are not acquired, or any properties which the Company
acquires prior to the termination of the Offering but are not retained,
subsequently acquired properties may be materially different in a number of
respects. In addition, investors should be aware that audited financial
statements of prior operations of existing properties acquired by the Company,
or of the lessees or of the property or guarantor of the underlying leases,
generally will not be available until after a supplement to this Prospectus
describing such acquisition has been provided to potential investors, and
financial statements for recently constructed properties may not be available
at all.

Limitation on Area in which the Company May Acquire Neighborhood
Retail Centers. Acquisition of Neighborhood Retail Centers (but not single-user
retail properties) is limited primarily to the approximate 150-mile radius
surrounding the Advisor's headquarters in Oak Brook, Illinois. Adverse economic
conditions affecting that area could adversely affect the Company's ability to
acquire, lease and dispose of such properties.

Insufficient Reserves. The Company has established a working capital
reserve of $590,500 (equal to 1% of the gross offering proceeds from the Prior
Offering) and will supplement such working capital reserve with an additional 1%
of the Gross Offering Proceeds from this Offering. However, if such amount is
insufficient to meet the unanticipated cash needs of the Company, the Company
may have to obtain financing from either affiliated or unaffiliated sources to
service such cash needs. There is no assurance that this financing will be
available or if available, will be available on terms acceptable to the
Company.

Mortgage Indebtedness and Other Borrowings May Increase the Company's
Business Risks. It is the Company's intention, whenever possible, to acquire
properties free and clear of permanent mortgage indebtedness by paying the
entire purchase price of each property in cash or for shares of the Company's
stock. However, if it is determined to be in the best interests of the Company,
the Company will, in certain instances, utilize borrowing to acquire properties.
The Company may later incur or increase mortgage indebtedness by obtaining loans
secured by selected properties, if favorable financing terms are available. The
proceeds from such loans would be used to acquire additional properties for the
purpose of increasing Cash Flow and providing further diversity. The Company
anticipates that aggregate borrowings related to all of the Company's properties
will not exceed 50% of their combined fair market values, however, the maximum
amount of borrowings in relation to Net Assets shall, in the absence of the
consent of a majority of the Stockholders, not exceed 300% of Net Assets.
Incurring mortgage indebtedness increases the risk of possible loss. If the
Company defaults on its secured indebtedness, the lender may foreclose and the
Company could lose its investment in the properties securing such loan. Any
such foreclosure would be treated as a sale of the property for a purchase price
equal to the outstanding balance of the debt secured by the mortgage, and if the
outstanding balance of the debt secured by the mortgage exceeds the basis of the
property to the Company, there could be taxable income upon a foreclosure. It
will be the policy of the Company to seek to incur only non-recourse mortgage
indebtedness, if available, meaning that the lender may look only to the
property or properties securing the mortgage indebtedness for satisfaction of
the indebtedness. See "Investment Objectives and Policies--Borrowing" and "Real
Property Investments."

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Under certain circumstances, the Company may borrow for the purpose of
maintaining the operations of the Company. Borrowing may increase the Company's
business risks. Debt service increases the expense of operations since the
Company will be responsible to retire the debt and pay the attendant interest
which may result in decreased cash available for distributions to Stockholders.
Also, lenders to the Company may require restrictions on future borrowings,
distributions and operating policies. The Company may incur indebtedness if
necessary to satisfy the requirement that the Company distribute at least 95% of
its REIT taxable income (as defined in the Code), or otherwise as is necessary
or advisable to assure that the Company maintains its qualification as a REIT
for federal income tax purposes.

Limits on Share Accumulation May Have an Anti-Takeover Effect. In
order for the Company to qualify as a REIT, no more than 50% of the outstanding
Shares may be owned, directly or indirectly, by five or fewer individuals at any
time during the last half of each of the Company's taxable years. To ensure
that the Company will not fail to qualify as a REIT under this test, the
Articles provide that no person may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.8% of the number or value of the
issued and outstanding stock of the Company. These restrictions may: (i)
discourage a change of control of the Company; (ii) deter individuals and
entities from making tender offers for Shares, which offers may be attractive to
Stockholders; or (iii) limit the opportunity for Stockholders to receive a
premium for their Shares in the event an investor is making purchases of Shares
in order to acquire a block of Shares. See "Description of
Securities--Restrictions on Transfer."

Objectives of Joint Venture Partners May Conflict with the Company's
Objectives. Certain of the Company's investments may be owned by joint ventures
between the Company and Affiliates of the Advisor. Investments in joint
ventures which own properties may involve risks not otherwise present,
including, for example, that the Company's co-venturer might become bankrupt,
that such co-venturer may at any time have economic or business interests or
goals which are inconsistent with the interests or goals of the Company or that
such co-venturer may be in a position to take action contrary to the Company's
instructions, requests, policies or objectives. Among other things, actions by
such co-venturer might subject property owned by the joint venture to
liabilities in excess of those contemplated by the terms of the joint venture or
other adverse consequences. See "Investment Objectives and Policies--Joint
Ventures."

Seller Financing by Company May Delay Liquidation or Reinvestment.
The Company intends to use its best efforts to sell its properties for cash.
However, the Company may sell its properties either subject to or upon the
assumption of any then outstanding mortgage debt or, alternatively, may provide
financing to purchasers with terms advantageous to the Company. A purchase
money obligation secured by a mortgage may be taken as part payment and there
are no limitations or restrictions on the Company taking such purchase money
obligations. The terms of payment to the Company will be affected by custom in
the area where the property being sold is located and the then prevailing
economic conditions. To the extent the Company receives promissory notes or
other property in lieu of cash from sales, such proceeds (other than any
interest payable thereon) will not be included in net sale proceeds until and to
the extent the promissory notes or other property are actually paid, sold,
refinanced or otherwise disposed of and, therefore, the distribution of the
proceeds of a sale to the Stockholders may be delayed until such time. In many
cases, the Company will receive initial downpayments (cash and other property)
in the year of sale in an amount less than the selling price and subsequent
payments will be spread over a number of years. See "Investment Objectives and
Policies-- Sale or Disposition of Properties."

Loss on Dissolution and Termination. At the date of dissolution or
termination of the Company, the undistributed proceeds realized from the
liquidation of assets, if any, will be distributed to

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Stockholders, but only after the satisfaction of claims of creditors.
Accordingly, a Stockholder's ability to recover all of his or her investment
under such circumstances will depend on the amount of funds so realized and
claims to be satisfied therefrom.

Limited Experience of Management in Operation of a REIT. IREIC and its
Affiliates have, during the past ten years, sponsored seven public and 70
private real estate programs which have raised in excess of $273,300,000. Two
of the seven public programs, Inland's Monthly Income Fund, L.P. and Inland
Monthly Income Fund II, L.P., had investment objectives which were substantially
similar to those of the Company. However, each of the seven prior public
programs, including Inland's Monthly Income Fund, L.P. and Inland Monthly Income
Fund II, L.P., were structured as limited partnerships and not as real estate
investment trusts. Additionally, the Company, which is the first IREIC-
sponsored REIT, did not commence operations until January 1995. Therefore, there
can be no assurance that the Company will attain its investment objectives since
the Company's management, the Advisor and its Affiliates have limited experience
in the management and operation of a REIT.

2. COMPANY RISKS

Prices Paid for Properties Acquired from Affiliates may be More than
Prices Paid by Non-Affiliates. Two properties owned by the Company, the Eagle
Crest Shopping Center and the Walgreens/Decatur property, were acquired by the
Company from an Affiliate. The Articles provide that the Company may not
purchase any property from an Affiliate unless a majority of the Directors
(including a majority of the Independent Directors) not interested in the
transaction approve the purchase as fair and reasonable to the Company and at a
price to the Company no greater than the cost of the asset to such Affiliate, or
if the price to the Company is in excess of such cost, that substantial
justification for such excess exists and that such excess is reasonable. In no
event may the cost of such asset to the Company exceed its current appraised
value. The Directors (including all of the then Independent Directors) approved
the purchases pursuant to the standards described herein. However, there can be
no assurance that the prices paid to the Affiliate for the Eagle Crest Shopping
Center and the Walgreens/Decatur property or properties which may, in the future
be acquired from Affiliates, did not or would not exceed that which would be
paid by an unaffiliated buyer.

Conflicts of Interest Between the Company and its Affiliates. The
Company is subject to various conflicts of interest arising out of its
relationship with its Affiliates, such as competition for the time and services
of Affiliates of the Advisor and acquisition of properties from Persons with
whom Affiliates of the Advisor have had prior business relationships and the due
diligence investigation of the Company by the Dealer Manager which cannot be
considered to be an independent review of the Company and, therefore, may not be
as meaningful as a review conducted by an unaffiliated broker-dealer.
Additionally, a substantial portion of the proceeds of the Offering will be paid
to an Affiliate for managing the Company. Such proceeds of the Offering will
pay expenses which include sales commissions and due diligence expense
allowances to the Dealer Manager, and reimbursement to an Affiliate for costs
related to organizing and offering the Shares for sale. An Advisor Asset
Management Fee of not more than 1% per annum of the Average Invested Assets will
be paid quarterly to the Advisor. Payment of the Advisor Asset Management Fee
is subordinated to the payment of Distributions in an amount equal to the
Current Return. Additionally, an Affiliate is being paid a Property Management
Fee equal to not more than 4.5% of the gross revenues of each of the Company's
properties on a monthly basis. The Advisor and its Affiliates will receive
substantial fees and payments for services rendered to the Company irrespective
of whether Stockholders receive Distributions.

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If an Affiliate breaches its fiduciary obligations to the Company, or
does not resolve conflicts of interest in the manner described in the section of
this Prospectus titled "Conflicts of Interest--Process for Resolution of
Conflicting Opportunities," the Company may not meet its investment objectives.
The agreement between the Advisor and the Company (the "Advisory Agreement")
grants the Company the first opportunity to buy any Neighborhood Retail Centers
placed under contract by the Advisor or its Affiliates provided the Company is
able to close the purchase of such property within 60 days. The Advisory
Agreement also requires that any single-user retail property net leased by a
creditworthy tenant located anywhere in the United States which is placed under
contract or is about to be placed under contract by the Advisor or its
Affiliates may be purchased by the Company, provided that: (i) the Company has
funds available to make the purchase; (ii) the Board votes to make the purchase
within five days of being offered such property by the Advisor; (iii) the
property meets the Company's acquisition criteria; and (iv) in the event that
more than one real estate investment program sponsored by Affiliates of the
Advisor has funds available to make the purchase, such property will first be
offered to the program which has had funds available for the longest period of
time. The Board, at its discretion, may reject any property presented for
purchase by the Advisor. In exercising this judgment, the Board will consider
the property's location and size and whether the purchase of the property is
consistent with the Company's investment objectives. Any property rejected by
the Board for purchase by the Company may be purchased by the Advisor or its
Affiliates. The Independent Directors, by a majority vote, must approve all
actions by the Advisor or its Affiliates which present potential conflicts of
interest with the Company. See "Compensation Table" and "Management--The
Advisory Agreement."

Dependence on the Directors and Advisor. The Board has supervisory
control over virtually all aspects of the Company's operations. The success of
the Company will depend to a large extent on the Board's ability to oversee, and
the quality of, the management provided by the Advisor, the Management Agent,
their Affiliates and employees for day-to-day operations. Therefore, the Company
will be dependent, in large part, on the ability of the Advisor and its
Affiliates to retain the services of each of its executive officers and key
employees, however, none of such individuals has an employment agreement with
the Advisor or its Affiliates. The loss of any of these individuals could have
a materially adverse effect on the Company. The Company does not currently
maintain key man life insurance policies on any of the individuals employed by
the Advisor or its Affiliates. See "Management."
Dilution. Stockholders have no preemptive rights, and therefore, in
the event the Company: (i) commences a subsequent public offering of its Shares
or of convertible debt or Preferred Shares; or (ii) issues Shares or Preferred
Shares upon exercise of warrants, including the Soliciting Dealer Warrants, or
to sellers of properties acquired by the Company in lieu of or in addition to
cash consideration, investors purchasing Shares in this Offering who do not
participate in any future stock issuance will experience dilution of their
equity investment in the Company. The Soliciting Dealer Warrants issued to the
Dealer Manager in connection with the Prior Offering and to be issued in
connection with this Offering, as well as the Shares issuable upon exercise
thereof, are being registered as part of this Offering. The Soliciting Dealer
Warrants and/or convertible securities, if any, likely would be exercised or
converted at a time when the Company would be able to obtain needed capital
through a new offering of its securities on terms more favorable than those
provided by such securities. As long as such securities remain unexercised or
unconverted, the terms on which the Company could raise additional capital may
be adversely affected.

All Stockholders Bound by Vote of Majority. The Articles, in most
cases, require a vote of only a majority of the Stockholders on those matters on
which Stockholders are required to vote.

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Therefore, a substantial minority of the Stockholders may be bound by the
decision of the majority of the Stockholders with respect to any matters put to
the Stockholders.

Company's and Stockholders' Rights Against the Directors and the
Advisor are Limited. The Directors and the Advisor are held harmless and
indemnified for certain actions taken by them in good faith and without
negligence or misconduct pursuant to the Articles or the Advisory Agreement,
respectively. As a result, the Company and the Stockholders may have more
limited rights against the Directors and the Advisor than they would otherwise
have under common law and, furthermore, may be obligated to fund the defense of
the Directors and the Advisor in certain cases. In particular, such persons
shall not be liable to the Company and the Stockholders unless: (i) it is
proved that the person actually received an improper benefit or profit in money,
property or services; and (ii) to the extent that a judgment or other final
adjudication adverse to the person is entered in a proceeding based on a finding
in the proceeding that the person's action, or failure to act, was the result of
active or deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. See "Fiduciary Responsibility of Directors and
the Advisor; Indemnification."

3. RISKS OF REAL ESTATE OWNERSHIP

General. All real property investments are subject to some degree of
risk. Equity real estate investments may limit the ability of the Company to
promptly vary its portfolio in response to changing economic, financial and
investment conditions. Such investments will be subject to risks such as
adverse changes in general economic conditions or local conditions which reduce
the demand for the goods or services of tenants. Such investments also will be
subject to other factors affecting real estate values, including: (i) possible
federal, state or local regulations and controls affecting rents, prices of
goods, fuel and energy consumption and prices, water and environmental
restrictions and other factors affecting real property; (ii) increasing labor
and material costs; and (iii) the attractiveness of the property to tenants in
the neighborhood.

The Company is subject to the risk that tenants, as well as lease
guarantors, if any, may be unable to make their lease payments. A default by a
lessee, the failure of a guarantor to fulfill its obligations or other premature
termination of a lease could, depending on the size of the leased premises and
the Advisor's ability to successfully find a substitute tenant, have an adverse
effect on the financial position of the Company. See "Prior Performance of the
Company's Affiliates--Loan Modifications and Work-Outs."

Competition for Tenants and Customers. The Company could be adversely
affected in the event retail centers are built in locations competitive with
properties owned by the Company, causing increased competition for customer
traffic and credit tenants. This could result in decreased cash flow for
tenants and may require the Company to make capital improvements to its
properties which it would not have otherwise made.

Hazardous Waste, Environmental Liens and Other Governmental
Regulations. Federal and state statutes impose, under certain circumstances,
liability on property owners or operators for the clean-up or removal of
hazardous substances found on their properties. Such statutes typically allow
the government to place liens for such liabilities against affected properties,
which liens will be senior in priority to other liens. In addition, there are
various local, state and federal health and safety regulations under which the
Company could, under certain circumstances, have responsibility for compliance
and liability for fines or damages for noncompliance. For example, properties
acquired by the Company likely

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will be subject to the Americans with Disabilities Act (the "ADA"), which
generally requires that public accommodations, including restaurants and retail
stores, be made accessible to disabled persons. See "--Costs Associated with
Compliance with the Americans with Disabilities Act" in this Section. Under
net leases, the tenant typically is responsible for compliance with the ADA and
other laws and regulations or is required to indemnify the Company when the law
or regulation places the burden on the landlord. However, the Company could be
liable for violations of such laws and regulations to the extent the tenant
does not have sufficient resources to provide such indemnification. State and
federal laws in this area are constantly evolving, and the Company intends to
monitor such laws and take commercially reasonable steps to protect itself from
the impact thereof, including obtaining environmental audits of each property
acquired. However, there can be no assurance that the Company will be
protected from the impact of such laws.

Costs Associated with Compliance with the Americans with Disabilities
Act. Under the ADA, all public accommodations are required to meet certain
federal requirements related to access and use by disabled persons. These
requirements became effective in 1992. The ADA has separate compliance
requirements for "public accommodations" and "commercial facilities" but
generally requires that buildings be made accessible to people with
disabilities. The ADA requirements could require removal of access barriers and
could result in the imposition of fines by the federal government or an award of
damages to private litigants. The Company will attempt to structure
acquisitions of its properties so that such properties are in compliance with
the ADA, at the expense of the seller, at the time of acquisition by the
Company. However, there can be no assurance that the acquisitions will be
structured in such a fashion.

Potential Additional Costs in Connection with Acquiring Single-User
Retail Properties. Certain of the properties or portions thereof may be
designed or built primarily for a particular tenant or a specific type of use.
If the Company is holding such a property upon the termination of the lease and
the tenant fails to renew, or such tenant defaults on its lease obligations, the
property may not be readily marketable to a new tenant without substantial
capital improvements or remodeling. Such improvements might require expenditure
of Company funds otherwise available for distribution or require the sale of
such property at a below-market price.

Competition with Others for the Acquisition of Properties. The Company
competes in the acquisition of property with many other entities engaged in real
estate investment activities, some of which have greater resources than the
Company. In addition, the number of entities and the amount of funds available
for investment in properties of a type suitable for investment by the Company
may increase, resulting in increased competition for such investments and
possible increases in the prices paid therefor.

Reliance on Certain Tenants. The Company could be adversely affected
in the event of the bankruptcy or insolvency, or a downturn in the business, of
any tenant generally occupying approximately 30% or more of the gross leasable
area ("GLA") of a Neighborhood Retail Center, or the tenant of any single-user
property ("Anchor Tenant"), or if any Anchor Tenant does not renew its lease
when it expires. In addition, lease termination by one or more Anchor Tenants
could result in lease terminations or reductions in rent by other tenants whose
leases permit cancellation or rent reduction in the event an Anchor Tenant's
lease is terminated. In such event, the Company's ability to re- lease the
vacated space could be adversely affected. Similarly, the leases of certain
Anchor Tenants may permit the Anchor Tenant to transfer its lease to another
retailer. The transfer to a new Anchor Tenant could adversely affect customer
traffic in the Neighborhood Retail Center and thereby reduce the income
generated by that center and could also allow other tenants to make reduced
rental payments or to

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terminate their leases at the center. Each of these developments could
adversely affect the Company's revenues and its ability to make expected
Distributions.

Inability of Lessees to Meet Their Obligations. The Company is
subject to the risk that tenants, as well as lease guarantors, if any, may be
unable to make their lease payments. A default by a lessee and/or the failure
of a guarantor to fulfill its obligations or other premature termination of a
lease could, depending on the size of the property and the Advisor's ability to
successfully find a substitute tenant, have an adverse effect on the financial
position of the Company.

Restrictions on Re-leasing Space. In many cases, tenant leases will
contain provisions giving the tenant the exclusive right to sell certain types
of merchandise or provide certain types of services within a Neighborhood Retail
Center, or will limit the ability of other tenants to sell such merchandise or
provide such services. When re-leasing space after a vacancy occurs, these
"exclusives" may limit the number and types of prospective tenants for the
vacant space.

Uninsured Losses; Unavailability of Insurance. Each lessee shall be
responsible for insuring its goods and premises and lessees may also reimburse
the Company for a share of the cost of acquiring comprehensive insurance for the
property in which it is located, including casualty, liability, fire and
extended coverage customarily obtained for similar properties in amounts which
the Advisor determines are sufficient to cover reasonably foreseeable losses.
Tenants of single-user, net leased properties will provide such insurance for
those properties. However, there are certain types of losses (generally of a
catastrophic nature, such as losses due to wars) which are either uninsurable or
not economically insurable. Should such an event occur to, or cause the
destruction of, a property owned by the Company, the Company could lose both its
invested capital and anticipated profits from such property. See "Investment
Objectives and Policies--Description of Leases."

Risk of Recharacterization of Sale and Leaseback Transactions. In
addition to the purchase of properties subject to net leases, the Company
intends to enter into sale and leaseback transactions, pursuant to which the
Company will purchase a property from an entity and lease such property to such
entity. In the event of the bankruptcy of such a lessee, a transaction
structured as a sale and leaseback may be recharacterized as either a financing
or as a joint venture, which may result in adverse consequences to the Company.
To the extent the sale and leaseback is treated as a financing, the Company
might not be considered the owner of such property and as such would have the
status of a creditor with respect to the property in question.

Potential Additional Costs in Connection with Acquiring Newly
Constructed Properties. The Company intends primarily to acquire existing or
newly constructed property currently in operation. Although the Company will
only acquire newly constructed buildings on a turnkey basis, the builder's
failure to perform may necessitate legal action by the Company to rescind its
purchase of a property, to compel performance or to sue for damages. Any such
legal action may result in increased costs to the Company.

Risks Associated with Investments in Unimproved Real Property. The
Board has the discretion to invest not more than 10% of the assets of the
Company in unimproved real property. Investment in such real property, in
addition to the risks of real estate investment in general, include the expense
and delay which may be associated with re-zoning the land for a higher use or
the development and environmental concerns of governmental entities and/or
community groups.

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4. TAX RISKS

General. There are various federal income tax risks associated with
an investment in the Company. Although the provisions of the Code relevant to
an investment in the Company are generally described in the Section of the
Prospectus titled "Federal Income Tax Considerations," each potential investor
is strongly urged to consult his or her own tax advisor concerning the effects
of federal income tax law on an investment in the Company and on his or her
individual tax situation.

Investors should recognize that many of the advantages and economic
benefits of an investment in the Company depend upon the continued treatment of
the Company as a REIT for federal income tax purposes. If the Company were no
longer taxed as a REIT, the Company would pay a corporate level tax on its
income which would reduce its cash available to pay Distributions and the yield
from an investment in the Company. The continued treatment of the Company as a
REIT is dependent on the law and regulations, which are subject to change, and
on the Company's ability to continue to satisfy a variety of objective tests set
forth in the Code.

Among the various risks associated with the federal income tax aspects
of the Offering of which investors should be aware are:

Risk of Failing to Qualify as a REIT. Qualification as a REIT
involves the application of certain technical and highly complex provisions of
the Code to various factual matters and circumstances based on the actual
operations of the Company, some of which are not within the Company's control.
In particular, timing differences between the recognition of income and the
receipt of cash could cause the Company to have difficulty meeting the REIT
requirement of distributing 95% of taxable income. Although the Company was
organized and intends to operate so as to continue to qualify as a REIT, no
assurance can be given that the Company will in fact be able to so qualify.
Further, the Company's desire to maintain REIT status could cause it not to
acquire certain properties or undertake certain activities.

If the Company fails to qualify as a REIT or loses its REIT status,
its Distributions will not be deductible and its income will be subject to tax,
which will substantially reduce the cash available to pay Distributions. In
addition, such tax liability might cause the Company to borrow funds, liquidate
certain of its investments or take other steps which could affect its operating
results. Moreover, if the Company's REIT status is terminated because of the
failure to meet a technical REIT test or it voluntarily revokes its election,
the Company would be disqualified from electing treatment as a REIT for the four
taxable years following the year in which REIT status is lost.

Limitations on Share Ownership. In order for the Company to qualify
as a REIT, no more than 50% of the outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals at any time during the last half of the
Company's taxable year. To ensure that the Company will not fail to qualify as
a REIT under this test, the Articles provide that no person may own, or be
deemed to own by virtue of the attribution provisions of the Code, more than
9.8% of the number or value of the issued and outstanding stock of the Company.
See "Description of Securities--Restrictions on Transfer."

Tax Liability on Reinvested Distributions. Stockholders that
participate in the DRP will be deemed to have received, and will for income tax
purposes be taxed on, the amount reinvested in Shares. Therefore, Stockholders
(other than Tax-Exempt Entities) will have to use funds from other

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sources to pay their tax liability on the value of the Shares received. See
"Federal Income Tax Considerations--Other Tax Considerations-- Distribution
Reinvestment Program."

Limitations on Opinion of Counsel. The opinion of Counsel is based
and conditioned on various assumptions and representations made by the Company
as to certain factual matters. As set forth more fully in the Section of the
Prospectus titled "Federal Income Tax Considerations," Counsel has expressed its
opinion based on the facts described in this Prospectus, the Articles and
certain representations by the Company and the Advisor that: (i) the Company
has been organized in conformity with the requirements for qualification as a
REIT, beginning with its taxable year ending December 31, 1995 and that its
prior, current and anticipated methods of operation have enabled and will enable
the Company to satisfy the REIT Requirements; and (ii) distributions to a
Stockholder which is a Tax-Exempt Entity will not constitute UBTI under current
law, unless: (a) such Stockholder has financed the acquisition of its Shares
with "acquisition indebtedness" (within the meaning of the Code); or (b) a
Qualified Trust (as defined herein) owns more than 10% of the Shares and the
Company is a "Pension-Held REIT" (as defined herein). See, however, "Description
of Securities--Restrictions on Transfer."

The Company's qualification as a REIT will depend upon the Company's
ability to meet, through actual operating results, various tests imposed by the
Code. The Company's ability to maintain its REIT status will depend upon its
ability (based on its actual operating results) to meet the REIT Requirements,
and Counsel will not review compliance with the REIT Requirements on a
continuing basis after the initial effectiveness date of the Registration
Statement or issue any opinions in the future unless expressly requested to do
so. Accordingly, no assurance can be given that the Company's actual operating
results will allow the Company to satisfy the REIT requirements. In addition,
this opinion represents Counsel's legal judgment based on the law in effect as
of the initial effective date, and is not binding on the Service and could be
subject to modification or withdrawal due to future changes in the law.

5. ERISA RISKS

Suitability of the Company's Investments for Qualified Pension and
Profit-Sharing Trusts. When considering an investment in the Company with a
portion of the assets of a Qualified Plan, a fiduciary should consider: (i)
whether the investment satisfies the diversification requirements of Section
404(a)(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or other applicable restrictions imposed by ERISA; and (ii) whether
the investment is prudent, since there is anticipated to be only a limited
market in which it can sell or otherwise dispose of the Shares. The Company has
not, and will not, evaluate whether an investment in the Company is suitable for
any particular plan, but, subject to the disclosure included therein, will
accept such entities as Stockholders if an entity otherwise meets the
suitability standards. See "ERISA Considerations."

If the Company is considered a Pension-Held REIT, an investment in the
Company may also produce UBTI which may cause a Qualified Plan holding 10% or
more of the Shares to pay a tax on a portion of the income distributed to it by
the Company. Whether the Company will constitute a Pension-Held REIT will
depend on the concentration of ownership by one or more Qualified Plans, a
factor that is not within the control of the Company. See "Federal Income Tax
Considerations" and "Description of Securities--Restrictions on Transfer."

In addition to considering their fiduciary responsibilities under
ERISA and the prohibited transaction rules of ERISA and the Code, advisors to
Qualified Plans should also consider the effect of the "Plan Asset" regulations
issued by the Department of Labor. See "ERISA Considerations."

25
<PAGE> 206

Stockholders subject to ERISA will be provided with an annual
statement of value reporting the value of each Share based upon an estimated
amount (as determined by the Company) they would receive if the Company's
properties were sold as of the close of the Company's fiscal year and if such
proceeds (without reduction for selling expenses), together with the other funds
of the Company were distributed in liquidation of the Company; provided,
however, the Net Asset Value of each Share is expected to be at least $10
through the termination of this Offering. This annual valuation may be revised
by the Company from time to time. There can be no assurance that: (i) such
value could actually be realized by the Company or by Stockholders upon
liquidation (in part because estimates of value do not necessarily indicate the
price at which assets could be sold, and because no attempt will be made to
estimate the expenses of selling any asset of the Company); (ii) Stockholders
could realize such value if they were to attempt to sell their Shares; or (iii)
such value would comply with the ERISA requirements. Should the Shares become
listed for trading on a national stock exchange or included for quotation on a
national market system, the Company will no longer provide such valuations.

IN VIEW OF THE COMPLEXITY OF THE TAX ASPECTS OF THE OFFERING,
PARTICULARLY IN LIGHT OF THE FACT THAT CERTAIN OF THE TAX ASPECTS OF THE
OFFERING WILL NOT BE THE SAME FOR ALL INVESTORS, PROSPECTIVE INVESTORS ARE
STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH SPECIFIC REFERENCE TO THEIR
OWN TAX SITUATION PRIOR TO INVESTMENT IN THE COMPANY.

ESTIMATED USE OF PROCEEDS OF OFFERING
The amounts set forth in the table below represent the Company's current
estimates concerning the use of the Gross Offering Proceeds. All proceeds of
the Offering are held in trust by the Company for the benefit of the
Stockholders, to be used only for the purposes set forth above and will not be
commingled. As of the date of this Prospectus, the Company owned 11 properties
including nine Neighborhood Retail Centers and two single-user retail properties
and had approximately $11,200,000 available for additional investments. The
Company estimates that 87.39% of Gross Offering Proceeds will be used to acquire
properties if the Maximum Offering is sold. If the Maximum Offering is sold,
9.05% of the Gross Offering Proceeds will be utilized to pay selling and due
diligence expenses to unaffiliated third parties and 2.06% of the Gross Offering
Proceeds will be paid to the Advisor and its Affiliates to pay for the costs of
the Offering and the Marketing Contribution and Due Diligence Expense Allowance.

26
<PAGE> 207
MAXIMUM OFFERING
(INCLUDING SHARES SOLD UNDER THE DISTRIBUTION
REINVESTMENT PROGRAM)(1)

AMOUNT PERCENT
<S> <C> <C>
Gross Offering Proceeds: $ 109,050,000 100.00%
Less Expenses:
Selling Commissions(2) 7,000,000 6.42%

Marketing Contribution and Due Diligence
Expense Allowance Fee(2) 2,500,000 2.29%

Organization and Offering Expenses(3) 2,621,500 2.40%

Total Public Offering Expenses 12,121,500 11.11%

Gross Amount Available for Investment 96,928,500 88.89%

Acquisition Expenses(4)(5) 545,250 0.50%

Working Capital Reserve(6) 1,090,500 1.00%
------------- -----

Net Cash Payments Relating to the
Purchase of Properties $ 95,292,750 87.39%
------------- -----

</TABLE>

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

(1) The amounts shown in this table represent the Company's current
estimates of the uses of the Gross Offering Proceeds if the Maximum Offering
Amount is sold, and, accordingly, may not accurately reflect the actual
application of such proceeds.

(2) The Company will pay the Dealer Manager selling commissions equal
to up to 7% of a maximum of $100,000,000 of the Gross Offering Proceeds and one
Soliciting Dealer Warrant for every 40 Shares sold, all or part of which
compensation may be retained or reallowed to Soliciting Dealers. The Dealer
Manager will also receive the Marketing Contribution and Due Diligence Expense
Allowance Fee equal up to 2.5% of a maximum of $100,000,000 of the Gross
Offering Proceeds, some portion of which may be reallowed to Soliciting Dealers.
This category of expense will pay all amounts attributable to marketing and bona
fide due diligence expenses. Certain volume discounts may be given on orders of
25,000 Shares or more and Soliciting Dealers may, in their discretion, request
that the Company pay them less than the maximum permitted compensation in
respect of the sale of Shares; however, such discounts will not affect the
amount of proceeds to the Company. No selling commission will be paid on any
Shares purchased by the Advisor, its Affiliates, the Dealer Manager or
Soliciting Dealers. Any Shares purchased by the Advisor or its Affiliates will
be for investment purposes only and not with a view toward resale. A maximum of
1,000,000 Shares purchased under the Distribution Reinvestment Program will not
be subject to selling commissions or the Marketing Contribution and Due
Diligence Expense Allowance Fee and will be sold at a price of $9.05 per Share
($9,050,000 if all such Shares are sold). See "Conflicts of Interest,"
"Management's Discussion and Analysis of the Financial Condition and Results of
Operations," "Plan of Distribution" and "Distribution Reinvestment and Share
Repurchase Programs--Distribution Reinvestment Program."

(3) These amounts are the Advisor's best estimates of the legal,
accounting, printing and other offering expenses, including amounts for the
reimbursement of the Advisor for marketing, salaries and direct expenses of its
employees while directly engaged in registering and marketing the Shares and
other

27
<PAGE> 208

marketing and organization expenses. The Advisor has guaranteed payment of all
public offering expenses (excluding selling commissions and the marketing
contribution and due diligence expense allowance fee) in excess of 5.5% of the
Gross Offering Proceeds or all Organization and Offering Expenses (including
such selling expenses) which together exceed 15% of the Gross Offering Proceeds.
This guaranty is without recourse to or reimbursement by the Company.

(4) The Advisor will be reimbursed for actual out-of-pocket Acquisition
Expenses in an amount estimated to be 0.5% of the Gross Offering Proceeds
($545,250, assuming the Maximum Offering, including Shares sold under the DRP).
In addition, the Advisor will be reimbursed for actual out-of-pocket Acquisition
Expenses equal to 0.5% of any funds borrowed by the Company to acquire
properties. Such expenses with respect to borrowed funds will be payable from
the proceeds of such borrowings ($272,625, assuming the Maximum Offering,
including Shares sold under the DRP, are sold, and the borrowings equal 50% of
the Maximum Offering). Acquisition Expenses include but are not limited to the
costs and expenses incurred by the Advisor in the selection, evaluation and
acquisition of, and investment in, the Company's properties, whether or not
acquired or made, including, but not limited to: surveys, appraisals, title
insurance and escrow fees, non-refundable option payments on properties not
acquired, legal and accounting fees and expenses, computer use related expenses,
architectural and engineering reports, environmental and asbestos audits, travel
and communication expenses and personnel and miscellaneous expenses related to
the selection and acquisition of properties.

(5) The Advisor will not receive a fee for the acquisition of
properties. However, the seller of a property may pay a real estate brokerage
commission to a third party in connection with the Company's purchase of a
property. Since a seller may fix the selling price of a property at an amount
sufficient to cover the cost of a real estate commission, the Company, as
purchaser, may indirectly pay such amount in the purchase price, which amount
may be considered an acquisition fee. The Advisor will endeavor, whenever
possible, to purchase properties directly from sellers, without the involvement
of a real estate broker. When a property has been listed by a seller with a real
estate broker, the Advisor will endeavor, whenever possible, to be allocated a
portion of the real estate brokerage commission paid by the seller. All real
estate brokerage commissions so allocated to the Advisor will then be remitted
in their entirety to the Company by the Advisor.

(6) The Company will add 1% of the Gross Offering Proceeds to its
working capital reserve.

WHO MAY INVEST

An investment in Shares involves certain risks and is suitable only as a
long-term investment for persons of adequate financial means who have no
immediate need for liquidity in their investment. Shares will be sold only to
persons who initially purchase a minimum of 300 Shares ($3,000) or Tax-Exempt
Entities which purchase a minimum of 100 Shares ($1,000), except for Iowa where
the minimum investment for IRAs will be 300 shares ($3,000) and for
Minnesota where the minimum investment for IRAs and qualified plan accounts will
be 200 Shares ($2,000). In addition, the Company has established financial
suitability standards for investors who purchase Shares. These standards require
investors to have either: (i) a minimum annual gross income of $45,000 and a
net worth (exclusive of home, home furnishings and automobiles) of $45,000; or
(ii) a net worth (determined with the foregoing exclusions) of $150,000. In
the case of gifts to minors, the suitability standards must be met by the
custodian account or by the donor and by acceptance of the confirmation of
purchase or delivery of the Shares, an investor represents that he satisfied
any applicable suitability standards.

<PAGE> 209
In purchasing Shares, custodians or trustees of employee pension benefits
plans or IRAs may be subject to the fiduciary duties employed by ERISA or other
applicable laws and to the prohibited transaction rules prescribed by ERISA and
related provisions of the Code. In addition, prior to purchasing Shares, the
trustee or custodian of an employee pension benefit plan or an IRA should
determine that such an investment would be permissible under the governing
instruments of such plan or account and applicable law. See "Federal Income
Tax Considerations--Taxation of Stockholders--Taxation of Tax-Exempt
Stockholders" and "ERISA Considerations."

Suitability standards may be higher in certain states. Investors must
meet all of the applicable requirements set forth in the Subscription
Agreement. Under the laws of certain states, an investor may transfer his
Shares only to persons who meet similar standards, and the Company may require
certain assurances that these standards are met. Investors should carefully
read the requirements in connection with resales of Shares set forth in the
Subscription Agreement and under "Description of Securities--Restrictions on
Transfer."

The Soliciting Dealers Agreements between the Dealer Manager and each of
the Soliciting Dealers requires such securities dealers to make diligent
inquiries as required by law of all prospective purchasers in order to
ascertain whether a purchase of Shares is suitable and appropriate for such
person based upon information provided by the prospective purchaser regarding
his financial situation and investment objectives and to transmit promptly to
the Company, the fully completed subscription documentation and any other
supporting documentation reasonably required by the Company. By executing the
subscription agreement relating to the Shares (the "Subscription Agreement"),
by tendering payment for Shares and by acceptance of the confirmation of
purchase or delivery of the Shares, an investor represents that he satisfies
any applicable suitability standards.

In addition, each Soliciting Dealer will, by completing the Subscription
Agreement, acknowledge its determination that the Shares are a suitable and
appropriate investment for the investor, and will be required to represent and
warrant his or her compliance with applicable laws requiring the determination
of the suitability and appropriateness of the Shares as an investment for the
subscriber. The Company will, in addition to the foregoing, coordinate the
processes and procedures utilized by the Dealer Manager and Soliciting Dealers
and, where necessary, implement such additional reviews and procedures deemed
necessary to assure the adherence by registered representatives to the
suitability standards set forth herein.

COMPENSATION TABLE

The arrangements as to compensation by the Company of the Advisor and
Affiliates are arrangements by and among entities all of which are affiliated
and, consequently, such arrangements were not determined by arm's-length
negotiations. See "Conflicts of Interest." The following table discloses the
significant compensation which may be received from the Company, directly or
indirectly, by the Advisor and its Affiliates. In those instances in which
there are maximum amounts or ceilings on the compensation which may be received
by the Advisor and its Affiliates for services rendered to the Company, the
Advisor and its Affiliates may not recover any excess amounts for those
services by reclassifying such services under a different compensation or fee
category. See "Conflicts of Interest--Receipt of Commissions, Fees and Other
Compensation by the Advisor and its Affiliates."

<PAGE> 210

NONSUBORDINATED PAYMENTS

The following aggregate amounts of compensation and fees payable to the
Advisor and its Affiliates by the Company are not subordinated to the Current
Return or Cumulative Return to the Stockholders.

UPON COMPLETION OF
OFFERING:

<TABLE>
<S> <C> <C>
Selling Commissions The Dealer Manager will Actual amount depends
(payable to the Dealer receive $0.70 per Share upon the number of
Manager and Soliciting for each Share sold and Shares sold. Selling
Dealers) a Soliciting Dealer commissions of
Warrant for each 40 $3,500,000 were incurred
Shares sold. The Dealer in the Prior Offering,
Manager will reallow the including $1,369,302
selling commissions and incurred through
Soliciting Dealer December 31, 1995.
Warrants to Soliciting $7,000,000 will be paid
Dealers for each Share if the Maximum Offering
they sell. (1) Shares is sold.
purchased under the
Distribution
Reinvestment Program
will be purchased net of
commissions.

Marketing Contribution An amount equal to up Actual amount depends
and Due Diligence Expense to 2.0% of the Gross upon the number of
Allowance Fee (payable to Offering Proceeds, some Shares sold. Expenses
the Dealer Manager and portion of which may beof $1,000,000 and
Soliciting Dealers) reallowed to Soliciting $250,000 were incurred
Dealers to pay the in the Prior Offering
expenses associated for the Marketing
with the Marketing Contribution and Due
Contribution. An Diligence Expense
additional 0.5% of the Allowance respectively,
Gross Offering Proceeds including $252,298 and
may be paid to the $97,754 incurred
Dealer Manager or through December 31,
reallowed to the 1995. A total of
Soliciting Dealers for $2,500,000 will be paid
the Due Diligence for the Marketing
Expense Allowance Fee. Contribution and Due
Shares purchased under Diligence Expense
the Distribution Allowance if the
Reinvestment Program Maximum Offering is
will be purchased net sold.
of the Marketing
Contribution and Due
Diligence Expense
Allowance Fee.

</TABLE>
30

<PAGE> 211

<TABLE>
<S> <C> <C>
TYPE OF COMPENSATION METHOD OF COMPENSATION ESTIMATED
MAXIMUM DOLLAR AMOUNT

Reimbursable Expenses The Advisor or its Reimbursable Expenses
(payable to the Advisor Affiliates may advance of approximately
and its Affiliates) Organization and $1,931,104 were
Offering Expenses for incurred through July
the Company. It will be 22, 1996 in connection
reimbursed for its with the Prior
actual costs incurred Offering, including
in connection with the $1,436,564 incurred
Offering on behalf of through December 31,
the Company, including 1995 (for Organization
legal and accountingand Offering Expenses,
fees, registration and but excluding selling
filing fees, printing commissions and the
costs and selling Marketing Contributions
expenses. However, if and Due Diligence
the aggregate of all Expense Allowance Fee).
Organization and
Offering Expenses,
including selling
commissions and the
Marketing Contribution
and Due Diligence
Expense Allowance Fee,
exceeds 15% of the
Gross Offering
Proceeds, or if the
aggregate of all
Organization and
Offering Expenses,
excluding such selling
expenses, exceeds 5.5%
of the Gross Offering
Proceeds, the Advisor
or its Affiliates will
promptly pay such
excess expenses and the
Company will have no
liability for such
expenses at any time
thereafter.

ACQUISITION STAGE:

Acquisition Expenses for An amount estimated to Acquisition Expenses of
the costs and expenses of be up to 0.5% of the approximately $48,856
the acquisition of Gross Offering Proceeds were incurred through
properties including in connection with the July 22, 1996 in
surveys, appraisals, expenses attendant to a connection with the
title insurance and property acquisition. Prior Offering, all of
escrow fees, legal and (2) which amounts were
accounting fees and incurred after December
expenses, computer use 31, 1995. If the
related expenses, Maximum Offering is
architectural and sold, Acquisition
engineering reports, Expenses
environmental and may not exceed
asbestos audits, travel $545,250;
and com

</TABLE>

<PAGE> 212

<TABLE>
<S> <C> <C>
ESTIMATED
TYPE OF COMPENSATION METHOD OF COMPENSATION MAXIMUM DOLLAR AMOUNT

munication however, the
expenses and other actual amounts cannot
related expenses (payable be determined at the
to the Advisor and its present time. In no
Affiliates). event will such amount
exceed 6% of the
purchase price of any
single property.

OPERATIONAL STAGE (3):

Property Management Fee A Property Management Actual amounts are
(payable to an Affiliate Fee equal to not more dependent upon results
of the Advisor) than 4.5% of the gross of operations.
revenues from the Property Management
properties will be paid Fees of approximately
monthly to Inland $133,796 were incurred
Commercial Property through July 22, 1996
Management, Inc., an in connection with the
Affiliate of the Prior Offering,
Advisor (the including $46,791
"Management Agent"). incurred through
December 31, 1995.

Compensation for Services In addition to property Actual amounts are
management, the Advisor dependent upon results
and its Affiliates will of operations and,
provide other therefore, cannot be
property-level services determined at the
to the Company, and may present time.
receive compensation
for such services,
including leasing fees,
development fees,
construction management
fees, loan origination
and servicing fees,
property tax reduction
fees and risk
management fees.
However, such
compensation will not
exceed 90% of that
which would be paid to
third parties providing
such services and all
such compensation must
be approved by a
majority of the
Independent Directors.
See "Management--Other
Services."

</TABLE>
32

<PAGE> 213

<TABLE>
<CAPTION>
<S> <C> <C>
ESTIMATED
TYPE OF COMPENSATION METHOD OF COMPENSATION MAXIMUM DOLLAR AMOUNT

Reimbursable Expenses Certain expenses of the Actual amounts are
(payable to the Advisor Advisor and its dependent upon results
and its Affiliates) Affiliates will be of operations;
reimbursed by the approximately $56,684
Company. (4) (5) (6) was incurred through
July 22, 1996 in
connection with the
Prior Offering,
including $7,277
incurred through
December 31, 1995.

LIQUIDATION STAGE:

Property Disposition Fee A property disposition Actual amounts to be
(payable to the Advisor fee, payable upon the received depend upon the
and its Affiliates) sale of each of the sale price of Company
Company's properties, inproperties and,
an amount equal to the therefore, cannot be
lesser of: (i) 3% of determined at the
the contracted for sales present time.
price of the property;
or (ii) 50% of the
commission paid to third
parties which is
reasonable, customary
and competitive in light
of the size, type and
location of such
property ("Competitive
Real Estate
Commission"). The
amount paid, when added
to the sums paid to
unaffiliated parties,
shall not exceed the
lesser of the
Competitive Real Estate
Commission or an amount
equal to 6% of the
contracted for sales
price. Payment of such
fees shall be made only
if the Advisor provides
a substantial amount of
services in connection
with the sale of the
property. See
"Management--The
Advisory Agreement."
</TABLE>

SUBORDINATED PAYMENTS

<PAGE> 214
<TABLE>
<CAPTION>
ESTIMATED
TYPE OF COMPENSATION METHOD OF COMPENSATION MAXIMUM DOLLAR AMOUNT

The following fee payable to the Advisor and its Affiliates by the Company
will be payable only after specified returns have been paid to the Stockholders
as set forth below:

<S> <C> <C>
OPERATIONAL STAGE (3): An Advisor Asset Actual amounts are
Advisor Asset Management Management Fee of not dependent upon results
Fee (payable to the more than 1% of the of operations. Advisor
Advisor) Average Invested Asset Management Fees
Assets. The fee will of approximately
be payable quarterly in $125,532 were incurred
an amount equal to 1/4 through July 22, 1996
of 1% of the Average in connection with the
Invested Assets of the Prior Offering, all of
Company, as of the last which amounts were
day of the immediately incurred after December
preceding quarter, 31, 1995.
pursuant to the
Advisory Agreement.
For any year in which
the Company qualifies
as a REIT, the Advisor
must reimburse the
Company: (i) to the
extent that the Advisor
Asset Management Fee
plus Other Operating
Expenses paid during
the previous calendar
year exceed 2% of the
Company's Average
Invested Assets for
that calendar year or
25% of the Company's
Net Income for that
calendar year; and (ii)
to the extent that
Stockholders have not
received an annual
Distribution equal to
or greater than the 8%
Current Return.

LIQUIDATION STAGE (3):

Incentive Advisory Fee After the Stockholders Actual amounts to be
(payable to the Advisor) have first received: received depend upon
(i) their 8% Cumulative the sale price of
Return; and (ii) a Company properties and,
return of their therefore, cannot be
Invested Capital, an determined at the
Incentive Advisory Fee present time.
equal to 15% of

</TABLE>
34

<PAGE> 215

<TABLE>
<CAPTION>
ESTIMATED
TYPE OF COMPENSATION METHOD OF COMPENSATION MAXIMUM DOLLAR AMOUNT
<S> <C> <C>
the net
proceeds from the sale
of a property. At such
time as the Advisory
Agreement is terminated
due to the listing for
trading of the Shares
on a national exchange
or market, the
Incentive Advisory Fee
shall also terminate.
The Advisor and
Management Agent may be
merged into the Company
at the time of listing
and may receive shares
in the Company, in an
amount which may be
determined at that
time, based upon the
value of all fees given
up or waived by the
Advisor and Management
Agent through the
merger. See
"Management--The
Advisory Agreement."

</TABLE>

(1) Each Soliciting Dealer Warrant grants the holder a right to purchase
one Share at a price of $12 per Share during the period beginning from the date
the Soliciting Dealer Warrants are issued and ending on October 13, 2000. No
Soliciting Dealer Warrants will be exercisable until one year from the date of
issuance. See "Plan of Distribution--Compensation."

(2) The total of all Acquisition Expenses paid by the Company in
connection with the purchase of a property by the Company shall in no event
exceed an amount equal to 6% of the Contract Price for the Property (as defined
herein), unless a majority of the Directors (including a majority of the
Independent Directors), not otherwise interested in the transaction, approve
the transaction as being commercially competitive, fair and reasonable to the
Company. Notwithstanding the foregoing, the total of all Acquisition Expenses
paid by the Company in connection with the purchase of a property by the
Company from an Affiliate shall in no event exceed an amount equal to 6% of the
Contract Price for the Property.

(3) The Advisor and its Affiliates will be involved in determining the
types of transactions entered into by the Company. The Advisor benefits from
the Company's retaining ownership of its properties and leveraging its
properties, while Stockholders may be better served by their sale or
disposition or acquisition or hold on an unleveraged basis. Furthermore, the
receipt and retention of certain fees and reimbursements is dependent upon the
Company making investments in properties. Therefore, the interest of the
Advisor in receiving such fees may conflict with the interest of the

35
<PAGE> 216

Stockholders to earn income on their investment in Shares and may result in the
Company entering into transactions which may not be in the best interest of the
Stockholders.

(4) (i) The Advisor and its Affiliates will be reimbursed for:
(a) the cost to the Advisor or its Affiliates of goods and services
used for and by the Company and obtained from unaffiliated parties;
and (b) administrative services related thereto. "Administrative
services" include only ministerial services such as typing,
recordkeeping, preparation and dissemination of Company reports,
preparation and maintenance of records regarding Stockholders,
recordkeeping and administration of the Distribution Reinvestment
and Share Repurchase Programs, preparation and dissemination of
responses to Stockholder inquiries and other communications with
Stockholders and any other recordkeeping required for Company
purposes.

(ii) In extraordinary circumstances fully justified to the
official or agency administering the state securities laws, the
Advisor and its Affiliates may provide other goods and services to
the Company if all of the following criteria are met: (a) the
goods or services must be necessary to the prudent operation of the
Company; (b) the compensation, price or fee must be equal to the
lesser of 90% of the compensation, price or fee the Company would
be required to pay to independent parties who are rendering
comparable services or selling or leasing comparable goods on
competitive terms in the same geographic location, or 90% of the
compensation, price or fee charged by the Advisor or its Affiliates
for rendering comparable services or selling or leasing comparable
goods on competitive terms; or (c) if at least 95% of gross
revenues attributable to the business of rendering such services or
selling or leasing such goods are derived from persons other than
Affiliates, the compensation, price or fee charged by an
unaffiliated person who is rendering comparable services or selling
or leasing comparable goods must be on competitive terms in the
same geographic location. In addition, any such payment will be
subject to the further limitation described in paragraph (iii)
below. Extraordinary circumstances shall be presumed only when
there is an emergency situation requiring immediate action by the
Advisor or its Affiliates and the goods or services are not
immediately available from unaffiliated parties. Services which
may be performed in such extraordinary circumstances include
emergency maintenance of Company properties, janitorial and other
related services due to strikes or lock-outs, emergency tenant
evictions and repair services which require immediate action, as
well as operating and re-leasing properties with respect to which
the leases are in default or have been terminated.

(iii) No reimbursement will be permitted to the Advisor or
its Affiliates under clause (i)(b) above for items such as rent,
depreciation, utilities, capital equipment and other administrative
items and the salaries, fringe benefits, travel expenses and other
administrative items of any controlling persons of the Advisor, its
Affiliates or any other supervisory personnel except in those
instances in which the Company believes it to be in the best
interest of the Company that the Advisor or its Affiliates operate
or otherwise deal with, for an interim period, a property with
respect to which the lease is in default. Permitted reimbursements,
except as set forth above, include salaries and related salary
expenses for non-supervisory services which could be performed
directly for the Company by independent parties such as legal,
accounting, transfer agent, data processing and duplication.
Controlling persons include, but are not limited to, any person,
irrespective

<PAGE> 217

of his or her title, who performs functions for the Advisor
similar to those of: (a) chairman or member of the board of
directors; (b) president or executive vice president; or (c) those
entities or individuals holding 5% or more of the stock of the
Advisor or a person having the power to direct or cause the
direction of the Advisor, whether through ownership of voting
securities, by contract or otherwise. Notwithstanding the
foregoing, and subject to the approval of the Board, the Company may
reimburse the Advisor for expenses related to the activities of
controlling persons undertaken in capacities other than those which
cause them to be controlling persons. The Advisor believes that its
employees and the employees of its Affiliates and controlling
persons who will perform services for the Company for which
reimbursement is allowed pursuant to clause (ii)(c) above, have the
experience and educational background, in their respective fields of
expertise, appropriate for the performance of such services.

(iv) The Total Operating Expenses of the Company shall not
(in the absence of a satisfactory showing to the contrary) in any
fiscal year exceed the greater of: (a) 2% of the Average Invested
Assets; or (b) 25% of its Net Income for such year. The
Independent Directors may, upon a finding of unusual and
non-recurring factors which they deem sufficient, determine that a
higher level of expenses is justified in any given year. There are
certain additional restrictions on expenses that will be borne by
the Company.

(5) The Advisor and its Affiliates shall not be compensated for any
services other than those which have been fully disclosed in this Compensation
Table.

(6) The Company shall not pay, directly or indirectly, a commission or
fee to the Advisor or its Affiliates in connection with the reinvestment of the
proceeds of any resale, exchange, financing or refinancing of a Company
property.

CONFLICTS OF INTEREST

The Company is subject to various conflicts of interest arising out of its
relationship with the Sponsor, the Advisor or its Affiliates. All agreements
and arrangements, including those relating to compensation, between the Company
and the Advisor and its Affiliates are not the result of arm's-length
negotiations. The limitations on the Advisor described below have been adopted
to control when the Company enters into transactions with the Advisor and its
Affiliates. With respect to the conflicts of interest described herein, the
Advisor and its Affiliates will endeavor to balance the interests of the
Company with the interests of the Advisor and its Affiliates in making any
determination.

1. Competition for the Time and Service of the Advisor and Affiliates.
The Company relies on the Advisor and its Affiliates for the daily operation of
the Company and the management of its assets. Affiliates of the Advisor have
conflicts of interest in allocating management time, services and functions
among various existing real estate programs and any future real estate programs
or other entities which they may organize or serve, as well as other business
ventures in which they are involved. The Advisor and its Affiliates believe
they have sufficient staff to be fully capable of discharging their
responsibilities in connection with various real estate programs and other
business ventures.

<PAGE> 218

The compensation paid to the Advisor or its Affiliates under the
Advisory Agreement is on terms no less favorable to the Company than those
customary for similar services performed by independent firms in the relevant
geographic area, but in no event more than 2% of the Average Invested Assets
less Other Operating Expenses. See "Compensation Table." The Advisory
Agreement provides that it may be terminated by a majority vote of the
Stockholders upon 60 days prior written notice. See "Management--The Advisory
Agreement."

2. Process for Resolution of Conflicting Opportunities. Affiliates of the
Advisor have sponsored publicly and privately offered entities and may in the
future sponsor publicly and privately offered REITs or other entities which may
have investment objectives very similar to those of the Company. The Advisor
and its Affiliates could, therefore, be subject to conflicts of interest
between the Company and other programs in connection with the acquisition of
properties. To the extent possible, the resolution of conflicting investment
opportunities between the Company and other investment entities advised or
managed by the Advisor and its Affiliates will, as a general rule, be resolved
by giving priority to the entity having uninvested funds for the longest period
of time. Specifically, the Advisory Agreement gives the Company the first
opportunity to buy Neighborhood Retail Centers placed under contract by the
Advisor or its Affiliates provided the Company is able to close the purchase of
such property within 60 days. The Advisory Agreement will also require that
any single-user retail property net leased by a creditworthy tenant located
anywhere in the United States which is placed under contract by the Advisor or
its Affiliates may be purchased by the Company provided that: (i) the Company
has funds available to make the purchase; (ii) the Board votes to make the
purchase within five days of being offered such property by the Advisor; (iii)
the property meets the Company's acquisition criteria; and (iv) in the event
that more than one real estate program sponsored by Affiliates of the Advisor
has funds available to make the purchase, such property will first be offered
to the program which has had funds available for the longest period of time.
Other factors which may be considered in connection with the decisions as to
the suitability of the property for investment include: (i) the effect of the
acquisition on the diversification of each entity's portfolio; (ii) the amount
of funds available for investment; (iii) cash flow; and (iv) the estimated
income tax effects of the purchase and subsequent disposition. The Independent
Directors must, by a majority vote, approve all actions by the Advisor or its
Affiliates which present potential conflicts with the Company. See
"Management--The Advisory Agreement."

It is believed that the aforementioned factors, together with the
obligations of the Advisor and the Affiliates to present to the Company any
investment opportunity which could be suitable for the Company, will help to
lessen the competition or conflicts with respect to the purchase of properties
by other entities and the Company.

3. Acquisition from Affiliates. Two of the properties acquired by the
Company were acquired from an Affiliate. The purchase prices for such
properties were not the subject of arm's-length negotiations. The Articles
provide that the purchase price of any property acquired from an Affiliate may
not exceed its fair market value as determined by a competent independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers, and a majority of the Directors (including a majority of the
Independent Directors) not interested in the transaction must approve the
purchase as fair and reasonable to the Company. The Directors (including all
of the then Independent Directors) approved these acquisitions, however, there
can be no assurance that the prices paid to the Affiliate did not exceed that
which would be paid by an unaffiliated purchaser.

4. The Company may Purchase Properties from Persons with whom Affiliates
of the Advisor have Prior Business Relationships. The Company may purchase
properties from certain sellers from

<PAGE> 219

whom the Advisor or its Affiliates have purchased properties in the past and
may purchase properties in the future. In the event the Company purchases
properties from such sellers, the Advisor will experience a conflict between
the current interests of the Company and its interests in preserving any ongoing
business relationship. Nevertheless, the Advisor will not consummate such
purchases in a manner which would cause it to breach its fiduciary obligations
to the Company. See "Management."

5. Property Management Services are being Rendered by an Affiliate of the
Advisor. An Affiliate of the Advisor, Inland Commercial Property Management,
Inc., provides property management services for the Company. The Management
Agent renders the management services to the Company on a competitive basis in
a manner consistent with customary business practices. See "Compensation
Table--Nonsubordinated Payments--Operational Stage." The Advisor and the
Management Agent believe that the Management Agent has sufficient personnel and
other required resources to discharge all responsibilities to the various
properties that it manages and will manage in the future.

6. Receipt of Commissions, Fees and Other Compensation by the Advisor and
its Affiliates. The Advisor and its Affiliates have received and will continue
to receive the compensation as described in the "Compensation Table." Certain
compensation is payable notwithstanding the lack of cash available to make
Distributions to the Stockholders. To that extent, the Advisor benefits from
the Company's retaining ownership of its properties and leveraging its
properties, while Stockholders may be better served by their sale or
disposition or acquisition or hold on an unleveraged basis. Furthermore, the
receipt and retention of certain fees and reimbursements is dependent upon the
Company making investments in properties. Therefore, the interest of the
Advisor in receiving such fees may conflict with the interest of the
Stockholders in earning income on their investment in Shares. The Advisor and
its Affiliates recognize that they have a fiduciary duty to the Company and the
Stockholders, and represent that their actions and decisions will be made in
the manner most favorable to the Company and its Stockholders, so as not to
breach their fiduciary duty. See also "Risk Factors -- Dilution" regarding
issuance of Soliciting Dealer Warrants to the Dealer Manager.

7. Non-Arm's-Length Agreements. The agreements and arrangements,
including those relating to compensation, between the Company and the Advisor
or any of its Affiliates may not be the result of arm's-length negotiations,
but are expected to approximate the terms of arm's-length transactions.

While the Company will make no loans to the Advisor or its Affiliates,
the Company has and may continue to borrow money from the Advisor or its
Affiliates for various purposes including working capital requirements, but only
on terms as to interest rate, security, fees and other charges at least as
favorable to the Company (as determined by a majority of the Directors
(including a majority of the Independent Directors)) as those charged by
unaffiliated lending institutions in the same locality on comparable loans for
the same purpose. See "Real Property Investments."

The Advisor and its Affiliates are not prohibited from providing
services o, and otherwise dealing or doing business with, persons who deal with
the Company, although there are no present arrangements with respect to any such
services. However, no rebates or "give-ups" may be received by the Advisor or
its Affiliates, nor may the Advisor or any such Affiliates participate in any
reciprocal business arrangements which would have the effect of circumventing
any of the provisions of the Advisory Agreement.

8. Legal Counsel for the Company and the Advisor is the Same Law Firm.
Shefsky Froelich & Devine Ltd. is acting as general counsel to the Company and
as special counsel to the Advisor and

<PAGE> 220

some of its Affiliates upon all legal matters related to the Offering. Shefsky
Froelich & Devine Ltd. is not acting as counsel for the Stockholders or any
potential investor.

There is a possibility that in the future the interests of the various
parties may become adverse, and under the Code of Professional Responsibility
of the legal profession, such counsel may be precluded from representing any
one or all of said parties. If any situation arises in which the interests of
the Company appear to be in conflict with those of the Advisor or its
Affiliates, additional counsel may be retained by one or more of the parties to
assure that their interests are adequately protected. Moreover, should such a
conflict not be readily apparent, counsel may inadvertently act in derogation
of the interest of certain parties which could affect the Company's and,
therefore, the Stockholders' ability to meet their investment objectives.

9. Inland Securities Corporation is Participating as Dealer Manager in the
Sale of the Shares. Inland Securities Corporation, a securities dealer
affiliated with the Advisor, is participating as the Dealer Manager in the
Offering and is entitled to selling commissions and Soliciting Dealer Warrants
which may be retained or reallowed to Soliciting Dealers. See "Risk Factors --
Dilution" and "Plan of Distribution--Compensation" regarding issuance of the
Soliciting Dealer Warrants to the Dealer Manager. Any review of the structure,
formation or operation of the Company performed by the Dealer Manager will be
conducted as if it was an independent review; however, it cannot be considered
to represent such an independent review, and such review may not be as
meaningful as a review conducted by an unaffiliated broker-dealer. Thus, the
Dealer Manager may be subject to a conflict of interest, which may arise out of
its participation in the Offering and its affiliation with the Advisor, in
performing its "due diligence" obligations which arise under the Securities Act
of 1933, as amended (the "Act"). However, the Dealer Manager believes it has
properly performed and will properly perform these "due diligence" activities.

10. The Advisor may have Conflicting Fiduciary Obligations in the Event
the Company Acquires Properties with Affiliates. The Advisor may cause the
Company to acquire an interest in a property through a joint venture with an
Affiliate of the Advisor. In such instance, the Advisor will have a fiduciary
duty to both the Company and the Affiliate participating in the joint venture.
In order to minimize the likelihood of a conflict between these fiduciary
duties, the Advisory Agreement provides guidelines for investments in such
joint ventures in various respects. In addition, the Articles provide that a
majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in the transaction determine that the transaction is
fair and reasonable to the Corporation and is on terms and conditions no less
favorable than from unaffiliated third parties. See "Investment Objectives and
Policies--Joint Ventures."

FIDUCIARY RESPONSIBILITY OF DIRECTORS AND
THE ADVISOR; INDEMNIFICATION

GENERAL

Consistent with the duties and obligations of, and limitations on, the
Directors as set forth in the Articles and under the laws of the State of
Maryland, the Directors are accountable to the Stockholders as fiduciaries and
are required to perform their duties in good faith and in a manner each
Director believes to be in the best interest of the Company and its
Stockholders, with such care, including reasonable inquiry, as a prudent person
in a like position would use under similar circumstances. In addition, the

<PAGE> 221

Independent Directors must review at least annually the relationship of the
Company with the Advisor and the Advisor's performance of its duties under the
Advisory Agreement, and must determine that the compensation paid to the
Advisor is reasonable in relation to the nature and quality of the services
performed. The Advisor also has a fiduciary duty to the Company and the
Stockholders.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The liability of the Directors and officers of the Company is limited to
the fullest extent permitted by the MGCL; accordingly, the Directors and
officers shall not be liable to the Company or its Stockholders except that
liability shall not be so limited: (a) if it is proved that the person
actually received an improper benefit or profit in money, property or services;
and (b) to the extent that a judgment or other final adjudication adverse to
the person is entered in a proceeding based on a finding in the proceeding that
the person's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.

The Company's Articles and Bylaws authorize it, to the fullest extent
permitted by Maryland statutory or decisional law, as amended or interpreted
and, without limiting the generality of the foregoing, in accordance with
Section 2-418 of the MGCL, to indemnify and pay or reimburse reasonable
expenses to: any Director, the Advisor or its Affiliates (each an "Indemnified
Party") provided, that: (i) the Director, Advisor or its Affiliates, have
determined, in good faith, that the course of conduct which caused the loss or
liability was in the best interest of the Company; (ii) the Director, the
Advisor or its Affiliates were acting on behalf of or performing services on
the part of the Company; (iii) such liability or loss was not the result of
negligence or misconduct on the part of the Indemnified Party, except that in
the event the Indemnified Party is or was an Independent Director, such
liability or loss shall not have been the result of gross negligence or willful
misconduct; and (iv) such indemnification or agreement to be held harmless is
recoverable only out of the assets of the Company and not from the
Stockholders. The Company shall not indemnify a Director, the Advisor or its
Affiliates for 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: (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee; (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee; or (iii) a court of competent jurisdiction
approves a settlement of the claims and finds that indemnification of the
settlement and related costs should be made and the court considering the
request has been advised of the position of the Securities and Exchange
Commission (the "Commission") and the published opinions of the Tennessee
Securities Division and any other state securities regulatory authority in
which securities of the Company were offered and sold as to indemnification for
securities law violations.

The Company may advance amounts to persons entitled to indemnification
hereunder for legal and other expenses and costs incurred as a result of any
legal action for which indemnification is being sought only if all of the
following conditions are satisfied: (i) the legal action relates to acts or
omissions with respect to the performance of duties or services by the
indemnified party for or on behalf of the Company; (ii) the legal action is
initiated by a third party who is not a Stockholder or the legal action is
initiated by a Stockholder acting in his or her capacity as such and a court of
competent jurisdiction specifically approves such advancement; and (iii) the
indemnified party receiving such advances undertakes to repay the advanced
funds to the Company, together with the applicable legal rate of interest
thereon, in cases in which such party is found not to be entitled to
indemnification.

<PAGE> 222

The Company shall have the power to purchase and maintain insurance on
behalf of an indemnified party against any liability asserted which was
incurred in any such capacity with the Company or arising out of such status;
provided, however, that the Company shall not incur the costs of any liability
insurance which insures any person against liability for which he, she or it
could not be indemnified under the Articles or the Bylaws.

Neither the amendment nor the adoption of any other provision of the
Articles or the Bylaws shall apply to or affect in any respect the
applicability of indemnification with respect to any act or failure to act
which occurred prior to such amendment, repeal or adoption. The parties
expressly agree that all of the terms and provisions hereof shall be construed
under the MGCL as now adopted or as may be hereafter amended and govern all
aspects of the Articles absent contrary terms contained in the Articles.

To the extent that the indemnification may apply to liabilities arising
under the Act, the Company has been advised that, in the opinion of the
Commission, such indemnification is contrary to public policy and, therefore,
unenforceable.

DEFENSES AVAILABLE

There are certain defenses available to the Directors, officers and the
Advisor under Maryland law and pursuant to the Articles in the event of a
Stockholder action against them. One such defense is the "business judgment
rule." A Director, officer or the Advisor can, under the "business judgment
rule," argue that he or she performed the action giving rise to the
Stockholder's action in good faith and in a manner he or she reasonably believed
to be in the best interests of the Company, and with such care as an ordinarily
prudent person in a like position would have used under similar circumstances.
The Directors, officers and the Advisor are also entitled to rely on
information, opinions, reports or records prepared by experts (including
accountants, consultants, counsel, etc.) who were selected with reasonable
care. However, the Directors, officers and the Advisor shall not invoke the
"business judgment rule" to further limit the rights of the Stockholders to
access records. In the event a Stockholder challenges an amendment to the
Articles made by Directors without the Stockholders' approval, the Directors are
permitted to contend that the Articles permit amendments to the Articles absent
Stockholder vote in certain circumstances. As described above, the Directors,
officers and the Advisor are also indemnified by the Company pursuant to the
Articles, subject to certain limitations.

PRIOR PERFORMANCE OF THE COMPANY'S AFFILIATES

PRIOR INVESTMENT PROGRAMS

The Inland organization, during the past ten years, has sponsored seven
public and 70 private real estate programs which have raised in excess in
$273,300,000. In excess of 19,500 investors have invested in these
Inland-sponsored programs. The investment objectives and policies of the
Company are similar to those of several investment programs which have owned
and operated retail properties. However, the vast majority of these investment
programs were dissimilar from the Company in that the partnerships owned
apartment properties or whole or partial interests in mortgage loans.

<PAGE> 223

these programs so that potential investors may evaluate the experience of the
Advisor and its Affiliates in sponsoring such programs. The following
discussion is intended to briefly summarize the objectives and performance of
prior programs and to disclose any material adverse business developments
sustained by them.

SUMMARY INFORMATION

The table below provides certain summarized information concerning prior
programs through the date of this Prospectus and is qualified in its entirety
by reference to the foregoing introductory discussion and the detailed
information appearing in the Prior Performance Tables in this Prospectus.
Investors should not construe inclusion of the succeeding tables, which cover
the period from January 1, 1986 through December 31, 1995, as implying in any
manner that the Company will have results comparable to those reflected in the
tables; the yield and cash available and other factors could be substantially
different for the Company's properties. Investors should note that by
acquiring Shares in the Company, they will not be acquiring any interests in
any prior programs.

<TABLE>
<CAPTION>
Prior Prior
Public Private
Programs Programs
---------------- ---------------
<S> <C> <C>
Number of programs sponsored ...................... 7 70
Aggregate amount raised from investors ............ $181,700,000 $91,617,000
Aggregate number of investors ..................... 16,500 3,000
Number of properties purchased .................... 87 107 (1)
Aggregate cost of properties ...................... $163,913,000 (2) $342,021,000(3)
Percentage of properties (based on cost) that were:
Commercial --
Retail .................................... 2.5% 0.0%
Single-user retail net-lease .............. 8.7% 23.5%
Nursing homes ............................. 8.7% 0.2%
Offices ................................... 0.0% 0.0%
Industrial ................................ 0.0% 1.3%
Health clubs .............................. 4.7% 0.0%
Mini-storage .............................. 0.0% 0.4%
Total commercial .......................... 24.6% 28.4%

Multi-family residential ...................... 19.0% 71.5%
Land .......................................... 56.4% 0.3%

</TABLE>

<PAGE> 224

<TABLE>
<S> <C> <C>
Percentage of properties (based on cost) that were:
Newly constructed (within a year of
acquisition) .............................. 8.7% 13.9%
Existing ...................................... 91.3% 86.1%
Construction .................................. 0.0% 0.0%

Number of properties sold ......................... 12 14
22.2% (4) 20.0%

Number of properties exchanged .................... 0 34
49.0%
</TABLE>

(1) Includes 37 properties acquired following the disposition of a program's
original real estate asset. See "--Loan Modifications and Work-Outs" in
this Section.
(2) Includes purchase price and acquisition fees and expenses.
(3) Represents the aggregate purchase prices paid by the investment programs.
Includes $104,768,242 in properties acquired following the disposition of
a program's original real estate asset.
(4) Based on costs of property including portions of land parcels sold at
December 31, 1995, and costs capitalized subsequent to acquisition.

During the three years prior to December 31, 1995, publicly registered
investment programs sponsored by IREIC purchased a total of 22 parcels of
land totalling 4,136 acres, all located in northeast Illinois. The land was
purchased on an all-cash basis.

Upon written request of the Company, any potential investor may obtain,
without charge, a copy of Table VI, filed with the Commission in connection
with this Offering, which provides more detailed information concerning these
acquisitions.

PUBLICLY REGISTERED LIMITED PARTNERSHIPS

Monthly Income Fund I raised $30,000,000 from over 2,200 investors.
Originally, Monthly Income Fund I purchased seven properties, including five in
Illinois, one in Ohio and one in Oklahoma, for a total investment of $27,511,692
which includes acquisition costs of $25,831,542 plus an additional $1,487,500
expended for the upgrade of the McHenry Plaza, a neighborhood retail center, in
McHenry, Illinois, plus $192,650 for upgrade costs at other properties. The
properties owned by Inland Monthly Income Fund I include, in addition to McHenry
Plaza, two nursing centers, two retail stores leased on a triple-net basis by
Wal-Mart Stores Inc., a health club facility and an apartment complex, which was
sold on an installment basis in 1994 and 1995. Through December 31, 1995, cash
distributions have been maintained at an 8% level and on an accrual basis have
totaled $335.06 per $500 unit or $18,877,468

<PAGE> 225

including $15,629,880 from operating cash flow, $305,000 of net sales proceeds
from the sale of the apartment complex, $2,095,863 from supplemental capital
contributions from IREIC and $541,725 as a partial return of capital from
partnership reserves. In the opinion of IREIC, the partnership is substantially
meeting its investment objective for cash flow.

Two of Monthly Income Fund I's properties, which represent 26.3% of its
total assets as measured by their original purchase price, are nursing center
facilities which are 100% leased by Elite Care Corporation ("Elite"). Monthly
Income Fund I's lease with Elite became effective in February 1991, following
the termination of a lease with Adventist Living Centers Inc. ("ALC"), the
tenant which was in place when Monthly Income Fund I purchased the properties.
After ALC began experiencing financial difficulties, IREIC sought out Elite as
a replacement nursing home operator/tenant. The net effect to Monthly Income
Fund I was a .5% decrease in the effective rent over the term of the leases for
the two nursing homes, from $67,270 per month when ALC was the tenant to
$66,936 from Elite. Under the terms of the lease agreements for the nursing
care facilities the partnership must approve any sublease transaction. The
current operator of these facilities has negotiated with a new operator to
sublease the facilities. IREIC has reviewed and approved the transaction with
no significant changes to the terms of the leases.

The major tenant at McHenry Plaza is a Walgreens drug store. Other
tenants are Don Robert's Beauty School, Midwest Furniture and Family
Entertainment Center. These tenants took possession of their spaces at the
center from 1990 through 1993, following the July 1989 termination of a lease
with Duckwell-Alco Stores, Inc. ("Alco"), the tenant which leased 94% of the
space in the center at the time Monthly Income Fund I purchased the property.
IREIC embarked on a program to re-lease the center to new tenants, and secured
a $1,700,000 line of credit for property upgrades, remodeling and re-leasing
expenses. Annual principal and interest payments on this debt total $187,943.
Approximately 83% of the property is currently leased. An additional 4,000
square feet of storage area at the rear of the center, representing 7% of the
total space, remains to be leased. Additional expenditures for build-out and
leasing commissions are anticipated as the remaining rentable space is leased.
The 1995 annual net operating income prior to debt service at McHenry Plaza is
$234,000, compared to approximately $213,000 when Alco was the tenant. The
completion of the redevelopment and lease-up of McHenry Plaza will increase the
cash flow available for distribution by Monthly Income Fund I.

The defaults by ALC and Alco, the expense of upgrades and build-out at the
McHenry Plaza and lower than expected net rental income from the apartment
complex have reduced cash available for distribution by Monthly Income Fund I.
Under the terms of a guarantee agreement, IREIC has made supplementary capital
contributions totaling $2,095,863 from the inception of the program through
December 31, 1995 for the purpose of providing 8% annual cash distributions to
investors. These supplementary capital contributions will begin to be repaid
from cash flow in the future, but only if excess cash flow exists after payment
of an 8% annual distribution to investors. The effect on investors is that
cash flow distributions will not exceed 8% per annum for the foreseeable
future. In addition, IREIC may be reimbursed for its supplementary capital
contributions from the sale or financing of properties, but only after
investors have received the return of their capital. The effect on investors
is that profits from the sale of the properties will be reduced by the amounts
contributed by IREIC under the 8% distribution guarantee agreement.

<PAGE> 226

Monthly Income Fund II raised $25,323,569 from more than 2,100 investors
and purchased five properties, a net-leased Wholesale Club retail property in
Indiana, a net-leased health club in Ohio, a net leased nursing center in
Illinois, a net-leased retail store in Arizona and the Water Tower Market Plaza
(formerly Eagle Plaza), a neighborhood retail center in Illinois, for a total
acquisition cost of $21,224,542. Through December 31, 1995, cash distributions
have been maintained at or above an 8% level and on an accrual basis have
totaled $349.65 per $500 unit or $16,279,471, including $11,883,906 from
operations and an additional $4,395,565 which constitutes the net proceeds from
the sale of the Wholesale Club.

One of Monthly Income Fund II's properties, which represents 35.44% of its
total assets, as measured by its original purchase price, is a nursing center
which is 100% leased to Elite. Monthly Income Fund II's lease with Elite
became effective in February 1991, following the termination of a lease with
ALC, the tenant which was in place when Monthly Income Fund II purchased the
property. After ALC began experiencing financial difficulties, IREIC sought
out Elite as a replacement nursing home operator/tenant. The net effect to
Monthly Income Fund II was an 8% decrease in the effective rent from the
nursing center over the term of the lease, from $77,368 per month when ALC was
the tenant to $71,895 from Elite. Under the terms of the lease agreement for
the nursing center the partnership must approve any sublease transaction. The
current operator of this facility has negotiated with a new operator to
sublease the facility. IREIC has reviewed and approved the transaction with no
significant changes to the terms of the lease.

On January 8, 1991, Monthly Income Fund II sold its Wholesale Club
property in Indiana for $4,400,000. Net sales proceeds of $4,395,565 were
distributed to investors on February 1, 1991. The property was purchased by
Monthly Income Fund II in December 1988 for $3,427,278, which included
acquisition fees of $275,013 and acquisition costs of $9,265. The gain on sale
for financial reporting purposes was $847,467, which is net of selling expenses
and commissions.

On January 21, 1994, the anchor tenant at Eagle Plaza neighborhood retail
center, Eagle Foods, closed its store. Under the terms of its lease, Eagle
Foods has guaranteed rent payments until May 1997. On February 4, 1994 and
with the approval of IREIC, Eagle Foods assigned its lease to Certified Grocers
Midwest, Inc. ("Certified"). The shopping center was subsequently renamed
Water Tower Market Plaza. During August 1995, Certified vacated the store.
Under the original lease, as well as the assignment of the lease, Eagle Foods
has guaranteed payments until November 1998. Eagle Foods assigned its lease to
Euro-Fresh Markets which began occupancy in May 1996.

<PAGE> 227

values, tax-sheltered quarterly cash distributions and the build-up of equity
through reduction of mortgage indebtedness.

Growth Fund I raised $9,465,000 from more than 700 investors and purchased
four properties which included one multi-family residential property in Arizona
and a partial interest in another multi-family residential property in
Illinois. The other two properties were repurchased from Growth Fund I by
IREIC. The terms of these repurchase transactions placed Growth Fund I in the
same cash position it would have been in had the properties never been
acquired. Growth Fund I sold the multi-family residential property located in
Illinois as condominium units to individual purchasers for $6,685,950. Of the
total net sales proceeds of $6,455,375, $1,650,000 was used to pay off the
underlying debt on the property, $1,715,198 was distributed to limited partners
during 1994, $1,832,785 was used to pay down the debt on the partnership's
Arizona property and the remainder was used to fund condominium conversion
costs. The property was purchased by Growth Fund I in December 1985 for
$3,836,416, which included acquisition fees of $483,500. The gain on sale for
financial reporting purposes was $2,236,220, which is net of selling expenses
and commissions. Cash distributions to limited partners through December 31,
1995 totaled $509.66 per $1,000 unit or $4,516,868, including $1,281,155 from
operations, $1,724,843 from the sale or refinancing of the partnership's
properties, $943,224 from the repurchase of partnership properties by IREIC
and $567,646 partial return of capital from partnership reserves. The monthly
principal and interest payments on the Arizona property were reduced from
$27,819 to $12,314 as a result of refinancing the Arizona property in March
1994 and the debt reduction described above.

In IREIC's opinion, the Arizona real estate market has been improving over
the last two years, and a sale of the Arizona property will be evaluated on an
ongoing basis with the intent to profitably conclude the partnership. The
decline in the Arizona market from 1989 through 1992 reduced net operating
income from that property and, therefore, the quarterly cash distributions
which might otherwise have been received by limited partners during that
period. Similarly, the decline of the Arizona market has extended the holding
period for that property. If and when the Arizona property can be sold at a
profit, the annual rate of capital appreciation realized by investors will be
less than if the Arizona market had not declined.

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

Growth Fund II raised $4,038,250 from 336 investors and purchased two
properties, a multi-family residential property in Illinois and a health club
in Ohio. These properties were purchased for a total acquisition cost of
$5,615,826. The health club is currently approximately 62% financed with 38%
equity. Cash distributions to limited partners through December 31, 1995
totaled $1,135.44 per $1,000 unit or $4,509,182, including $862,410 from
operations and $3,646,772 return of capital from the sale of the multi-family
property in Illinois as 18 individual six-unit apartment buildings. All 18 of
the six-unit buildings were sold to third-party buyers on an installment basis
for $245,334 to $250,000 per building or a total of $4,261,895 (net of selling
expenses). Growth Fund II's cost basis in the buildings was $4,112,195. The
partnership extended financing to buyers to allow buyers to make monthly
interest payments to Growth Fund II for a period of not more than seven to ten
years, at which time the balance of the purchase price would be due. However,
as of December 31, 1995, 13 of the installment sale loans had been prepaid in
full and five had been substantially pre-paid (the partnership continues to be
owed
47

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$80,000 on these loans, secured by second mortgages). In the opinion of IREIC,
the sale of the multi-family property as individual six-unit apartment buildings
has resulted in modest capital appreciation within a short holding period.
IREIC is evaluating strategies to sell the partnership's remaining assets and
bring the partnership to a profitable conclusion.

INLAND LAND APPRECIATION FUND, L.P. ("LAND FUND I") -- The offering period
for Land Fund I began October 12, 1988 and ended October 6, 1989. The
objectives were to invest in pre-development land on an all-cash basis and
realize appreciation of such land upon resale.

Land Fund I raised $30,001,000 from 3,425 investors and purchased 25 land
parcels, all in suburban counties surrounding Chicago, Illinois, for an
aggregate purchase price of $25,187,069. As of December 31, 1995, Land Fund I
has completed 51 sales transactions, involving all or portions of 11 parcels,
including three sales of rights-of-way to the Illinois Department of
Transportation plus a land option, which generated $4,774,251 in net sales
proceeds. Land Fund I's cost basis in the land parcels sold was $2,654,277
resulting in a gain, net of selling expenses and commissions, of $2,119,974 for
financial reporting purposes. In the opinion of IREIC, the partnership is
currently meeting its investment objectives and has, through completed sales
transactions, realized significant capital appreciation on the assets sold.
Cash distributions to limited partners through December 31, 1995 totaled
$4,146,395, all from the sale of land parcels.

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

Land Fund II raised $50,476,170 from 5,055 investors and purchased 27 land
parcels and two buildings, all in suburban counties surrounding Chicago,
Illinois, for an aggregate purchase price of $41,314,301. As of December 31,
1995, Land Fund II has had multiple sales transactions involving all or
portions of seven parcels which generated $9,113,875 in net sales proceeds.
Land Fund II's cost basis in the land parcels sold was $5,552,092 resulting in
a gain, net of selling expenses and commissions, of $3,561,783 for financial
reporting purposes. In the opinion of IREIC, the partnership is currently
meeting its investment objectives and has, through completed sales
transactions, realized significant capital appreciation on the assets sold.
Cash distributions to limited partners through December 31, 1995 totaled
$2,836,752, including $2,115,752 from sales and $721,000 from operations.

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

Land Fund III raised $32,399,282 from 2,683 investors and purchased 18
land parcels, one of which included a house and several outbuildings, for an
aggregate purchase price of $25,945,990. Land Fund III has completed two sales
transactions, involving the house and portions of two parcels which generated
$646,334 in net sales proceeds. Land Fund III's cost basis in the land parcels
sold was $417,551 resulting in a gain, net of selling expenses and commissions,
of $228,783 for financial reporting purposes. In the opinion of IREIC, the
partnership is currently meeting its investment objectives and has, through
completed sales transactions, realized significant capital appreciation on the
assets sold. Cash distributions to limited partners through December 31, 1995
totaled $646,334, all from the sale of land parcels.

PRIVATE PARTNERSHIPS

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Since inception, Affiliates of the Advisor have sponsored 514 private
placement limited partnerships which have raised more than $524,201,000 from
approximately 17,000 investors and invested in properties for an aggregate
price of more than $1 billion in cash and notes. Of the 522 properties
purchased, 93% have been in Illinois. Approximately 90% of the funds were
invested in apartment buildings, 6% in shopping centers, 2% in office buildings
and 2% in other properties. Including sales to Affiliates, 275 partnerships
have sold their original property investments. Officers and employees of IREIC
and its Affiliates invested more than $17,000,000 in these partnerships.

From 1990 and through the end of 1995, investors in Inland's private
partnerships have received total distributions in excess of $82,473,427
consisting of cash flow from partnership operations, sales and refinancing
proceeds and cash received during the course of property exchanges. Following
a proposal by Inland Real Estate Corporation, the former corporate general
partner, investors in 301 private partnerships voted in 1990 to make IREIC the
corporate general partner for those partnerships.

Beginning in December 1993 and continuing into the first quarter of 1994,
investors in 101 private limited partnerships for which IREIC is the general
partner received letters from IREIC informing them of the possible opportunity
to sell the 66 apartment properties owned by those partnerships to a
to-be-formed REIT (the "Apartment REIT") in which Affiliates of IREIC would
receive stock and cash and the limited partners would receive cash. In
connection therewith, the underwriters for the Apartment REIT subsequently
advised IREIC to sell to a third party its management and general partner's
interests in those remaining limited partnerships not selling their apartment
properties to the Apartment REIT (approximately 30% of the Inland-sponsored
limited partnerships owning apartment buildings). The prospective third-party
buyers of IREIC's interests in the remaining partnerships, however, would make
no assurance to support those partnerships financially. As a result, in a
letter from IREIC dated March 30, 1994, investors were informed of IREIC's
decision not to go forward with the formation of the Apartment REIT. Following
this decision, two investors filed a complaint on April 19, 1994 in the Circuit
Court of Cook County, Chancery Division, purportedly on behalf of a class of
other unnamed investors, alleging that IREIC had breached its fiduciary
responsibility to those investors whose partnerships would have sold apartment
properties to the Apartment REIT. The complaint sought an accounting of
information regarding the Apartment REIT matter, an unspecified amount of
damages and the removal of IREIC as general partner of the partnerships that
would have participated in the sale of properties to the Apartment REIT. On
August 1, 1994, Judge Thomas O'Brien granted IREIC's motion to dismiss, finding
that plaintiffs lacked standing to bring this case individually. Plaintiffs
were granted leave to file an amended complaint within 28 days. On August 29,
1994, six investors filed an amended complaint, purportedly on behalf of a class
of other investors, and derivatively on behalf of six limited partnerships of
which IREIC is the general partner. The derivative counts seek damages from
IREIC for alleged breach of fiduciary duty and breach of contract, and assert a
right to an accounting. IREIC filed a motion to dismiss in response to the
amended complaint. The suit was dismissed on March 31, 1995 with prejudice, and
the plaintiffs were given until May 1, 1996 to file an appeal. An appeal was
filed on April 25, 1996 and the parties briefed the issue. It is not expected
that oral arguments will be made until Fall 1996.

PRIVATE PLACEMENT REAL ESTATE EQUITY PROGRAM

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raised. Seven parcels of land in the Madison, Wisconsin, area were purchased
with the proceeds of the offering. Limited partners will receive cash
distributions as land parcels are sold.

PRIVATE PLACEMENT MORTGAGE AND NOTE PROGRAMS

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

TRIPLE SECURITY FUND, L.P., an Illinois limited partnership, was formed in
May 1992. The principal investment objectives of the partnership were to
invest in participations in third-party mortgage loans owned by an Affiliate of
IREIC and thereby return investors' capital within five years, and to provide a
10% annual return on invested capital during the life of the partnership. The
return of capital and the 10% annual return were guaranteed by IREIC. The
offering period for interests in this privately offered partnership began in
May 1992 and ended in June 1992 with the maximum amount of $3,000,000 raised.
All of the offering proceeds were used to invest in participations in 14
wraparound mortgage loans and first mortgage loans, secured by condominium,
multi-family residential and commercial properties located in the Chicago
metropolitan area. Limited partners received their first monthly cash
distribution on July 17, 1992. Cash distributions to limited partners through
December 31, 1995 totaled $1,044,218, including $986,185 from operations and
$58,033 from a loan from IREIC, pursuant to the guarantee for that program.

10% INCOME FUND, L.P., an Illinois limited partnership offering
investments in promissory notes, was formed in May 1992. The offering period
for the purchase of notes began in May 1992 and ended June 1992 with the
maximum amount of $2,000,000 raised. Notes with a term of five years and
providing a 10% annual return for the first four years and 10.5% in the fifth
year were issued by the partnership. The return of capital to noteholders and
the specified annual returns are guaranteed by IREIC. 10% Income Fund, L.P.
invested in loans made to an Affiliate of IREIC, which were secured by
collateral assignments of third-party mortgage loans owned by the Affiliate.
Noteholders received their first monthly interest distribution on July 17,
1992. Cash distributions to noteholders through December 31, 1995 totaled
$681,223 including $663,939 from interest earnings and $17,284 from working
capital reserves.

9% INCOME JUNIOR MORTGAGE FUND, L.P., an Illinois limited partnership, was
formed in July 1992. The principal investment objectives of the partnership
were to invest in third-party junior mortgage loans owned by an Affiliate of
the Advisor and thereby return investors' capital within six years, and to
provide a 9% annual return on invested capital during the life of the
partnership. The return of capital and the 9% annual return were guaranteed by
IREIC. The offering period for interests in this privately offered partnership
began in July 1992 and ended September 1992 with the maximum amount of
$1,000,000 raised. All of the offering proceeds were used to invest in
third-party junior mortgage loans owned by the Affiliate, secured by
condominium, multi-family residential and commercial properties located in the
Chicago metropolitan area. Limited partners received their first monthly cash
distribution on September 17, 1992. Cash distributions through December 31,
1995 totaled $357,116, of which $276,364 was interest earnings, $73,463 was a
return of capital resulting from the amortization of mortgage loans and $7,339
was a loan from IREIC, pursuant to the distribution guarantee for that program.

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of four years and providing 10% annual interest were issued by the partnership.
The return of capital to noteholders and the specified annual return are
guaranteed by IREIC. Inland Employee Appreciation Fund, L.P. invested in a loan
made to an Affiliate of IREIC, which was secured by collateral assignments of
third-party investor loans owned by the Affiliate. Noteholders received their
first monthly interest distribution on March 17, 1993. Cash distributions
through December 31, 1995 totalled $342,060, of which $339,631 was interest
earnings and $2,429 was subsidy income from IREIC, pursuant to the guarantee for
that program. On May 31, 1996, the promissory notes were paid in full. This
partnership will be liquidated in 1996.

In February 1993, IREIC sponsored 9% MONTHLY CASH FUND, L.P., an Illinois
limited partnership offering investments in promissory notes to accredited
investors. The offering period for this program began February 1, 1993 and
ended on May 17, 1993 when the maximum amount of $4,000,000 raised. Notes
maturing August 1, 1999 and providing a 9% annual return were issued by the
partnership. 9% Monthly Cash Fund, L.P. invested in loans made to an Affiliate
of IREIC secured by collateral assignments of third party mortgage loans owned
by the Affiliate. The return of capital to noteholders and the 9% annual return
are guaranteed by IREIC. Cash distributions through December 31, 1995 totaled
$929,094, of which $924,784 was interest earnings and $4,310 from working
capital reserves.

In April 1993, IREIC sponsored 9% MONTHLY CASH FUND II, L.P., an Illinois
limited partnership offering investments in promissory notes to accredited
investors, with investment objectives identical to those of 9% Monthly Cash
Fund, L.P. The offering period for this program began April 5, 1993 and ended
July 23, 1993, with the maximum amount of $4,000,000 raised. Notes maturing
February 1, 2000 and providing a 9% annual return were issued by the
partnership. 9% Monthly Cash Fund II, L.P. has invested in a loan made to an
Affiliate of IREIC, secured by collateral assignments of third-party mortgage
loans owned by the Affiliate. The return of capital to noteholders and the 9%
annual return are guaranteed by IREIC. Cash distributions through December 31,
1995 totaled $867,945, of which $864,752 was interest earnings and $3,193 from
working capital reserves.

In July 1993, Inland Mortgage Corporation, an Illinois corporation and an
Affiliate of IREIC ("IMC"), sponsored IMC NOTE ISSUE #2 1993, offering
investments in promissory notes. The offering period for this program began
August 25, 1993 and closed on June 13, 1994 after raising $6,800,000. Notes
maturing December 31, 2003 with 8% per annum interest and 100% return of
principal guaranteed by IREIC were issued by IMC. Proceeds of the offering
have been used to invest in a mortgage loan secured by an apartment property in
Manchester, New Hampshire, owned by an Affiliate of IREIC. Investors may also
receive additional interest, dependent on the future sale of the property. An
initial distribution to investors of escrow interest, totaling $13,685, was
made November 17, 1993. Cash distributions through December 31, 1995 totaled
$1,068,666 of which $671,865 was interest earnings and $19,456 was subsidy
income from IREIC pursuant to the guarantee for that program.

In December 1993, IREIC sponsored INLAND CONDOMINIUM FINANCING FUND, L.P.,
an Illinois limited partnership offering investment in promissory notes. The
offering period for this program began December 15, 1993 and closed on June 30,
1994. This partnership offered notes in a maximum principal amount of
$2,000,000 maturing July 1, 2001 with 10% per annum interest and 100% return of
principal guaranteed by IREIC. The proceeds of the offering have been used to
make unsecured loans to limited partnerships which are Affiliates of IREIC, for
the purposes of paying expenses relating to the conversion of apartment
properties owned by those partnerships to condominiums, and conducting
condominium unit sales and other partnership expenses. Cash distributions began
on March 17, 1994. Distributions through March 31, 1995 totaled $177,893 all of
which were interest earnings.

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An August 1988 private placement securities offering sponsored by an
Affiliate of IREIC was INLAND JUNIOR MORTGAGE FUND, L.P., an Illinois limited
partnership. The offering period for this program ended May 1989 with $410,000
raised. All of the proceeds available for investment were used to purchase 82
second mortgages owned by Inland Mortgage Investment Corporation ("IMIC"),
secured predominantly by condominium units located in the Chicago metropolitan
area. Cash distributions through December 31, 1995 have totaled $404,175,
including $124,794 from interest earnings and $279,381 return of capital from
loan repayments. In February 1996, 20 limited partners exercised their put
option and IMIC bought their interests. As a result, IMIC currently owns 88%
of the limited partner units.

LOAN MODIFICATIONS AND WORK-OUTS

Between 1990 and December 31, 1995, 38 Inland-sponsored partnerships
owning 25 properties ceased making debt service payments to unaffiliated
lenders which held the underlying financing on the properties. These actions
were taken with the objective of reducing or restructuring the debt to levels
commensurate with the levels of performance of the operating properties. In
the case of six of these partnerships, namely 14 W. Elm Limited Partnership,
1445 North State Parkway Limited Partnership, 5600 Sheridan Limited
Partnership, 5630 Sheridan Limited Partnership, 6030 Sheridan Limited
Partnership and Oak Brook Commons Limited Partnership, the original asset of
each of these partnerships was transferred to a new partnership which was 100%
owned by the old partnership. IREIC believed that the new partnerships were
better positioned to accomplish a work-out with the lender. In connection with
the transfers of three of these properties to the new partnerships discussed
above, the lender holding the first mortgages on these properties filed a
separate proceeding against the general partner and its Affiliates, claiming
contractual interference and other allegations. This complaint was withdrawn
as part of a final settlement reached with the lender in February 1993.

Each of these new partnerships filed for financial reorganization in
federal court. In addition, 1036 N. Dearborn Limited Partnership also filed
for financial reorganization in federal court. All of these filings for
reorganization were an extension of negotiations with the lenders, with the
objective of reducing or restructuring the debt on the properties owned by the
partnerships. In the case of the filing for reorganization by each of the new
partnerships owned by 1445 North State Parkway Limited Partnership, 5600
Sheridan Limited Partnership and 5630 Sheridan Limited Partnership, the
reorganization proceedings were dismissed after each lender approved a
tax-deferred exchange transaction between the new partnership and an
unaffiliated third party. The general partner of the 1036 North Dearborn
Limited Partnership was able to purchase the debt encumbering that property at
a discount from the lender and the filing for reorganization of that
partnership was dismissed. The 1036 North Dearborn property was subsequently
refinanced with a third-party lender and then sold to a third party. The new
partnerships owned by the 14 W. Elm, 6030 Sheridan and Oak Brook Commons
Limited Partnerships participated with the general partner and its affiliates
and with 16 other affiliated limited partnerships, all of whose properties were
subject to first-mortgage loans from the same third-party lender, in a
settlement agreement with that lender. Under the terms of the settlement
agreement, the 16 other affiliated limited partnerships--none of which were in
default on their mortgage loans--provided additional security to the lender
with respect to each of their loans by transferring administration of property
tax escrow accounts to the lender. The transfer of the escrow accounts had no
financial impact on the 16 partnerships. Five of the 16 other partnerships
also obtained favorable loan modifications from the lender. In the case of the
new partnership owned by the 14 W. Elm Limited Partnership, the lender
cooperated in a tax-deferred exchange of the partnership's real estate asset.
The partnership assigned its interest in its property, subject to the existing
indebtedness, to an unaffiliated third party in exchange for an assignment of
the unaffiliated third party's interest in another property, subject to
indebtedness in a principal amount similar to that on the 14 W. Elm

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property. This transaction was accomplished with the objective of avoiding the
creation of any current income tax liability to the partnership or its limited
partners. As a result of this tax-deferred exchange, the 14 W. Elm Limited
Partnership owns a net-lease commercial property secured by a long-term lease
with a creditworthy tenant. The debt service on the indebtedness used to
acquire the exchange property is in the form of fully amortizing payments
over the term of the store lease, with the net-lease payments received from the
tenant equal to the required debt service payments. The possibility of cash
flow distributions to the limited partners is, therefore, precluded. However,
the expectation exists for equity accumulation through the amortization of the
loan and, therefore, a distribution to the limited partners upon the disposition
of the exchange property. IREIC believes that the limited partners of the 14 W.
Elm Limited Partnership are in a better position to realize a return of their
capital investment through the ultimate disposition of the exchange property.
In the case of the new partnership owned by the Oak Brook Commons Limited
Partnership, the lender acquired the property through foreclosure and the
general partner has supplied the Oak Brook Commons Limited Partnership with a
new property, an ownership interest in a retail store in Marshall, Minnesota,
leased on a triple-net basis by Wal-Mart Stores, Inc. In the case of the new
partnership owned by the 6030 Sheridan Limited Partnership, the lender agreed
to permit a tax-deferred exchange of the partnership's property, similar to
that completed by the 14 W. Elm Limited Partnership and subsequently the lender
sold its mortgage to an unaffiliated party who then acquired the property. The
new partnership acquired a replacement property similar to that acquired by the
14 W. Elm Limited Partnership, which property was then conveyed to the 6030
Sheridan Limited Partnership.

Four of the 38 Inland-sponsored partnerships described in the first
paragraph of this section owned four adjacent office buildings in Park Ridge,
Illinois. These four operating partnerships were, in turn, owned by 21 other
Inland-sponsored partnerships which had sold their original real estate assets
and reinvested a portion of the proceeds from those sales in ownership units in
the four operating partnerships. During 1991, the lenders which held the first
mortgages encumbering the four office buildings acquired the deeds to the
properties in lieu of foreclosure. The four operating partnerships were
subsequently liquidated. The general partner of the 21 partnerships which had
owned the four operating partnerships arranged for the transfer to each of the
21 partnerships of certain ownership interests in five net-lease commercial
properties having long-term leases with creditworthy tenants. The debt service
on the indebtedness used to acquire the commercial properties consists of
principal and interest payments which fully amortize the indebtedness over the
term of the store leases, with the net-lease payments received from the tenants
equal to the required debt service payments. The possibility of cash flow
distributions to the limited partners in the 21 partnerships is, therefore,
precluded. However, the expectation exists for equity accumulation through the
amortization of the loan and, therefore, a future distribution to the limited
partners upon the disposition of the commercial properties. The 21
partnerships experienced minimal adverse tax consequences from the liquidation
of the four operating partnerships and their receipt of the ownership interests
in the commercial properties. IREIC believes that the limited partners of the
21

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partnerships are now positioned to realize a return of their capital investment
through the ultimate disposition of the commercial properties.

In the case of the 900 DeWitt and the Hoffman Ridge Limited Partnerships,
two of the 38 limited partnerships mentioned in the first paragraph of this
section, tax-deferred exchanges of the partnerships' properties were
accomplished, in the same manner as described above. The partnerships acquired
net-lease commercial properties. Subsequent to the exchanges, the 900 DeWitt
and Hoffman Ridge properties were acquired by the first-mortgage lenders whose
loans were secured by those properties.

In the case of the Park Colony Limited Partnership, one of the 38 limited
partnerships mentioned in the first paragraph of this section, the partnership
defaulted on a loan secured by a second mortgage against the Park Colony
property. The lender which owned the second-mortgage loan purchased the
position of the lender which had funded the first mortgage loan secured by the
property. The lender then sold the debt, at a substantial discount, to an
Affiliate of the general partner of Park Colony Limited Partnership, and all
legal actions associated with the loan default were dismissed. The partnership
then refinanced the debt at the lower principal amount, retiring the debt owned
by the Affiliate. In December 1993, a new general partner replaced IREIC.
IREIC believes that this debt reduction is of significant benefit to the
partnership, which is now better positioned to realize its investment
objectives.

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

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

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

<PAGE> 235

by the partnerships to the lenders. In each case, the litigation resulted after
the partnership ceased making debt service payments in an effort to bring about
a renegotiation of the terms of the financing. The lenders agreed to permit a
tax-deferred exchange of the partnerships' respective properties.

In January 1995, the Timberlake Limited Partnership ceased making payments
on the first mortgage loan for that partnership's property. IREIC is
attempting to negotiate with the lender to modify the terms of the loan to a
level commensurate with the operating performance of the Timberlake property,
but to date, no agreement has been reached. It is IREIC's intent to initiate a
tax-deferred exchange whereby the partnership will acquire an interest in a
net-lease commercial property prior to the Timberlake property being acquired by
the lender whose loan is secured by a first mortgage against the property.

EFFECTS OF PROPERTY EXCHANGES ON INVESTORS

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

ADDITIONAL INFORMATION

Through December 31, 1995, 18 private partnerships sponsored by Affiliates
of the Advisor which sold properties on an installment basis re-acquired their
properties as a result of defaults by the purchasers. Thirteen of the
properties that were re-acquired were subsequently sold. One property was
returned to the lender and the remaining properties are being operated by the
partnerships.

Through December 31, 1995, seven private partnerships sponsored by
Affiliates of the Advisor have agreed to modifications of the original terms of
the installment receivables. The impact of these modifications on the
installment receivables includes reductions in net interest income during the
first year or two following a modification (and corresponding decreases in
distributions to limited partners during that period) and increases in interest
income thereafter (and corresponding increases in distributions), as well as
the deferral of some interest until maturity and, in the case of two
partnerships, the extension of a maturity date. The decreases in distributions
to limited partners range from 25% to 50% of the originally scheduled
distributions for the initial one- or two-year period of the modifications
followed by similar increases over the originally scheduled distributions for
the year or two following the modifications. Any interest deferred until
maturity would result in a lower-than-originally-scheduled

<PAGE> 236

distribution until the maturity date, when such deferred amounts would be
received from the borrowers. The distribution to investors of the principal
proceeds due upon maturity would also be received at a later date, i.e.,
one to two years later, due to a negotiated extension of the original maturity
date.

During 1988, one private partnership sponsored by an Affiliate of IREIC
transferred its property to the municipality in which it was located pursuant
to an involuntary conversion proceeding. On March 1, 1989, the proceeds of the
conversion were reinvested in a new property, a transaction intended to qualify
as tax-deferred under the Code.

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

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

MANAGEMENT

GENERAL

The Company operates under the direction of the Board of Directors that is
responsible for the overall management and control of the affairs of the
Company. However, the Board of Directors has retained the Advisor to manage
the Company's day-to-day affairs, subject to the Board's supervision.

Investment policies of the Company, as well as fees and expenses of the
Company, have been established by the Directors and will be reviewed and
approved by the Directors (including a majority of the Independent Directors)
not less often than annually and with sufficient frequency to determine that
the policies being followed are in the best interest of the Stockholders. All
Directors are responsible, as a result of their fiduciary duties, for
determining the reasonableness of the total fees and expenses of the Company in
light of the investment experience of the Company and the fees and expenses of
comparable advisor companies in supervising the relationship of the Company
with the Advisor and its Affiliates. Each such determination and the basis
therefor shall be set forth in the minutes of the Directors.

The Independent Directors shall determine from time to time, but not less
often than annually, that the compensation which the Company contracts to pay
to the Advisor is reasonable in relation to the nature and quality of the
services performed and that such compensation is within the limits prescribed
by applicable state regulatory authorities. The Independent Directors shall
also supervise the performance of the Advisor and the compensation paid to it
by the Company to determine that the provisions of the Advisory Agreement are
being carried out. Each such determination shall be based on the factors set
forth below and all other factors that the Independent Directors may deem
relevant and the findings of the Independent Directors on each such factor
shall be recorded in the minutes of the Board. Such factors include: (i) the
size of the Advisory Fee in relation to the size, composition and
profitability of the portfolio of the Company; (ii) the success of the Advisor
in generating opportunities that meet the investment objectives of the Company;
(iii) the rates charged to other REITs and to investors other than

<PAGE> 237

REITs by advisors performing similar services; (iv) additional revenues realized
by the Advisor and any Affiliate through their relationship with the Company,
including loan administration, underwriting or brokerage commissions, servicing,
engineering, inspection and other fees, whether paid by the Company or by
others with whom the Company does business; (v) the quality and extent of
service and advice furnished by the Advisor; (vi) the performance of the
investment portfolio of the Company, including income, conservation or
appreciation of capital, frequency of problem investments and competence in
dealing with distress situations; and (vii) the quality of the portfolio of the
Company in relationship to the investments generated by the Advisor for its own
account. See "Fiduciary Responsibility of Directors and the Advisors;
Indemnification" and "--The Advisory Agreement" in this Section.

The Board is currently comprised of five individuals, a majority of whom
are independent (the "Independent Directors"). Each of the Directors serves
for a one-year term and will be elected annually. See "Summary of
Organizational Documents."

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
Directors and the Company's executive officers:

<TABLE>
<CAPTION>
Name Age Position and Office with the Company
- -------------------------- --- -----------------------------------------------
<S> <C> <C>
Robert D. Parks 52 President, Chief Executive Officer, Chief
Operating Officer and Affiliated Director
G. Joseph Cosenza 52 Affiliated Director
Roland W. Burris 58 Independent Director
Douglas R. Finlayson, M.D. 56 Independent Director
Heidi N. Lawton 33 Independent Director
Roberta S. Matlin 51 Vice President -- Administration
Cynthia M. Hassett 37 Secretary, Treasurer and Chief Financial
Officer
Patricia A. Challenger 42 Assistant Secretary
</TABLE>

ROBERT D. PARKS. President, Chief Executive Officer, Chief Operating
Officer and Affiliated Director of the Company since its formation in 1994.
Mr. Parks joined The Inland Group, Inc. and its Affiliates ("TIGI") in 1968.
He is Director of TIGI and is President, Chairman and Chief Executive Officer
of Inland Real Estate Investment Corporation ("IREIC") and is a Director of
Inland Securities Corporation. Mr. Parks is responsible for the ongoing
administration of existing partnerships, corporate budgeting and administration
for IREIC. He oversees and coordinates the marketing of all limited
partnership interests nationwide and has overall responsibility for the
portfolio management of all partnership investments and investor relations.
Mr. Parks received his B.A. Degree from Northeastern Illinois University and
M.A. from the University of Chicago. He is a registered Direct Participation
Program Principal with the National Association of Securities Dealers, Inc. and
a licensed real estate broker. He is a member of the Real Estate Investment
Association and the National Association of Real Estate Investment Trusts.

G. JOSEPH COSENZA. Affiliated Director of the Company since its formation
in 1994. Mr. Cosenza joined TIGI in 1968. Mr. Cosenza is a Director and Vice
Chairman of TIGI. Mr. Cosenza oversees, coordinates and directs Inland's many
enterprises and, in addition, immediately supervises a staff of three persons
who engage in property acquisition. Mr. Cosenza has been

<PAGE> 238

a consultant to other real estate entities and lending institutions on
property appraisal methods. Mr. Cosenza received his B.A. Degree from
Northeastern Illinois University and his M.S. Degree from Northern Illinois
University. From 1967 to 1968, Mr. Cosenza taught at the LaGrange School
District in Hodgkins, and from 1968 to 1972, he served as Assistant Principal
and teacher in the Wheeling School District. He has been a licensed real
estate broker since 1968 and an active member of various national and local
real estate associations, including the National Association of Realtors and
the Urban Land Institute. Mr. Cosenza has also been Chairman of the Board of
American National Bank of DuPage and part owner of American National Bank of
DuPage and Burbank State Bank, and has served on the Board of Directors of
Continental Bank of Oakbrook Terrace. Mr. Cosenza was the individual general
partner of a limited partnership which ceased making debt service payments to
an unaffiliated lender with the objective of reducing or restructuring the debt
to a level which was commensurate with the level of performance of the property
owned by such partnership. The lender acquired the property owned by such
partnership through foreclosure and an affiliate of Mr. Cosenza supplied the
partnership with the new property, an ownership interest in a retail store in
Marshall, Minnesota, leased on a triple-net basis by Wal-Mart Stores, Inc. See
"Prior Performance of the Company's Affiliates--Loan Modifications and
Work-Outs."

ROLAND W. BURRIS. Independent Director since January 1996. Mr. Burris
has been the Managing Partner of Jones, Ware & Grenard, a Chicago law firm
since June 1995, where he practices primarily in the areas of environmental,
banking and consumer protection. After obtaining his law degree from Howard
University Law School in 1963, Mr. Burris began a career in the banking
industry initially as a federal bank examiner and then at Continental Illinois
National Bank where he rose to the position of vice president. From 1973 to
1995, Mr. Burris was involved in State of Illinois government including holding
the positions of State Comptroller and Attorney General of the State of
Illinois. Mr. Burris completed his undergraduate studies at Southern Illinois
University and studied international law as an exchange student at the
University of Hamburg in Germany. Mr. Burris serves on many boards, including
the Illinois Criminal Justice Authority, the Financial Accounting Foundation,
the Law Enforcement Foundation of Illinois, the African American Citizens
Coalition on Regional Development and the Boy Scouts of America. He currently
serves as chair of the Illinois State Justice Commission. He is also serving
as an adjunct professor in the Master of Public Administration Program at
Southern Illinois University.

DOUGLAS R. FINLAYSON, M.D. Independent Director of the Company since
October 1994. Dr. Finlayson is a full-time family practice and nutritional
medicine physician with Partners in Primary Care in Rolling Meadows, Illinois
and Westlake Clinic in Ingleside, Illinois. He joined the Clinic in 1992.
From 1968 to 1971, Dr. Finlayson was a battalion surgeon in the United States
Army. Dr. Finlayson began private practice in 1971 joining the staff of
Northwest Community Hospital, and from 1982 until 1988, Dr. Finlayson served as
Medical Director of the Rolling Meadows Alcohol and Drug Dependence Program of
Lutheran Welfare Services. From 1988 until joining Westlake Clinic in 1992,
Dr. Finlayson practiced medicine on a part-time basis primarily in the area of
nutritional medicine. Since 1975, Dr. Finlayson has been involved with buying
and selling real estate assets, including vacant land, speculative housing and
rental properties, for his own account. In 1978, Dr. Finlayson acquired and
developed 100 acres in South Barrington, Illinois, and as a member of the
Church Building Committee, led the development of the Willow Creek Community
Church Campus. Since 1983, Dr. Finlayson has been designing computer software
systems for medical application including projects for the Illinois Hospital
Association. Dr. Finlayson holds a B.S. Degree in Chemistry from the
University of Illinois and a M.D. Degree from the University of Heidelberg,
Germany.

<PAGE> 239

HEIDI N. LAWTON. Independent Director of the Company since October 1994.
Ms. Lawton is managing broker, owner and president of Lawton Realty Group, an
Oak Brook, Illinois real estate brokerage firm which she founded in 1989.
Lawton Realty Group employs four full-time associates and generates sales
volume of approximately $20,000,000 annually. The firm specializes in
commercial, industrial and investment real estate brokerage. Ms. Lawton is
responsible for all aspects of the operations of the company. She also
structures real estate investments for clients -- procuring partner/investors,
acquiring land and properties and obtaining financing for development and/or
acquisition. Prior to founding Lawton Realty Group and while she was earning
her B.S. Degree in business management from the National College of Education,
she was managing broker for VCR Realty in Addison, Illinois. While there, she
was engaged primarily in brokerage of industrial and commercial property. She
also provided property management services, including leasing, for a portfolio
of more than 100 properties, including condominium complexes, industrial,
apartment and small retail shopping centers. At the beginning of her career in
real estate, she acted as a general contractor building and selling
single-family homes as well as a retail center in Lombard, Illinois. As a
licensed real estate professional since 1982, she has served as a member of the
Certified Commercial Investment Members, secretary of the Northern Illinois
Association of Commercial Realtors, and is a past board member and commercial
director of the DuPage Association of Realtors.

ROBERTA S. MATLIN. Vice President - Administration of the Company since
March 1995. Ms. Matlin joined Inland in 1984 as Director of Investor
Administration and currently serves as Senior Vice President - Investments of
IREIC directing the day-to-day internal operations. She is also the President
and a Director of Inland Securities Corporation. Prior to joining Inland, Ms.
Matlin spent 11 years with the Chicago Region of the Social Security
Administration of the United States Department of Health and Human Services.
Ms. Matlin received her B.A. Degree from the University of Illinois. She is
registered with the NASD as a general securities principal.

CYNTHIA M. HASSETT. Secretary, Treasurer and Chief Financial Officer of
the Company since January 1995. Ms. Hassett has been Secretary and Treasurer
of the Advisor since its formation in 1994. Ms. Hassett joined Inland in 1983
and is a Vice President of IREIC. Ms. Hassett is responsible for the
Investment Accounting Department which includes the accounting for the Company
and all public limited partnership accounting functions along with quarterly
and annual SEC filings. Prior to joining Inland, Ms. Hassett was on the audit
staff of Altschuler, Melvoin and Glasser since 1980. She received her B.S.
Degree in Accounting from Illinois State University. Ms. Hassett is a
Certified Public Accountant and is a member of the American Institute of
Certified Public Accountants.

PATRICIA A. CHALLENGER. Assistant Secretary of the Company since March
1995. Ms. Challenger joined Inland in 1985. She is currently a Senior Vice
President of IREIC in the area of asset management. As head of the Asset
Management Department, she develops operating and disposition strategies for
all investment-owned properties. Ms. Challenger received her B.S. Degree from
George Washington University and her Master's Degree from Virginia Tech
University. Ms. Challenger was selected and served from 1980 to 1984 as
Presidential Management Intern, where she was part of a special government-wide
task force to eliminate waste, fraud and abuse in government contracting and
also served as Senior Contract Specialist responsible for capital improvements
in 109 government properties. Ms. Challenger is a licensed real estate
salesperson, NASD registered securities sales representative and is a member of
the Urban Land Institute.

COMMITTEES OF THE BOARD OF DIRECTORS

<PAGE> 240

Audit Committee. The Board has established an Audit Committee consisting
of two Independent Directors, Ms. Lawton and Mr. Burris. The Audit Committee
makes recommendations concerning the engagement of independent public
accountants, reviews the plans and results of the audit engagement with the
independent public accountants, approves professional services provided by, and
the independence of, the independent public accountants, considers the range of
audit and non-audit fees and consults with the independent public accountants
regarding the adequacy of the Company's internal accounting controls.

Executive Committee. The Board may establish an Executive Committee
consisting of three Directors, including two Independent Directors. The
Executive Committee would likely exercise all powers of the Directors except
for those which require actions by all of the Directors or the Independent
Directors under the Articles or Bylaws or under applicable law.

Executive Compensation Committee. The Board may establish an Executive
Compensation Committee consisting of three Directors, including two Independent
Directors, to establish compensation policies and programs for the Company's
executive officers. The Executive Compensation Committee will exercise all
powers of the Board in connection with establishing and implementing
compensation matters, including incentive compensation and benefit plans.

COMPENSATION OF DIRECTORS

The Company pays its Independent Directors an annual fee of $1,000. In
addition, Independent Directors receive $250 for attendance (in person or by
telephone) at each meeting of the Board or committee thereof. Officers of the
Company who are Directors are not paid any directors' fees. Each Independent
Director received options to purchase 3,000 Shares at a price of $9.05 per
Share under the Company's Independent Director Stock Option Plan. On the date
of the annual meeting of the Company's Stockholders, each Independent Director
then in office will receive an annual grant of options to purchase 500 Shares.
See "--Independent Director Stock Option Plan" in this Section.

THE ADVISOR

The Advisor is a wholly owned subsidiary of IREIC. The Advisor is an
Illinois corporation and the following table sets forth information with
respect to the executive officers and directors of the Advisor. The
biographies of Robert D. Parks, G. Joseph Cosenza, Roberta S. Matlin, Patricia
A. Challenger and Cynthia M. Hassett are set forth above.

Name Position and Office with the Advisor
--------------- ------------------------------------
Robert D. Parks Chairman of the Board and President
G. Joseph Cosenza Director
Norbert J. Treonis Director
Roberta S. Matlin Director and Secretary
Patricia A. Challenger Vice President -- Asset Management
Cynthia M. Hassett Treasurer

NORBERT J. TREONIS (age 45) has been a director of the Advisor since its
formation in 1994. Mr. Treonis joined TIGI and its Affiliates in 1975 and he
is currently Chairman and Chief Executive Officer of Inland Property Management
Group, Inc., Chairman of the Board of Directors of Inland Commercial Property
Management, Inc. and a Director of TIGI. He serves on the Board of Directors
of all Inland

<PAGE> 241

subsidiaries involved in the property management, acquisitions and maintenance
of real estate, including Mid-America Management Corp. and American Building
Services, Inc. Mr. Treonis is charged with the responsibility of the overall
management and leasing of all apartment units, retail, industrial and
commercial properties nationwide. Mr. Treonis is a licensed real estate
broker. He is a past member of the Board of Directors of American National
Bank of DuPage, the Apartment Builders and Managers Association of Illinois,
the National Apartment Association and the Chicago Apartment Association.

The Advisor is a member of a group of affiliated corporations, The Inland
Group, Inc. ("TIGI"), which is engaged in businesses related to many aspects of
real estate and mortgage financing. The relevant skills and experience of each
of these companies, developed over the course of 30 years in business,
primarily in the Chicago metropolitan area, is available to the Company in the
conduct of its business.

The first of the TIGI-affiliated businesses was started by a group of
Chicago school teachers in 1967, and incorporated the following year. The
founders of TIGI all remain actively involved in overseeing these companies.
The businesses of these TIGI-affiliated companies are still centered in the
Chicago metropolitan area, since the founders of TIGI believe that sound real
estate operations require detailed knowledge of local conditions. Over the
past 30 years, TIGI-affiliated companies have experienced significant growth.
TIGI-affiliated companies, in the aggregate, in April 1996 were ranked by
Crain's Chicago Business as the 32nd largest privately held business group
headquartered in the Chicago area. Limited partnerships for which IREIC is the
general partner own in excess of 9,800 acres of pre-development land in the
Chicago area, as well as 10,500,000 square feet of commercial property in
Chicago and nationwide.

As TIGI-affiliated companies bought and sold properties over the years,
necessary expertise in real estate financing was developed. This function was
formally recognized in 1977, with the incorporation of IMC. IMC, during its
history, has originated more than $1 billion in financing, including loans to
third parties and affiliated entities.

Further delineation of functions and duties associated with financing
occurred in 1990, with the separate incorporation of Inland Mortgage Investment
Corporation ("IMIC") and Inland Mortgage Servicing Corporation ("IMSC"). IMIC,
as of March 1, 1996, owned a $57,000,000 loan portfolio, and IMSC serviced a
loan portfolio of 455 loans exceeding $460,000,000.

THE ADVISORY AGREEMENT

Under the terms of the Advisory Agreement, the Advisor generally has
responsibility for the day-to-day operations of the Company, administers the
Company's bookkeeping and accounting functions, serves as the Company's
consultant in connection with policy decisions to be made by the Directors,
manages or causes to be managed the Company's properties and renders other
services as the Directors deem appropriate. The Advisor is subject to the
supervision of the Directors and has only such functions as are delegated to
it.

The Advisor bears the expenses incurred by it in connection with
performance of its duties under the Advisory Agreement, including employment
expenses of its personnel, certain travel and other expenses of the directors,
officers and employees of the Advisor, rent, telephone, and equipment expenses
to the extent such expenses relate to the office maintained by both the Company
and the Advisor and miscellaneous administrative expenses incurred in
supervising, monitoring and inspecting real property or

<PAGE> 242

other investments of the Company or relating to its performance under the
Advisory Agreement. The Advisor receives reimbursement for certain expenses it
incurs. The Company bears its own expenses for functions not required to be
performed by the Advisor under the Advisory Agreement, which generally include
capital raising and financing activities, corporate governance matters and
other activities not directly related to the Company's properties.

The Advisory Agreement, which was entered into by the Company, with the
unanimous approval of the Directors, including the Independent Directors, is
for a one-year term subject to successive one-year renewals upon the mutual
consent of the parties. It may be terminated by either party, or by mutual
consent of the parties or by a majority of the Independent Directors of the
Company or the Advisor, as the case may be, upon 60 days written notice without
cause or penalty. In the event of the termination of the Advisory Agreement,
the Advisor will cooperate with the Company and take all reasonable steps
requested to assist the Directors in making an orderly transition of the
advisory function.

For any year in which the Company qualifies as a REIT, the Advisor must
reimburse the Company: (i) to the extent that the Advisor Asset Management Fee
plus Other Operating Expenses paid during the previous calendar year exceed 2%
of the Company's Average Invested Assets for that calendar year; or (ii) 25%
of the Company's Net Income for that calendar year.

The Advisory Agreement gives the Company the first opportunity to buy any
Neighborhood Retail Centers placed under contract by the Advisor or its
Affiliates provided the Company is able to close the purchase within 60 days.
The Advisory Agreement also provides the Company with the first opportunity to
purchase any single-user retail property net leased by a creditworthy tenant
located anywhere in the United States which is placed under contract or about
to be placed under contract by the Advisor or its Affiliates, provided that:
(i) the Company has funds available to make the purchase; (ii) the Board votes
to make the purchase within five days of being offered such property by the
Advisor; (iii) the property meets the Company's acquisition criteria; and (iv)
in the event that more than one real estate investment program sponsored by the
Advisor or its Affiliates has funds available to make the purchase, such
property will first be offered to the program which has had funds available for
the longest period of time.

If the Advisor or its Affiliates perform services that are outside of the
scope of the Advisory Agreement, compensation is at such rates and in such
amounts as are agreed by the Advisor and the Independent Directors. The
Directors (including a majority of its Independent Directors) approved the
payment to the Advisor of an Acquisition Expense reimbursement equal to
approximately 0.5% of Gross Offering Proceeds to cover costs incurred in the
Advisor's site selection and acquisition activities (including travel and
related items) on behalf of the Company. See "Compensation Table."

Many REITs which are listed on national stock exchange or included for
quotation on a national market system are considered "self-administered," since
the employees of the REIT perform all significant management functions. In
contrast, REITs that are not self-administered, like the Company, typically
engage a third-party to perform management functions on its behalf, such as an
advisor. Accordingly, should the Company commence a subsequent public offering
after completion of this Offering and apply to have the Shares listed for
trading on a national stock exchange or included for quotation on a national
market system, it may be in the Company's best interest to become
self-administered. In this event, if the Independent Directors determine that
the Company should become self-administered, the Advisory Agreement permits the
Advisor to merge into the Company and for the Company to allow such merger,
with the consideration determined through appropriate means agreed to by the
Company and the Advisor.

<PAGE> 243

In the event the Advisor is merged into the Company, certain key employees of
the Advisor will become employees of the Company.

In the event the Advisory Agreement is terminated because Shares are
listed for trading on a national stock exchange or market system, provision for
payment of fees to the Advisor will be terminated. The Advisor and the
Management Agent may be merged into the Company at the time of listing and may
receive Shares in the Company in an amount which would be determined at that
time, based upon the value of all fees given up or waived by the Advisor and
the Management Agent through the merger. In the event the Advisory Agreement
is terminated for any reason other than the merger of the Advisor into the
Company, all obligations of the Advisor and its Affiliates to offer properties
to the Company for purchase shall also terminate.

The Company has agreed to indemnify the Advisor and pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to the
Advisor with respect to acts or omissions of the Advisor, provided that: (i)
the Advisor determined, in good faith, that the course of conduct which caused
a loss or liability was in the best interest of the Company; (ii) the Advisor
was acting on behalf of or performing services for the Company; (iii) such
liability or loss was not the result of misconduct on the part of the Advisor;
and (iv) such indemnification or agreement to hold harmless is recoverable only
out of the Company's net assets and not from the Stockholders.

THE MANAGEMENT AGENT

Inland Commercial Property Management, Inc. ("ICPM" or the "Management
Agent"), an Affiliate of the Advisor, provides property management services to
the Company. ICPM, an Illinois corporation, is a wholly owned subsidiary of
Mid-America Management Corp. ("Mid- America"), which manages approximately
14,600 multi-family units, including approximately 13,600 in the Chicago
metropolitan area more than any other firm in that market. ICPM was
incorporated in 1994 to segregate responsibility for Mid-America's growing
management portfolio of commercial properties. In August 1988, Mid-America and
its Affiliates owned or managed 1.3 million square feet of retail property.
This figure had grown to 5.8 million square feet by August 1991 and to 9.6
million square feet in April 1996.

ICPM is responsible for collections, leasing and maintenance of the
commercial properties which it manages. A substantial portion of the
portfolio, approximately 7.6 million square feet, consists of properties
triple-net leased to creditworthy tenants, whereby the tenant operates and
maintains the property and rent is net of property taxes, insurance and
operating expenses.

The following table sets forth information with respect to the
executive officers and directors of ICPM. The biography of Mr. Norbert J.
Treonis is set forth above.

<TABLE>
<CAPTION>
Name Age Position and Office with ICPM
---- --- -----------------------------
<S> <C> <C>
Norbert J. Treonis 45 Chairman of the Board of Directors
Robert H. Baum 52 Director
Daniel L. Goodwin 52 Director
D. Scott Carr 30 President
Kristi Wells 30 Vice President
Robert M. Barg 42 Secretary/Treasurer
</TABLE>

63
<PAGE> 244

ROBERT H. BAUM has been a Director of ICPM since its formation. Mr.
Baum has been with TIGI and its Affiliates since 1967 and is one of the four
original principals. Mr. Baum is Executive Vice President-General Counsel and
a Director of TIGI. In his capacity as General Counsel, Mr. Baum is
responsible for the supervision of the legal activities of TIGI and its
Affiliates. This responsibility includes the supervision of the Inland Law
Department and serving as liaison with all outside counsel. Mr. Baum is a
member of the North American Securities Administrators Association Real Estate
Advisory Committee and is a member of the Securities Advisory Committee to the
Secretary of State of Illinois. He is also a member of the American
Corporation Counsel Association, as well as a member of several bar
associations. Mr. Baum has been admitted to practice before the Supreme
Courts of the United States and the State of Illinois, as well as the bars of
several federal courts of appeals and federal district courts. He received his
B.S. Degree from the University of Wisconsin and his J.D. Degree from
Northwestern University School of Law.

DANIEL L. GOODWIN has been a Director of ICPM since its formation.
Mr. Goodwin is Chairman of the Board of Directors of TIGI, a billion-dollar
real estate and financial organization located in Oak Brook, Illinois. Mr.
Goodwin has been with TIGI and its Affiliates since 1967. Among TIGI's
subsidiaries is the largest property management firm in Illinois and one of the
largest commercial real estate and mortgage banking firms in the Midwest. Mr.
Goodwin has served as Director of the Avenue Bank of Oak Park and as a Director
of the Continental Bank of Oakbrook Terrace. He was also Chairman of the Bank
Holding Company of American National Bank of DuPage. Currently, he is the
Chairman of the Board of Inland Mortgage Investment Corporation.

Mr. Goodwin has served on the Board of the Illinois State Affordable
Housing Trust Fund for the past six years. He is an advisor for the Office of
Housing Coordination Services of the State of Illinois, and a member of the
Seniors Housing Committee of the National Multi- Housing Council. Illinois
Governor James Edgar appointed him Chairman of the Housing Production Committee
for the Illinois State Affordable Housing Conference. He has also served as a
member of the Cook County Commissioner's Economic Housing Development
Committee, and he was the Chairman of the DuPage County Affordable Housing Task
Force. The 1992 Catholic Charities Award was presented to Mr. Goodwin for his
work in addressing affordable housing needs. The City of Hope designated him
as the 1980's Man of the Year for the Illinois construction industry. In 1989,
the Chicago Metropolitan Coalition on Aging presented Mr. Goodwin with an award
in recognition of his efforts in making housing more affordable to Chicago's
senior citizens. On May 4, 1995, PADS, Inc. (Public Action to Deliver Shelter)
presented Mr. Goodwin with an award, recognizing TIGI as the leading corporate
provider of transitional housing for the homeless people of DuPage County.

Mr. Goodwin is a product of Chicago-area schools, and obtained his
Bachelor's and Master's Degrees from Illinois universities. Following
graduation, he taught for five years in the Chicago public schools. In 1990,
he received the Northeastern Illinois University President's Meritorious
Service Award. Mr. Goodwin holds a Master's Degree in Education from Northern
Illinois University and, in 1986, he was awarded an honorary doctorate from
Northeastern Illinois University College of Education. He is currently a
trustee of Illinois Benedictine College, and a member of the Board of Governors
of Illinois State Colleges and Universities. He was elected chairman of the
Northeastern Illinois University Board of Trustees in January 1996. Mr.
Goodwin served as a member of Governor Edgar's Transition Team. He also
served as a member of the Illinois House of Representatives Speaker's Advisory
Council.

Mr. Goodwin was the individual general partner of 14 W. Elm Limited
Partnership, 1445 North State Limited Partnership, 5600 Sheridan Limited
Partnership, 5630 Sheridan Limited Partnership and

64
<PAGE> 245

6030 Sheridan Limited Partnership, each of which ceased making debt service
payments to unaffiliated lenders with the objective of reducing or
restructuring the debt to a level which was commensurate with the level of
performance of the property owned by such partnerships. See "Prior Performance
of the Company's Affiliates--Loan Modifications and Work-Outs."

D. SCOTT CARR has been an officer of ICPM since its formation. Mr.
Carr was appointed Vice President and Secretary of ICPM in July 1994 and was
appointed President in July 1995. Mr. Carr joined TIGI and its Affiliates in
1987. Mr. Carr has responsibility for all the portfolio of commercial
properties managed by ICPM, including management and leasing. Mr. Carr is a
licensed real estate broker. He is a Certified Property Manager candidate with
the Institute of Real Estate Management and a member of the International
Council of Shopping Centers.

KRISTI A. WELLS has been an employee of ICPM since its formation. Ms.
Wells was appointed Assistant Vice President in July 1994 and in July 1995 was
appointed Vice President. Ms. Wells joined TIGI in 1990. Ms. Wells is a
licensed real estate broker and is a member of the International Counsel of
Shopping Centers.

ROBERT M. BARG has been the Secretary and Treasurer of ICPM since
January 1995. Mr. Barg joined the Inland Property Management Group in January
1986 and is Vice President and Controller of Mid-America. Prior to joining
TIGI, Mr. Barg was an Accounting Manager for the Charles H. Shaw Co. He
received his B.S. Degree in Business Administration from the University of
Illinois - Chicago and a Master's Degree from Western Illinois University. Mr.
Barg is a Certified Public Accountant and is a member of the Illinois CPA
Society. He holds a real estate sales license and is registered with the NASD
as a securities sales representative.

OTHER SERVICES

In addition to the services described above provided by the Advisor
and its Affiliates, Affiliates of the Advisor may provide other property-level
services to the Company and may receive compensation for such services,
including leasing, development, construction management, loan origination and
servicing, property tax reduction and risk managing fees. However, under no
circumstances will such compensation exceed 90% of that which will be paid to
third parties providing such services and all such compensation must have the
prior approval of a majority of the Directors, including a majority of the
Independent Directors.

INDEPENDENT DIRECTOR STOCK OPTION PLAN

The Company adopted the Independent Director Stock Option Plan (the
"Independent Director Stock Option Plan") concurrently with the commencement of
the Prior Offering. Only non-employee Directors who are "disinterested
persons" as defined under Rule 16b-3 of the Exchange Act are eligible to
participate in the Independent Director Stock Option Plan.

A total of 50,000 shares of Common Stock have been authorized and
reserved for issuance under the Independent Director Stock Option Plan. If the
outstanding shares of Common Stock are increased, decreased or changed into, or
exchanged for, a different number or kind of shares or securities of the
Company through a reorganization or merger in which the Company is the
surviving entity, or through a combination, recapitalization, reclassification,
stock split, stock dividend, stock consolidation or otherwise, an appropriate
adjustment shall be made in the number and kind of shares that may be issued

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pursuant to options. A corresponding adjustment to the consideration payable
with respect to options granted prior to any such change shall also be made.
Any such adjustment, however, shall be made without change in the total
payment, if any, applicable to the portion of the options not exercised but
with a corresponding adjustment in the price for each share.

The Independent Director Stock Option Plan provides for the grant of
non-qualified stock options to purchase 3,000 Shares to each Independent
Director as of the date such individuals become Directors (the "Initial
Options"), and subsequent grants of options to purchase 500 Shares on the date
of each annual stockholders' meeting to each Independent Director then in
office (the "Subsequent Options", collectively with the "Initial Options"
referred to herein as an "Option" or "Options"). As of the date of this
Prospectus, Options to purchase 11,500 Shares at $9.05 per Share had been
granted.

The purchase price of Common Stock (the "Option Price") under each
Initial Option granted to Independent Directors who became Directors on or
before the date of the Offering is the fair market value of the Common Stock at
the date of the commencement of the Offering. The Option Price under each
Initial Option granted to Directors who become Directors after the commencement
of the Offering will be the fair market value of the Common Stock as of the
date of grant. The Option Price under each Subsequent Option granted to
Directors shall be the fair market value of the Common Stock on the last
business day preceding the annual meeting. The Option Price under Options
granted during the period of the Offering is fixed in the Independent Director
Stock Option Plan at $9.05 per share.

The Initial Options are exercisable as follows: 1,000 Shares on the
date of grant and 1,000 Shares on each of the first and second anniversaries of
the date of grant. The Subsequent Options are exercisable on the second
anniversary of the date of grant. Options granted under the Independent
Director Stock Option Plan continue to be exercisable until the first to occur
of the tenth anniversary of the date of grant or three months following the
date the Independent Director ceases to be a Director and may be exercised by
payment of cash or through the delivery of Common Stock. Notwithstanding any
other provisions of the Independent Director Stock Option Plan to the contrary,
no Option issued pursuant thereto may be exercised if such exercise would
jeopardize the Company's status as a REIT under the Code.

No Option may be sold, pledged, assigned or transferred by an
Independent Director in any manner otherwise than by will or the laws of
descent or distribution. Options granted under the Independent Director Stock
Option Plan are generally exercisable in the case of death or disability for a
period of one year after death or the disabling event or three months after the
Independent Director ceases to be a member of the Board for any reason except
death or disability.

Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation
or upon sale of all or substantially all of the Company's property, the
Independent Director Stock Option Plan shall terminate, and any outstanding
options shall terminate and be forfeited. Notwithstanding the foregoing, the
Board may provide in writing in connection with, or in contemplation of, any
such transaction for any or all of the following alternatives (separately or in
combinations): (i) for the assumption by the successor corporation of the
options theretofore granted or the substitution by such corporation for such
options of options covering the stock of the successor corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and kind
of shares and prices; (ii) for the continuance of the Independent Director
Stock Option Plan by such successor corporation in which event the Independent
Director Stock Option Plan and the options shall continue in the manner and
under

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the terms so provided; or (iii) for the payment in cash or Shares in lieu of
and in complete satisfaction of such options.

SELECTED FINANCIAL DATA

The following table sets forth selected financial information derived
from the financial statements of the Company. Balance sheet data at March 31,
1996 and December 31, 1995 and 1994 and income statement data for the three
months ended March 31, 1996 and for the years ended December 31, 1995 and 1994
have been derived from the audited financial statements of the Company. In
addition, the data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
financial statements of the Company and related notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
(Unaudited)
Three
Months
Ended
March 31, Year Ended December 31,
---------- -----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Total assets . . . . . . . . . . . . . . . . . . . . . . $26,428,081 18,750,877 2,402,373

Mortgage payable . . . . . . . . . . . . . . . . . . . . 748,011 750,727 --

Total income . . . . . . . . . . . . . . . . . . . . . . 761,079 1,180,422 --

Net income . . . . . . . . . . . . . . . . . . . . . . . 235,266 496,514 --

Net income per share (a) . . . . . . . . . . . . . . . . .12 .53 --

Distributions declared . . . . . . . . . . . . . . . . . 476,675 736,627 --

Distributions per share (a) . . . . . . . . . . . . . . . .20 .78 --

Funds from Operations (a) (b) . . . . . . . . . . . . . . 338,357 666,408 --

Funds available for distributions (b) . . . . . . . . . . 440,406 787,011 --

Cash flows from operating activities . . . . . . . . . . 596,106 978,350 --

Cash flows used in investing activities . . . . . . . . . (5,811,430) (6,577,843) (1,703,498)

Cash flows from financing activities . . . . . . . . . . 7,413,866 6,327,490 1,714,432

Weighted average number of common shares
</TABLE>

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<PAGE> 248

<TABLE>
<S> <C> <C> <C>
outstanding . . . . . . . . . . . . . . . . . . . . 2,394,092 943,156 20,000
</TABLE>

(a) The net income and distributions per share are based upon the weighted
average number of common shares outstanding. The $.20 per share
Distribution for the three months ended March 31, 1996 and the $.78
per share Distribution for the fiscal year ended December 31, 1995,
represented 141% and 110.5% of the Company's Funds From Operations
("FFO") and 108% and 93.6% of funds available for distribution for
those periods. See Footnote (b) below for information regarding the
Company's calculation of FFO. Distributions by the Company to the
extent of its current and accumulated earnings and profits for federal
income tax purposes will be taxable to Stockholders as ordinary
dividend income. Distributions in excess of earnings and profits
generally will be treated as a non-taxable reduction of the
stockholder's basis in the Shares to the extent thereof, and
thereafter as taxable gain (a return of capital). These Distributions
will have the effect of deferring taxation of the amount of the
Distribution until the sale of the Stockholder's Shares. The Company
cannot calculate the portion of the Distribution for the three months
ended March 31, 1996 that represented a return of capital. For 1995,
$42,414 (or 5.76%) of the $736,627 Distribution paid for 1995
represented a return of capital. In order to maintain its
qualification as a REIT, the Company must make annual distributions to
Stockholders of at least 95% of its taxable income (which does not
include net capital gains) which was approximately $659,500 (or 89.5%)
of the Distribution paid in 1995. Under certain circumstances, the
Company may be required to make Distributions in excess of cash
available for distribution in order to meet the REIT distribution
requirements. Distributions are determined by the Company's Board of
Directors and are dependent on a number of factors, including the
amount of funds available for distribution, the Company's financial
condition, any decision by the Board of Directors to reinvest funds
rather than to distribute the funds, the Company's capital
expenditure, the annual distribution required to maintain REIT status
under the Code and other factors the Board of Directors may deem
relevant.

(b) "FFO" means net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation, and after
adjustments for unconsolidated partnerships and joint ventures. The
Company presently has no interests in unconsolidated partnerships or
joint ventures. FFO and funds available for distribution are
calculated as follows:

<TABLE>
<CAPTION>
3/31/96 1995 1994
------- ---- ----
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . $ 235,266 496,514 --
Depreciation . . . . . . . . . . . . . . . . . . . . 103,091 169,894 --
------- ------- --------

Funds from operations (1) . . . . . . . . . . . 338,357 666,408 --

Deferred rent receivable . . . . . . . . . . . . . (7,284) (12,413)(2) --
Rental income received under master
lease agreements (3) . . . . . . . . . . . . . 109,333 133,016 --
------- ------- ---------

Funds available for distribution . . . . . . . $440,406 787,011 --
======== ========== ==========
</TABLE>

(1) FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available
to fund cash needs. FFO should not be considered as an
alternative to net income as an

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<PAGE> 249

indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity. FFO as
reported by the Company may not be comparable to other
similarly titled measures of other real estate companies.

(2) Reference is made to Note (5) of the Notes to Financial
Statements of the Company.

(3) As part of the Montgomery-Goodyear, Hartford/Naperville Plaza,
Nantucket Square and Antioch Plaza purchases, the Company will
receive rent under master lease agreements on the spaces
currently vacant for periods ranging from one year to 18
months or until the spaces are leased. Generally accepted
accounting principles require that as these payments are
received, they be recorded as a reduction in the purchase
price of the properties rather than as rental income. As of
December 31, 1995, the Company had recorded $133,016 of such
payments and for the three months ended March 31, 1996, the
Company recorded $109,333 of such payments.

INVESTMENT OBJECTIVES AND POLICIES

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

2. Distributions. The Company currently pays regular monthly
Distributions to its Stockholders. However, the Company reserves the right,
prior to the completion of the acquisition process, to pay Distributions on a
quarterly basis out of Cash Flow, in an amount determined by the Board. The
properties owned by the Company are currently generating sufficient cash flow
to cover operating expenses of the Company plus pay a monthly Distribution of
8% per annum on weighted average Shares. The continuation of Distributions and
the size of the Distributions depend upon a variety of factors. There can be
no assurance that Distributions will be made. Distributions for the year ended
December 31, 1995, totaled $736,627, of which $42,414 was a return of capital
for federal income tax purposes. In addition, Distributions for the three
months ended March 31, 1996 totalled $476,675, a portion of which may be a
return of capital.

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Company, subject to applicable REIT rules, to reinvest proceeds from the sale,
financing, refinancing or other disposition of its properties through the
purchase of additional properties. See "--Sale or Disposition of Properties"
in this Section.

3. Types of Investments. The Company was formed to acquire
existing Neighborhood Retail Centers located primarily within an approximate
150-mile radius of its headquarters in Oak Brook, Illinois, a Chicago suburb,
where the Advisor maintains its acquisition and property management
headquarters, as well as single-user properties net leased by creditworthy
tenants, located throughout the United States. The Company may enter into sale
and leaseback transactions, pursuant to which the Company will purchase a
property from an entity and lease the property to such entity. It is the
Company's intention, whenever possible, to acquire properties free and clear of
permanent mortgage indebtedness by paying the entire purchase price of each
property in cash or for shares of the Company's stock. However, if it is
determined to be in the best interests of the Company, the Company will, in
certain instances, utilize borrowing to acquire properties. On properties
purchased on an all-cash basis, the Company may later incur mortgage
indebtedness by obtaining loans secured by selected properties, if favorable
financing terms are available. The proceeds from such loans would be used to
acquire additional properties and increase Cash Flow. Certain of these
properties will be subject to "net" leases. "Net" leases typically require
that tenants pay all or a majority of the operating expenses including real
estate taxes, special assessments and sales and use taxes, utilities, insurance
and building repairs related to the property, as well as lease payments. The
leases will be long-term (typically 15 to 25 years, but generally not less than
ten years) and may provide for a base minimum annual rent with periodic
increases. For purposes hereof, a creditworthy tenant shall be defined as a
tenant with a minimum net worth equal to ten times one year's rental payments
required under the terms of the lease or, alternatively, a tenant for whom
payments under the lease are guaranteed by an affiliate having a minimum net
worth of $10 million.

The Company will elect to purchase properties based on an
examination and evaluation by the Advisor of the potential value of the site,
the financial condition and business history of the property, the demographics
of the area in which the property is located or to be located, the proposed
purchase price, geographic and market diversification and potential sales. In
acquiring a property, the Advisor requires a Phase I environmental report and,
if necessary, a Phase II environmental report. In a sale-leaseback situation,
the seller of the property generally is assuming the operating risk which may
increase the price paid for the property. All acquisitions from Affiliates are
subject to approval by a majority of the Directors, including a majority of the
Independent Directors.

The Advisor and its Affiliates may purchase properties in
their own name, assume loans in connection therewith and temporarily hold title
thereto for the purpose of facilitating the acquisition of such property,
borrowing money or obtaining financing for the Company, the completion of
construction of the property or any other purpose related to the business of
the Company. In no event, however, may the Advisor or its Affiliates transfer
any property to the Company which it has held in excess of 12 months prior to
commencement of the Offering, except those specified in this Prospectus.

4. Acquisition Standards. Through its experience with the
acquisition of approximately 750 properties by Affiliates, the Advisor believes
the Company has the ability to identify quality properties capable of meeting
the investment objectives of the Offering. In evaluating potential
acquisitions, the Company considers a number of factors, including a
property's: (a) geographic location and type; (b) construction quality and
condition; (c) current and projected cash flow; (d) potential for capital
appreciation; (e) lease rent roll, including the potential for rent increases;
(f) potential for economic growth in the tax and regulatory environment of the
community in which the property is located; (g) potential for

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expanding the physical layout of the property and/or the number of sites; (h)
occupancy and demand by tenants for properties of a similar type in the same
geographic vicinity; (i) prospects for liquidity through sale, financing or
refinancing of the property; (j) competition from existing properties and the
potential for the construction of new properties in the area; and (k) treatment
under applicable federal, state and local tax and other laws and regulations.

Statistics in this section are excerpted from Woods & Poole
Economics, Inc., 1996 MSA Profile, Metropolitan Area Forecasts to 2020. Woods
& Poole Economics, Inc. is a Washington, D.C.-based independent research firm
that specializes in long-term county economic and demographic forecasts.
Chicago statistics are for the Chicago Metropolitan Statistical Area/Primary
Metropolitan Statistical Area, as defined by the Office of Management and
Budget. All earnings, personal income and retail sales data are presented in
inflation-adjusted 1987 "constant" dollars.

In 1993, Chicago had the third largest population among 313
metropolitan areas in the nation with more than 7.6 million people. Chicago
today is one of the nation's largest metropolitan areas and retail markets.
While the rate of growth of this large market from 1993 through 2020 is
forecast to trail that of the nation as a whole, in absolute numbers Chicago
will be a leader in increases in population, jobs, per capita income and retail
sales. Population is forecast to increase 0.33% per year in the Chicago
metropolitan area, compared to 0.83% for the nation as a whole; for jobs, the
forecasted annual increase is 0.87% for Chicago, compared to 1.02% for the
nation; for retail sales, the total forecasted increase from 1993 to 2020 is
43% for Chicago and 64% for the nation.

Woods & Poole Economics, Inc. projects that from 1993 through
2020, the Chicago metropolitan area will add 714,840 persons, the 21st largest
increase among the nation's 313 metropolitan areas, with Chicago retaining its
current place as third largest metropolitan area in the nation.

For the same period it is forecast that the Chicago area will:
(i) see a 50% rise in per capita income, improving the area's ranking from 23rd
to 18th among the nation's 313 metropolitan areas; (ii) lead the nation in the
number of new jobs, with 1,153,500; and (iii) see a rise in annual retail sales
from $49.8 billion to $71.1 billion, the largest increase among any
metropolitan area in the nation.

5. Description of Leases. The Company anticipates that with
regard to its properties, lessees will generally be required to pay a share,
either pro rata or fixed, of the real estate taxes, insurance, utilities and
common area maintenance of the properties. It is the Company's intent that a
substantial number of these leases will also contain provisions which increase
the amount of base rent payable at certain points during the lease term and/or
provide for the payment of additional rent calculated as a percentage of a
tenant's gross sales above predetermined thresholds. The terms of the leases
with Anchor Tenants will generally have initial terms of ten to 25 years, with
one or more options available to the lessee upon expiration of the initial
term. By contrast, smaller tenant leases typically have three to five year
terms.

During the initial term of a "net" lease, anticipated to be
not less than ten years, but typically 15 to 25 years, the tenant will pay the
Company, as lessor, a predetermined minimum annual rent generally based upon
the Company's cost of purchasing the land and building.

Each "net" lease tenant will be required to pay its share of
the cost of the liability insurance covering the properties owned by the
Company. The third party liability coverage will insure, among others, the
Company and the Advisor. Each tenant will be required to obtain, at its own
expense,

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property insurance naming the Company as the insured party for fire and other
casualty losses in an amount equal to the full value of such property. All
such insurance must be approved by the Advisor. In general, the "net" lease
may be assigned or subleased with the Company's prior written consent, but the
original tenant will remain fully liable under the lease unless the assignee
meets certain income and net worth tests.

6. Property Acquisition. The Company's acquisitions are
anticipated to be acquisitions of fee interests in real property, although
other methods of acquiring a property may be utilized if it is deemed to be
advantageous to the Company. For example, the Company may acquire properties
through a joint venture or the acquisition of substantially all of the
interests of an entity which in turn owns the real property. The Company may
also use wholly owned subsidiaries to acquire a property. Such wholly owned
subsidiaries will be formed solely for the purpose of acquiring a property or
properties. See "--Joint Ventures" in this Section.

As of the date of this Prospectus, the Company had acquired
nine Neighborhood Retail Centers and two single-user retail properties. Two of
the properties acquired to date, the Eagle Crest Shopping Center and the
Walgreen/Decatur property, were acquired from an Affiliate. The purchase
prices for those properties were not the subject of arm's-length negotiations.
The Articles provide that the Company shall not purchase a property from an
Affiliate unless a majority of the Directors (including a majority of the
Independent Directors) not interested in the transaction approve the purchase
as fair and reasonable to the Company and at a price to the Company no greater
than the cost of the asset to such Affiliate, or if the price to the Company is
in excess of such cost, that substantial justification for such excess exists
and that such excess is reasonable. In no event shall the cost of such asset
to the Company exceed its current appraised value. A majority of the Directors
(including a majority of the then Independent Directors) approved the purchases
of the Eagle Crest Shopping Center and the Walgreen/Decatur property as being
fair and reasonable to the Company and at a price to the Company no greater
than the cost of the assets to such Affiliate. There can be no assurance,
however, that the prices paid to the Affiliate for the Eagle Crest Shopping
Center and the Walgreens/Decatur property or for future acquisitions of
properties from Affiliates, if any, did not or would not exceed that which
would be paid by an unaffiliated buyer. See "Real Property Investments."

In some cases, the Company may commit to purchase properties
subject to completion of construction in accordance with terms and conditions
specified by the Company. In such cases, the Company will be obligated to
purchase the property at the completion of construction, provided the
construction conforms to definitive plans, specifications and costs approved by
the Company and embodied in the construction contract, as well as, in most
instances, satisfaction that agreed upon percentages of the property are
leased. The Company will receive a certificate of an architect, engineer or
other appropriate party, stating that the property complies with all plans and
specifications. The Company will not be permitted to construct or develop
properties, or render any services in connection with such development or
construction.

If remodeling is required prior to the purchase of a property,
the Company will pay a negotiated maximum amount either upon completion or in
installments commencing prior to completion. Such amount will be based on the
estimated cost of such remodeling. In such instances, the Company will also
have the right to review the lessee's books during and following completion of
the remodeling to verify actual costs. In the event of substantial disparity
between estimated and actual costs, an adjustment in purchase price may be
negotiated. If remodeling is required after the purchase of a property,

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an Affiliate of the Advisor may serve as construction manager for a fee no
greater than 90% of the fee a third party would charge for such services.

The Advisor and its Affiliates may purchase properties in
their own name, and assume loans in connection therewith and temporarily hold
title thereto for the purpose of facilitating the acquisition of such property,
obtaining financing for the Company, the completion of construction of the
property or any other purpose related to the business of the Company, in
accordance with the terms set forth in the Bylaws.

7. Borrowing. It is the Company's intention, whenever possible,
to acquire properties free and clear of permanent mortgage indebtedness by
paying the entire purchase price of each property in cash or for shares of the
Company's stock. However, if it is determined to be in the best interest of
the Company, the Company will, in certain instances, utilize borrowing to
acquire properties. On properties purchased on an all cash basis, the Company
may later incur mortgage indebtedness by obtaining loans secured by selected
properties, if favorable financing terms are available. The proceeds from such
loans would be used to acquire additional properties and increase Cash Flow.
The Company may also incur indebtedness to finance improvements to the
properties it acquires. The Company anticipates that aggregate borrowings
related to all of the Company's properties will not exceed 50% of their
combined fair market values, however, the maximum amount of borrowings in
relation to Net Assets shall, in the absence of the consent of a majority of
the Stockholders, not exceed 300% of Net Assets.

If the Company does borrow funds secured by its properties, it
intends to incur only non-recourse indebtedness, if available, in connection
with such borrowings, meaning that the lenders' rights on default will
generally be limited to foreclosure on the property which secured the
obligation. The Company will not borrow funds from a program sponsored by the
Advisor or its Affiliates which makes or invests in mortgage loans. If the
Company incurs mortgage indebtedness, it would endeavor to obtain level payment
financing, meaning that the amount of debt service payable would be
substantially the same each year, although some mortgages might provide for a
so-called "balloon" payment. Any mortgages secured by Company property will
comply with the restrictions set forth by the Commissioner of Corporations of
the State of California. See "Summary of the Organizational
Documents--Restrictions on Borrowing."

8. Sale or Disposition of Properties. The determination of
whether a particular property should be sold or otherwise disposed of will be
made after consideration of relevant factors, including performance or
projected performance of the property and market conditions, with a view toward
achieving the principal investment objectives of the Company.

In general, it will be the Company's policy to hold its
properties, prior to sale, for a minimum of four years. See "Federal Income
Tax Considerations--Taxation of the Company--Prohibited Transactions."
Furthermore, the general policy of the Company will be to reinvest proceeds
from the sale, financing, refinancing or other disposition of its properties
that represents the initial investment into additional properties or,
secondarily, to use such proceeds for the maintenance or repair of existing
properties or to increase reserves for such purposes. The objective of
reinvesting such portion of the sale, financing and refinancing proceeds is to
increase the real estate assets owned by the Company, and the Cash Flow derived
from such assets, prior to listing the Company's Shares on a national
securities exchange or market, with the further objective of maximizing Share
prices at the time of listing. Notwithstanding this policy, the Board, in its
discretion, may distribute to Stockholders all of the proceeds from the sale,
financing, refinancing or other disposition of the Company's properties. In
determining

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whether all of such proceeds should be distributed to Stockholders, the Board
will consider, among other factors, the desirability of properties available
for purchase, real estate market conditions, the likelihood of the listing of
the Company's shares on a national stock exchange or included for quotation on
a national market system and compliance with REIT regulations. Because the
Company may reinvest such portion of the proceeds from the sale, financing or
refinancing of its properties, the Company could hold Stockholders' capital
indefinitely. However, the affirmative vote of the Stockholders controlling a
majority of the Shares will force the Company to liquidate its assets and
dissolve. See "Summary of the Organizational Documents--Dissolution or
Termination of the Company."

In connection with a sale of a property owned by the Company,
the Company's general policy will be to obtain an all-cash sale price.
However, a purchase money obligation secured by a mortgage on the property sold
may be taken as partial payment; there are no limitations or restrictions on
the Company taking such purchase money obligations. The terms of payment to
the Company will be affected by custom in the area in which the property being
sold is located and the then prevailing economic conditions. To the extent the
Company receives notes and other property instead of cash from sales, such
proceeds (other than any interest payable thereon) will not be included in net
sale proceeds until and to the extent the notes or other property are actually
paid, sold, refinanced or otherwise disposed of and, therefore, the
distribution of the proceeds of a sale to the Stockholders may be delayed until
such time. In such cases, the Company will receive payments (cash and other
property) in the year of sale in an amount less than the selling price and
subsequent payments will be spread over a number of years.

9. Change in Investment Objectives. The Stockholders have no
voting rights with respect to implementing the investment objectives and
policies of the Company, all of which are the responsibility of the Board. The
Board will not, however, make any material change in the principal investment
objectives described herein under the caption "Investment Objectives and
Policies" without first obtaining the written consent or approval of the
Stockholders controlling a majority of the Shares.

10. Certain Investment Limitations. The Company will not: (i)
invest more than 10% of its total assets in unimproved real property; (ii)
invest in commodities or commodity future contracts; (iii) issue redeemable
equity securities; (iv) issue shares on a deferred payment basis or other
similar arrangement; and (v) operate in such a manner as to be classified as an
"investment company" for purposes of the Investment Company Act of 1940, as
amended. See "Summary of the Organizational Documents--Restrictions on
Investments."

11. Appraisals. All real property acquisitions made and to be
made by the Company have been or will be supported by an appraisal prepared by
a competent, independent appraiser who is a member-in-good standing of the
American Institute of Real Estate Appraisers prior to the purchase of the
property. The purchase price of each property will not exceed its appraised
value. It should be noted, however, that appraisals are estimates of value and
should not be relied on as measures of true worth or realizable value. The
appraisal will be maintained in the Company's records for at least five years
and copies of such appraisals will be available for review by Stockholders upon
their request.

12. Return of Uninvested Proceeds. Any of the proceeds of this
Offering allocable to investments in real property which have not been invested
in real property or committed for such purpose within the later of: (i) 24
months from the original effective date of this Prospectus; or (ii) 12 months
from the termination of the Offering, will be returned by the Company to the
Stockholders. All funds received by the Company out of the escrow account will
be available for the general use of the Company from the time of such receipt
until the expiration of the period discussed above and may be expended to

74
<PAGE> 255

operate the properties which have been acquired and to reimburse the Advisor
for certain expenses of the Company, to the extent allowable under the Advisory
Agreement. Funds will not be segregated or held separate from other funds of
the Company pending investment, and interest will be payable to the
Stockholders if uninvested funds are returned to them.

13. Additional Offerings and Exchange Listing. The Company
anticipates that, by 1999, the Board of Directors will determine whether it is
in the best interests of the Company to: (i) apply to have the Shares listed
for trading on a national stock exchange or included for quotation on a
national market system, provided the Company meets the then applicable listing
requirements; and/or (ii) commence a subsequent public offering after
completion of this Offering. The Company believes that the completion of a
subsequent public offering and/or exchange listing will allow the Company to
increase its size, portfolio diversity, stockholder liquidity, access to
capital and stability, and decrease its operating costs through economies of
scale. If listing of the Shares is not feasible by 1999, the Board may decide
to: (i) sell the Company's assets individually; or (ii) list the Shares at a
future date to provide liquidity for Stockholders.

14. Joint Ventures. The Company shall be permitted to invest in
joint venture arrangements with other public real estate programs formed by the
Advisor or any of its Affiliates if a majority of Directors (including a
majority of Independent Directors) not otherwise interested in the transaction
approve the transaction as being fair and reasonable to the Company and the
investment by each such joint venture partner is substantially on the same
terms and conditions as those received by other joint venturers.

The Company shall be permitted to invest in general
partnerships or joint venture arrangements with Affiliates other than publicly
registered Affiliates only under the following conditions: (i) the investment
is necessary to relieve the Company from any commitment to purchase a property
entered into prior to the closing of the Offering; (ii) there are no duplicate
property management or other fees; (iii) the investment of each entity is on
substantially the same terms and conditions; and (iv) the Company must have a
right of first refusal if the Advisor or its Affiliates wish to sell the
property held in such joint venture. In addition, the Company shall be
permitted to invest in general partnerships or joint venture arrangements with
Affiliates as co-owners of a property. The Company will be able to increase
its equity participation in such entity as additional proceeds of the Offering
are received by the Company with the result that the Company will end up with
up to a 100% equity ownership of the property, provided, however that the
affiliated general or joint venture partner will not be entitled to any profit
or other benefit on such sale of its equity participation to the Company.

It should be noted that there is a potential risk of an
impasse on joint venture decisions (i.e., that the Company and its joint
venture partner will be unable to agree on a matter material to the joint
venture). Furthermore, there can be no assurance that the Company will have
sufficient financial resources to exercise its right of first refusal. The
Company will not enter into joint venture arrangements with entities
unaffiliated with the Advisor and its Affiliates. See "Risk
Factors--Investment Risks--Objectives of Joint Venture Partners May Conflict
with the Company's Objectives."

15. Other Policies. In determining whether to purchase a
particular property, the Company may first obtain an option to purchase such
property. The amount paid for the option, if any, usually would be surrendered
if the property was not purchased and normally would be credited against the
purchase price if the property was purchased.

75
<PAGE> 256

The Company will not invest in any multi-family residential
properties, leisure home sites, farms, ranches, timberlands, unimproved or
mining properties. Assuming the Maximum Offering is sold, the Company does not
intend to invest more than approximately 20% of the anticipated proceeds in any
one property.

The Company holds all funds, pending investment in properties,
in assets which will allow the Company to continue to qualify as a REIT. Such
investments are highly liquid and provide for appropriate safety of principal
and may include, but are not limited to, investments such as GNMA bonds and
real estate mortgage investment conduits ("REMICs"). See "Federal Income Tax
Considerations--Taxation of the Company--REIT Qualification Tests."

The Company will not make distributions-in-kind, except for:
(i) distributions of readily marketable securities; (ii) distributions of
beneficial interest in a liquidating trust established for the dissolution of
the Company and the liquidation of its assets in accordance with the terms of
the Articles; or (iii) distributions of in-kind property which meet all of the
following conditions: (a) the Directors advise each Stockholder of the risks
associated with direct ownership of the property; (b) the Directors offer each
Stockholder the election of receiving in-kind property distributions; and (c)
the Directors distribute in-kind property only to those Stockholders who accept
the Directors' offer.

REAL PROPERTY INVESTMENTS

The Company currently owns nine Neighborhood Retail Centers and two
single-user retail properties. The terms of the Company's leases vary
depending upon tenant size, but in many cases contain contractual provisions
which automatically increase the amount of base rent payable at certain points
during the term of the lease. Such leases may also contain provisions which
provide for the payment of additional rent calculated as a percentage of a
tenant's gross sales above pre-determined thresholds.

THE WALGREENS/DECATUR PROPERTY

On January 31, 1995, the Company acquired the Walgreens/Decatur
property from Inland Property Sales, Inc. ("IPS"), an Affiliate of the Advisor,
for the purchase price of $1,209,053, including acquisition costs of $482.
Although it was originally anticipated that this property would be acquired on
an all cash basis, management of the Company made the determination, based on
the recommendations of the Advisor, that the investment objectives of the
Company would be better met by assuming a portion of the first mortgage loan
secured by such property, since: (i) the terms of the current first mortgage
loan are more favorable for the Company than mortgage rates currently available
from unaffiliated third parties; and (ii) the Company was able to apply its
available cash towards the acquisition of an additional property.

The Walgreen Company ("Walgreens"), which is the largest drug store
chain in the United States based on sales volume and is considered to be
creditworthy by the Company, leases 100% of the free-standing building, which
has 13,500 square-feet of GLA and was constructed in 1988. IPS purchased the
Walgreens/Decatur property in 1990 for a purchase price of $1,152,500,
including a cash downpayment of $112,500 and first- mortgage debt of
$1,040,000. On June 9, 1994, IPS refinanced the Walgreens/Decatur property.
The existing first-mortgage loan was retired in the amount of $1,025,498,
including nine days of interest at $2,462. A new first mortgage loan was
funded in the principal amount of $1,075,000.

76
<PAGE> 257

The following table describes the formulation of the purchase price
paid by the Company:

TOTAL PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,209,053
=========
</TABLE>

As of June 30, 1996, the balance of the assumed mortgage was
approximately $745,242. This mortgage has an interest rate of 7.655%,
amortizes over a 25-year period and matures May 31, 2004. The Company is
responsible for monthly payments of principal and interest of $5,689. For
federal income tax purposes, the Company's basis in the Walgreens/Decatur
property is $1,130,723. Real estate taxes and insurance for the
Walgreens/Decatur property paid in 1995 were $24,600 and $1,701, respectively.

Walgreens' lease requires it to pay $127,820 in annual base rent
($9.47 per square foot). The rent does not include any allowances for tenant
improvements, leasing commissions or similar amounts. The lease provides for
payment of percentage rent equal to the amount by which 2.5% of general sales
and 1% of liquor sales exceed the base rent. 2.5% of general merchandise sales
and 1% of liquor sales currently equal approximately $80,000; therefore, no
percentage rent is currently payable. Walgreens has the option to cancel the
lease on September 1, 2008 or it can exercise up to five, five-year extensions.
The lease is on a double-net basis. Walgreens guarantees payment of rent,
reimbursement of property taxes and payment of all other property expenses,
exclusive of the roof and structural elements of the building.

<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received
December 31, Rate Per Sq. Ft.
------------ ---- -----------
<S> <C> <C>
1995 100% $9.47
1994 100 9.47
1993 100 9.47
1992 100 9.47
1991 100 9.47
</TABLE>

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a fair market value of the Walgreens/Decatur property as
of May 9, 1994 of $1,550,000. It should be noted, however, that appraisals are
estimates of value and should not be relied on as measures of true worth or
realizable value.

77
<PAGE> 258

THE EAGLE CREST SHOPPING CENTER

On March 1, 1995, the Company acquired the Eagle Crest Shopping Center
("Eagle Crest"), a Neighborhood Retail Center located in Naperville, Illinois,
from IPS for a purchase price of $4,816,970, including acquisition costs of
$11,059. Although it was originally anticipated that Eagle Crest would be
acquired on an all-cash basis, management of the Company made the
determination, based on the recommendation of the Advisor, that the investment
objectives of the Company would be better met by assuming a portion of the
first mortgage loan held by IPS secured by such property, as well as entering
into a loan agreement with IPS for the balance of the purchase price. By
utilizing seller financing to purchase Eagle Crest, the Company was able to
begin receiving the net income, after debt service payments, from Eagle Crest
on an expedited basis, thus increasing the Company's earnings to be distributed
to the Stockholders.

Eagle Crest aggregates 67,650 square feet of GLA and is 100% leased.
Its major tenant is Eagle Foods, Inc. ("Eagle"). Eagle, which leases 46,096
square feet (approximately 68%) of Eagle Crest's GLA, is the only tenant at
Eagle Crest which leases more than 10% of Eagle Crest's GLA and is considered
creditworthy by the Company. IPS purchased Eagle Crest in April 1991 for
$3,200,000, including a cash down payment of $457,893, first- and
second-mortgage debt of $2,244,139 and a note owed to the seller in the amount
of $493,192. In 1992, IPS refinanced the first-mortgage debt in the principal
amount of $2,450,000, realizing $76,792 in net refinancing proceeds. Since
purchasing Eagle Crest, IPS expended $142,441 for capital improvements at the
property. In 1993, Eagle completed extensive improvements to its store at
Eagle Crest, converting the store to a "country market" format. On March 1,
1994, IPS again refinanced Eagle Crest, increasing the principal amount of the
first mortgage loan from $2,450,000 to $3,600,000, using the additional
$1,150,000 in loan proceeds, plus $50,000 of IPS's funds, to reimburse
$1,200,000 to Eagle for the improvements made by Eagle to its store. In return
for the reimbursement Eagle began paying an additional $157,500 per annum in
rent under its lease. Eagle's lease requires it to pay base rent equal to
$6.61 per square foot per annum through 1995 and increasing to $6.68 per square
foot per annum through February 2014. The lease contains five five-year
renewal options at a base rent equal to $6.68 per square foot. Eagle leases
its store on a double-net basis and is responsible for paying its pro rata
share of property taxes and a fixed amount of the common area maintenance
("CAM") at Eagle Crest, which payments were $48,674 and $19,207, respectively,
for 1995.

The following table describes the formulation of the purchase price
paid by the Company:

Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,059
-----------

TOTAL PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,816,970
=========
</TABLE>

78
<PAGE> 259

* Amount of principal and accrued interest due as of July 1, 1994.
Interest is accruing at the rate of $1,970 per month and this amount
will be adjusted at the time of purchase by the Company.

The balance of the assumed mortgage was paid in full in April 1995
with interest at 9.5% per annum. The total amount paid was $3,551,100, of
which $3,533,760 was principal paid from Gross Offering Proceeds and $17,340
was interest paid from Company operations. The deferred portion of the
purchase price, totaling $1,212,427, was paid to IPS in full from Gross
Offering Proceeds, including accrued interest of $22,009, in May 1995. The
interest was paid from Company operations. At December 31, 1995, for federal
income tax purposes, the Company's basis in Eagle Crest was $2,938,352.

None of the rents received from any of the Eagle Crest tenants include
allowances for tenant improvements, leasing commissions or similar amounts.
Property taxes payable in 1995 for the tax year ended 1994 (the most recent tax
year for which information is available) totalled $72,854.

<TABLE>
<CAPTION>
Annual
Year Ending Rents
December Occupancy Received
31, Rate Per Sq. Ft.
------------- -------------- -----------
<S> <C> <C>
1995 100% $ 8.70

1994 100 8.16

1993 100 6.06

1992 100 6.11

1991 100 6.00
(nine months
annualized)
</TABLE>

At March 31, 1996, Eagle Crest had a total of 13 tenants. The
following tables set forth certain information with respect to the amount of
and expiration of leases at this Neighborhood Retail Center:

79
<PAGE> 260

<TABLE>
<CAPTION>
Approx.
Gross Average Percent of Percent of
Leasable Area Base Rent Total Annual
("GLA") of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ --------------------------- ---------- ------- ------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1 1,505 $ 15,260 $ 573,357 $10.14 2.22% 2.66%

1997 4 5,590 86,670 564,540 15.50 8.26 15.35

1998 4 9,525 130,745 481,127 13.73 14.08 27.17

1999 1 4,028 42,294 350,382 10.50 5.95 12.07

2000-2005 -- -- -- 308,088 -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market prices.

<TABLE>
<CAPTION>
Square Feet Renewal Current Annual Rent Per
Lessee Leased Lease Ends Options Base Rent Square Foot
------ ------------ ---------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Eagle Foods 46,096 2/2014 5/5 years $ 308,088 $ 6.68

Blue Angel Travel 910 6/1997 None 16,800 18.46

State Farm Insurance 888 7/2000 None 17,746 19.98

Dental Office 900 7/1997 None 17,158 19.06

Pot Pourri Gifts 4,028 1/1999 1/5 years 40,280 10.00

La Cantina Lounge 2,000 12/1998 1/5 years 30,980 15.49

Pepe's Restaurant 2,000 12/1998 1/5 years 30,980 15.49

Prudential Real Estate 4,250 2/1998 None 42,500 10.00

The Grill 1,275 11/1998 1/5 years 17,850 14.00

Clothes Clean Center 1,700 6/1997 None 23,800 14.00

Hair Inc. 1,505 4/1999 3/3 years 15,260 10.14

The Sewing Room 2,080 10/1997 None 27,560 13.25

Coffee Grinder (outlet) 18 6/1996 None 6,000 333.33
</TABLE>

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a fair market value of Eagle Crest as of August 1, 1994
of $4,850,000. It should be noted, however, that appraisals are estimates of
value and should not be relied on as measures of true worth or realizable
value.

80
<PAGE> 261

MONTGOMERY-GOODYEAR SHOPPING CENTER

On September 14, 1995, the Company acquired the Montgomery-Goodyear
Shopping Center ("Montgomery-Goodyear"), a Neighborhood Retail Center located
in Montgomery, Illinois, from an unaffiliated third party for a purchase price
of $1,145,992, including acquisition costs of $5,992. A portion of the
purchase price was evidenced by a promissory note payable to Inland Mortgage
Investment Corporation, an affiliate of the Advisor ("IMIC"), in the gross
amount of $600,000, bearing interest at a rate of 10.9% per annum and maturing
on October 14, 1995. The remainder of the purchase price, net of prorations,
of approximately $535,000 was funded with proceeds of the Prior Offering. The
promissory note was paid in full in October 1995. The total amount paid was
$604,260, of which $600,000 was principal paid from Gross Offering Proceeds and
$4,260 was interest paid from Company operations. At December 31, 1995, for
federal income tax purposes, the Company's basis in the Montgomery-Goodyear
building was $827,390. Real estate taxes and insurance for the
Montgomery-Goodyear property paid in 1995 were $25,450 and $3,012,
respectively.

Montgomery-Goodyear, built in 1991, aggregates 12,863 square feet of
gross leasable area ("GLA") and is 100% occupied. Its major tenant is Goodyear
Tire & Rubber Co. which leases 6,293 square feet and is considered creditworthy
by the Company. The other tenants are Merlin Corporation, which leases
approximately 28% of GLA, and National Carpet Outlet, Inc., which leases the
remaining 23% of GLA.

<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received
December 31, Rate Per Square Foot
------------ ---------------- ---------------
<S> <C> <C>
1995 100% $ 11.39
1994 100 11.39
1993 100 11.39
1992 100 11.39
</TABLE>

At March 31, 1996, Montgomery-Goodyear had a total of three tenants.
The following tables set forth certain information with respect to the amount
of and expiration of leases at this Neighborhood Retail Center:

<PAGE> 262

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ --------------------------- ---------- ----------- ------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1 3,010 $ 36,120 $ 146,520 $12.00 23.40% 24.65%

1997-2000 -- -- -- 115,080 -- -- --

2001 -- -- -- 116,467 -- -- --

2002-2005 -- -- -- 121,428 -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market rates.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent Per
Lessee Leased Ends Options Base Rent Square Foot
- ------ -------------- -------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
Goodyear Tire & Rubber Co. 6,293 11/2006 5/5 years $63,600 $10.10
Merlin Corporation 3,560 10/2006 3/5 years 46,800 13.15
National Carpet Outlet, Inc. 3,010 9/1996 1/1 year 36,120 12.00
</TABLE>

The Company received an appraisal prepared by an independent appraiser who
is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a fair market value of Montgomery-Goodyear as of May 10,
1995 of $1,260,000. It should be noted, however, that appraisals are estimates
of value and should not be relied on as measures of true worth or realizable
value.

THE HARTFORD/NAPERVILLE PLAZA PROPERTY

On September 14, 1995, the Company acquired Hartford/Naperville Plaza
("Hartford/Naperville") located in Naperville, Illinois from an unaffiliated
third party for a purchase price of $4,414,015, including acquisition costs of
$14,015. A portion of the purchase price was evidenced by a promissory note
payable to IMIC, in the gross amount of $600,000, bearing interest at a rate of
10.9% per annum and maturing on October 14, 1995. In addition, the Company
paid closing costs of $13,915 and deposited $150,000 in an escrow account for
leasehold improvements to the Blockbuster, Inc. space. The remainder of the
purchase price was funded with proceeds of the Prior Offering. The promissory
note was paid in full in October 1995. The total amount paid was $605,102, of
which $600,000 was principal paid from Gross Offering Proceeds and $5,102 was
interest paid from Company operations. At December 31, 1995, for federal
income tax purposes, the Company's basis in Hartford/Naperville was $3,325,211.
Real estate taxes for Hartford/Naperville paid in 1995 for the tax year ended
1994 were $25,450.

Hartford/Naperville aggregates 43,862 square feet of GLA and construction
was completed in July 1995. Its anchor tenants include nationally recognized
tenants such as Sears Hardware with 21,000 square feet and Blockbuster Video
with 6,500 square feet, as well as Keller/Williams Realty with 6,160 square
feet, and each is considered creditworthy by the Company.

<PAGE> 263

Hartford/Naperville is currently 100% leased and is anchored by Sears
Hardware, Blockbuster Video and Keller/Williams Realty, each of which leases
more than 10% of the building's square footage. The lease with Sears Hardware
requires a base rent of $9.35 per square foot per annum until August 2005 and
contains three renewal options of five years each. Sears Hardware sells
hardware supplies and tools. The lease with Blockbuster Video requires a base
rent of $15 per square foot per annum until September 30, 2000 and $17.25 per
square foot per annum from October 1, 2000 until October 31, 2005, and contains
four renewal options of five years each. Blockbuster Video sells and rents
prerecorded audio and video products. The lease with Keller/Williams Realty
requires a base rent of $15 per square foot per annum until December 2000 and
such lease has no renewal options. Keller/Williams Realty is a local real
estate brokerage firm.

At March 31, 1996, Hartford/Naperville had a total of eight tenants. The
following tables set forth certain information with respect to the amount of
and expiration of leases at this Neighborhood Retail Center:

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ --------------------------- ---------- ----------- ------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996-1999 -- -- -- $ 548,170 -- -- --

2000 4 11,610 $178,728 551,186 $15.39 26.47% 32.43%

2001 1 2,992 40,392 384,067 13.50 6.82 10.52%

2002-2004 -- -- -- 343,675 -- -- --

2005 3 29,260 343,675 343,675 11.75 66.71 100.00%
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market rates.

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent Per
Lessee Leased Ends Options Base Rent Square Foot
- ------ ------------ -------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Sears Hardware 21,000 8/2005 3/5 years $196,350 $ 9.35
Blockbuster Video 6,500 10/2005 4/5 years 97,500 15.00
Keller/Williams Realty 6,160 12/2000 None 92,400 15.00
Hair Cuttery 1,320 3/2000 1/5 years 21,780 16.50
Signature Cleaners 1,760 12/2005 1/5 years 35,200 20.00
Aspen Bakery 2,600 11/2000 1/5 years 41,600 16.00
Sound Deluxe 2,992 2/2001 1/5 years 40,390 13.50
Nancy's Pizza 1,530 12/2000 3/5 years 22,950 15.00
</TABLE>

<PAGE> 264

of $4,680,000. It should be noted, however, that appraisals are estimates of
value and should not be relied on as true worth or realizable value.

NANTUCKET SQUARE SHOPPING CENTER

On September 20, 1995, the Company acquired Nantucket Square Shopping
Center ("Nantucket Square"), a Neighborhood Retail Center located in
Schaumburg, Illinois from an unaffiliated third party for a purchase price of
$4,257,918, including acquisition costs of $4,913. A portion of the purchase
price was evidenced by a promissory note payable to IMIC in the gross amount of
$3,550,000, bearing interest at a rate of 10.5% per annum and maturing on
November 19, 1995. The remainder of the purchase price was funded with
proceeds of the Prior Offering. The promissory note was paid in full in
December 1995. The total amount paid was $3,612,011, of which $3,550,000 was
principal paid from Gross Offering Proceeds and $62,011 was interest paid from
Company operations. There are two buildings on the property, one of which is a
one-story, multi-tenant shopping mall located on approximately 7.75 acres of
land containing 53,720 square feet. The other building is a one-story, free-
standing building which houses a Burger King restaurant containing
approximately 3,260 square feet. Real estate taxes for the shopping mall and
the Burger King restaurant outlot were $152,122 and $39,733, respectively, for
1993. Subsequent to the purchase of the property, the Company paid $51,135 for
tenant improvements, from Gross Offering Proceeds, for two tenants expanding
their space, which sum was added to the cost of the property. At December 31,
1995, for federal income tax purposes, the Company's basis in the Nantucket
Square building was $2,372,160

Nantucket Square is currently 89% leased (100% leased when including
the master lease) and has four tenants which lease more than 10% of the
building's square footage. The lease with Play It Again Sports requires a
current base rent of $10 per square foot per annum until September 30, 1998,
$10.50 per square foot per annum from October 1, 1998 to September 30, 1999 and
$11 per square foot per annum from October 1, 1999 to September 30, 2000 with
no renewal provisions. Play It Again Sports sells sports equipment and related
accessories. The lease with Kathy's Hallmark requires a current base rent of
$10.50 per square foot per annum until February 28, 1999 and $11.50 per square
foot per annum from March 1, 1999 until May 31, 2000, and contains one renewal
option of five years. Kathy's Hallmark sells greeting cards and gift items.
The lease with Super Trak Corp. requires a current base rent of $7 per square
foot per annum until November 30, 1998 and $7.50 per square foot per annum from
December 1, 1998 until November 30, 2003, and contains three renewal options of
five years each. Super Trak sells auto parts and accessories. The lease with
Fashionation requires a base rent of $8.76 per square foot per annum until
January 31, 1998 and such lease has one renewal option of five years.
Fashionation is a clothing retailer. In October 1995, the Company received
notice from one of its tenants at Nantucket Square of its intent to close its
store. The tenant, which occupies 6,228 square feet of space, vacated the
premises on December 10, 1995. The lease for the space currently expires on
January 31, 1998. The tenant is continuing to pay its monthly rent, however,
the Company is pursuing a replacement tenant. A second tenant at Nantucket
Square, occupying 3,300 square feet of space, filed for financial and
reorganization protection under the federal bankruptcy laws. This tenant
continues to occupy its space and pay its monthly rent. The bankruptcy
petition filed with the bankruptcy court stated this tenant planned on closing
a number of its other stores but did not anticipate closing its store at
Nantucket Square.

<PAGE> 265

supplied by the seller of Nantucket Square to the Company, is unaudited.
Information for prior years is not available to the Company.

<TABLE>
<CAPTION>
Annual Rents
Year Ending Occupancy Received Per
December 31, Rate Square Foot
------------ ---------------- ---------------
<S> <C> <C>
1995 81% $ 8.54
1994 83 8.44
</TABLE>

At March 31, 1996, Nantucket Square had a total of 17 tenants. The
following tables set forth certain information with respect to the amount of
and expiration of leases at this Neighborhood Retail Center:

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ --------------------------- ---------- ----------- ------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 2 4,500 $ 42,750 $ 589,081 $ 9.50 7.90% 7.26%

1997 -- -- -- 554,563 -- -- --

1998 5 11,106 109,772 559,980 9.88 19.49 19.60

1999 1 1,050 12,477 467,558 11.88 1.84 2.67

2000 5 17,218 204,368 459,340 11.87 30.22 44.49

2001 1 2,403 27,000 255,562 11.24 4.22 10.56

2002 3 5,661 103,540 229,162 18.29 9.93 45.18

2003 1 11,743 88,072 126,022 7.50 20.61 69.89

2004 1 3,300 37,950 37,950 11.50 5.79 100.00

2005 -- -- -- -- -- -- --
</TABLE>

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

<PAGE> 266

<TABLE>
<CAPTION>
Current
Square Feet Lease Renewal Annual Rent Per
Lessee Leased Ends Options Base Rent Square Foot
- ------ ------------ -------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Currency Exchange 1,246 12/2000 1/5 years $ 18,067 $ 14.50
Baskin-Robbins Ice Cream 900 11/2000 None 14,769 16.41
Express Services 1,050 2/1998 1/3 years 11,025 10.50
Travel Agency 1,050 7/1999 None 11,550 11.00
Vacant* 2,400 22,800 9.50
Mail Works Plus 1,200 12/1997 1/5 years 13,500 11.25
Imperial Cleaners 1,200 12/2002 1/10 years 16,800 14.00
Proof Positive Photo 1,200 4/1998 1/3 years 15,022 12.52
Nancy's Pizza 1,200 8/1998 2/5 years 12,000 10.00
Vacant* 2,100 19,950 9.50
Fashionation 6,228 1/1998 1/5 years 54,557 8.76
Super Trak 11,743 11/2003 3/5 years 82,201 7.00
Kathy's Hallmark 7,156 5/2000 1/5 years 75,138 10.50
Clothes Time 3,300 4/2004 2/5 years 34,650 10.50
Great Clips 1,428 9/1998 1/5 years 14,994 10.50
Radio Shack 2,403 2/2001 None 24,600 10.24
Once Upon A Child 2,703 7/2000 1/5 years 25,678 9.50
Play It Again Sports 5,213 9/2000 None 52,130 10.00

Burger King 3,261 7/2002 1/5 years 67,900 20.82
</TABLE>

- ---------------
* The vacancies currently total 4,500 square feet, however, the vacant
space is being master leased by the seller at $15.00 per square foot
for one year, on a gross basis. For purposes of the charts appearing
on this and the prior page, the Company presented the vacant space as
being master leased at a rate of $9.50 per square foot, on a net
basis.

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a fair market value of Nantucket Square as of September
14, 1995 in the range of $4,400,000 to $4,600,000. It should be noted,
however, that appraisals are estimates of value and should not be relied on as
true worth or realizable value.

ANTIOCH PLAZA

On December 28, 1995, the Company purchased the Antioch Plaza property
("Antioch Plaza"), a Neighborhood Retail Center located in Antioch, Illinois
from an unaffiliated third party for a purchase price of $1,750,365, including
acquisition costs of $365. A portion of the purchase price was evidenced by a
promissory note payable to Inland Real Estate Investment Corporation, an
affiliate of the Advisor ("IREIC"), in the gross amount of $660,000, which bore
interest at a rate of 9.5% per annum. The remainder of the purchase price, net
of prorations of approximately $1,100,000 was funded with proceeds of the Prior
Offering. The loan to IREIC was repaid in full on January 9, 1996 and the
total amount paid was $661,163, of which $660,000 was principal paid from Gross
Offering Proceeds and $1,163 was interest paid from Company operations.
Antioch Plaza, built in 1995, consists of a two-building, free-standing,
masonry-constructed strip center aggregating 19,810 square feet of gross
leasable area. Its major tenant is Blockbuster Video which leases 6,500 square
feet of GLA and is considered creditworthy by the Company. At the time of
acquisition, a second lease had been signed by a dry-cleaning establishment and
a third lease was under negotiation. At December 31, 1995, for federal income
tax purposes, the Company's basis in Antioch Plaza was $1,480,648.

<PAGE> 267

Antioch Plaza is currently 49% leased (100% leased when including the
master lease) and is anchored by Blockbuster Video. Currently 10,160 square
feet of the vacant space at Antioch Plaza is being master leased by the seller
until June 1997 at $12 per square foot, on a net basis. Blockbuster Video
leases more than 10% of the building's square footage. The lease with
Blockbuster Video requires a base rent of $10 per square foot per annum until
August 31, 2000 and $11 per square foot per annum from September 1, 2000 until
August 31, 2005, and contains four renewal options of five years each.
Blockbuster Video sells and rents prerecorded audio and video products.

At March 31, 1996, Antioch Plaza had a total of three tenants. The
following tables set forth certain information with respect to the amount of
and expiration of leases at this Neighborhood Retail Center:

<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
------------ ----------- ------------- ---------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 -- -- -- $ 224,720 -- -- --

1997 1 10,160 $121,920 224,720 $12.00 51.29% 54.25%

1998 -- -- -- 102,800 -- -- --

1999 2 3,150 37,800 102,800 12.00 15.99 36.77

2000 -- -- -- 67,167 -- -- --

2001-2004 -- -- -- 71,500 -- -- --

2005 1 6,500 71,500 71,500 11.00 32.99 100.00
</TABLE>

(1) No assumptions were made regarding the releasing of expired
leases. It is management of the Company's current opinion
that the space will be released at market rates.

Antioch Floral 1,650 12/1999 1/3 years 19,800 12.00

One Hour Cleaners 1,500 12/1999 1/3 years 18,000 12.00

Vacant* 10,160 6/1997 None 121,920 12.00
</TABLE>

- ---------------
* The vacancies currently total 10,160 square feet, however, the vacant
space is being master leased by the seller until June 1997 at $12.00
per square foot, on a net basis.

The Company received an appraisal prepared by an independent appraiser
who is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a fair market value of Antioch Plaza as of December 18,
1995 of $1,850,000. It should be noted, however, that appraisals are estimates
of value and should not be relied on as measures of true worth or realizable
value.

<PAGE> 268

THE MUNDELEIN PLAZA PROPERTY

On March 29, 1996, the Company purchased the Mundelein Plaza property
("Mundelein Plaza"), a Neighborhood Retail Center located in Mundelein,
Illinois from an unaffiliated third party for a purchase price of $5,658,230,
including acquisition costs of $8,230, on an all cash basis. Mundelein Plaza,
built in 1990, consists of two one-story, multi-tenant brick and block strip
centers located on approximately 4.3 acres of land. Mundelein Plaza aggregates
67,896 square feet of GLA and was constructed in 1990. Its anchor tenant is
Sears Home Life with 47,000 square feet. Sears Home Life is a nationally
recognized home furnishings chain and is considered creditworthy by the
Company.

Mundelein Plaza is currently 100% leased. Sears Home Life is the only
tenant occupying 10% or more of the rentable square feet. The lease with Sears
Home Life requires a base rent of $8.47 per square foot per annum until October
23, 1996, $8.72 per square foot per annum from October 24, 1996 to October 23,
1997, $9.29 per square foot per annum from October 24, 1997 to October 23,
1998, $9.53 per square foot per annum from October 24, 1998 to October 23,
1999, $9.81 per square foot per annum from October 24, 1999 to October 23, 2000
and contains two renewal options of five years each. Although there currently
is no vacant space at Mundelein Plaza, the seller is providing a lease guaranty
for 6,181 square feet of space, on a net basis, through December 1997. 4,088
square feet of the space which is subject to the lease guaranty is currently
leased by Color Tile, Inc., which recently filed for financial and
reorganization protection under the federal bankruptcy laws. This tenant
continues to occupy its space and is anticipated to pay its monthly rent. The
bankruptcy petition filed with the Bankruptcy Court stated that this tenant
planned on closing a number of its other stores. The Company has been advised
that Color Tile, Inc. considers the store at Mundelein Plaza to be one of its
best performing stores and the Company does not anticipate the closing of the
Color Tile store at Mundelein Plaza. The other space, 2,093 square feet, is
leased to Tile World, Ltd., on a month-to-month lease. For federal income tax
purposes, the Company's basis in Mundelein Plaza will be approximately
$3,847,000. Depreciation expense, for tax purposes, will be computed using the
straight-line method. Buildings and improvements are based upon estimated
useful lives of 40 years. Property taxes paid in 1995 for the tax year ended
1994 (the most recent tax year for which information is available) were
$84,768.

<TABLE>
<CAPTION>
Average Effective
Year Ending Occupancy Annual Rent Per
December 31, Rate Square Foot
------------- --------------- -----------------
<S> <C> <C>
1995 100% $ 9.41
1994 97 9.22
1993 97 9.03
1992 97 8.93
1991 97 8.90
</TABLE>

At March 31, 1996, Mundelein Plaza had a total of eight tenants. The
following tables set forth certain information with respect to the amounts of
and expiration of leases at this Neighborhood Retail Center:

<PAGE> 269

<TABLE>
<CAPTION>
Approx.
Gross Average Percent of Percent of
Leasable Area Base Rent Total Annual
("GLA") of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent Leases(1) Leases Leases
------------ ----------- -------------- ---------- -------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1 3,100 $ 46,800 $ 685,209 $15.10 4.57% 6.83%

1997 2 7,628 97,506 654,902 12.78 11.23 14.89

1998 1 1,620 28,172 583,236 17.39 2.39 4.83

1999 -- -- -- 567,888 -- -- --

2000 3 51,460 524,605 582,389 10.19 75.79 90.08

2001-2004 -- -- -- 59,280 -- -- --

2005 -- -- -- 61,871 -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases.
It is management of the Company's current opinion that the space will
be released at market rates.

<TABLE>
<CAPTION>
Square Current Annual Base Rent
Feet Term Renewal Base Per Square
Lessee Leased Ends Options Rent Foot
------- ------ ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Color Tile, Inc. (1) 4,088 12/2009 None $55,188 $13.50

R R B Cycles, Ltd. 2,460 12/2000 None 37,259 15.15

Cartel, Inc. 1,620 12/1998 None 26,555 16.51

C M C Music, Inc. 5,535 06/1997 1/5 years 66,420 12.00

Esterquest (Pet store) 3,100 12/1996 None 46,800 15.10

Sears Roebuck & Co.
(Sears Home Life) 47,000 10/2000 2/5 years 400,301 8.52

Tile World, Ltd. (1) (2) 2,093 Month to None 31,086 14.85
Month

Minnesota Fats 2,000 08/2000 3/5 years 21,600 10.80
</TABLE>

(1) Although currently leased, these spaces are subject to a lease
guaranty from the seller through December 1997.

(2) This space is currently leased on a month-to-month basis.

The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers reflecting a fair market value of Mundelein Plaza as of March
28, 1996 of not less than $5,650,000. It should be noted, however, that
appraisals are estimates of value and should not be relied on as measures of
true worth of realizable value.

<PAGE> 270
REGENCY POINT SHOPPING CENTER

On April 5, 1996, the Company acquired Regency Point Shopping Center
located in Lockport, Illinois ("Regency Point") from an unaffiliated third
party for a purchase price of $5,700,000. As part of the acquisition, the
Company assumed the existing first mortgage loan of approximately $4,473,200,
along with a related interest rate swap agreement. The remainder of the
purchase price of approximately $1,226,800 was funded, after prorations, with
proceeds of the Prior Offering. For federal income tax purposes, the Company's
basis in the Regency Point building will be approximately $4,700,000. Property
taxes paid in 1995 for the tax year ended 1994 (the most recent tax year for
which information is available) were $16,867. Regency Point is located in the
Des Plaines River Valley Enterprise Zone, therefore, the assessed value of the
property will remain fixed until the year 2003.

The first mortgage loan has a floating interest rate of 180 basis points
over the 30-day LIBOR rate, which rate is adjusted monthly and amortizes over
25 years. The interest rate swap agreement, in conjunction with the first
mortgage, provides for Bank One, Chicago, to receive from or pay to the Company
the difference between 6.11% and the 30-day LIBOR rate, so that the first
mortgage loan has an effective rate of 7.91% per annum. The first mortgage
loan matures in August 2000. The interest rate swap agreement expires
concurrently therewith.

Regency Point is currently 95% leased and is anchored by Walgreens and Ace
Hardware. The vacant space at Regency Point is being master leased by the
seller for a one-year period at $14 per square foot for 1,600 square feet, on a
net basis, and $10 per square foot for 1,450 square feet, on a gross basis.
Regency Point was 88% occupied at December 31, 1995, 100% occupied at December
31, 1994 and 36% occupied at December 31, 1993. Walgreens and Ace Hardware
both lease more than 10% of the building's square footage. The lease with
Walgreens requires Walgreens to pay base rent equal to $10.98 per square foot
per annum until December 31, 2013 and contains six renewal options of five
years. Walgreens is a national pharmacy chain providing prescriptive and
over-the-counter medications, sundries and household items. The lease with Ace
Hardware requires Ace Hardware to pay base rent equal to $7.49 per square foot
per annum until October 31, 2008 and contains one renewal option for five
years. Ace Hardware is a national retail hardware chain.

The table below sets forth certain information with respect to the
occupancy rate at Regency Point expressed as a percentage of total gross
leasable area for each of the last three years (since the opening of Regency
Point) and the average effective annual base rent per square foot for each of
the last three years.

<TABLE>
<CAPTION>
Average
Effective
Annual Rent
Year Ending Occupancy Per Square
December 31, Rate Foot
------------ --------- -----------
<S> <C> <C>

1995(1) 93% $ 9.83
1994 100 10.09
1993(2) 36 3.57
</TABLE>

90
<PAGE> 271

(1) During 1995, an additional 5,000 square feet of space was added to
Regency Point, of which 1,950 square feet is leased with rent beginning in
February 1996.

(2) Regency Point was built in 1993 and 1994. The occupancy rate and average
effective annual rent per square foot represent the initial rent-up phase
of this property.

At March 31, 1996, Regency Point had a total of 17 tenants. The following
table sets forth information with respect to the amount of and expiration of
leases at this Neighborhood Retail Center:

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

1996 -- -- -- $613,655 -- -- --

1997 3 5,690 $ 74,882 620,670 $13.16 10.37% 12.06%

1998 5 9,945 142,378 553,623 14.32 18.12 25.72

1999 3 3,900 53,560 415,775 13.73 7.11 12.88

2000 1 985 15,240 362,821 15.47 1.79 4.20

2001 -- -- -- 348,670 -- -- --

2002 -- -- -- 349,869 -- -- --

2003 1 1,398 19,572 350,615 14.00 2.55 5.58

2004 1 2,503 31,913 339,432 12.75 4.56 9.40

2005 -- -- -- 307,728 -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be released
at market rates.

<TABLE>
<CAPTION>
Square Current Rent
Feet Lease Renewal Annual Per Square
Lessee Leased Ends Options Base Rent Foot
----------------- ------ ------- ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>

Walgreens 13,000 12/2013 6/5yr. $142,740 $10.98
Cellular Center 1,820 8/99 1/5yr. 24,570 13.50
Body Basters 1,600 4/97 1/3yr. 23,138 14.46
Personal Finance 985 1/2000 1/5yr. 13,950 14.16
J.C. Flick 5,265 11/98 1/3 yr & 1/2yr. 64,556 12.26
Ace Hardware 15,505 10/2008 1/5yr. 116,280 7.49
Vet 1,300 10/98 1/5yr. 18,937 14.56
Subway 1,105 12/98 1/5yr. 16,515 14.94
Cost Cutters 975 12/98 1/5yr. 13,481 13.82
Little Ceasars 1,040 1/99 2/5yr. 13,520 13.00
Just $1 1,040 1/99 1/5yr. 13,520 13.00
Optometrist 1,040 4/97 1/5yr. 14,548 13.98
Brown's Chicken 1,398 12/2003 1/5yr. 18,174 13.00
Cleaners 1,300 12/98 1/5yr. 19,751 15.19
U.S. Post Office 2,503 3/2004 2/5yr. 30,036 12.00
Currency Exchange 550 1/2006 1/10yr. 12,000 21.81
Vacant* 1,600 4/1997 None 22,400 14.00
1,450 4/1997 None 14,500 10.00
Dunkin Donuts 1,400 1/2006 2/5yr. 21,700 15.49
</TABLE>

<PAGE> 272

* The vacancies currently total 3,050 square feet, however, the vacant
space will be master leased by the seller at $14.00 per square foot, on a
net basis, for 1,600 square feet and $10.00 per square foot, on a gross
basis, for 1,450 square feet, for a one-year period.

The Company received an appraisal prepared by an independent appraiser who
is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a fair market value of Regency Point as of March 7, 1996
of $5,710,000. It should be noted, however, that appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

PROSPECT HEIGHTS PLAZA

Prospect Heights, built in 1985, consists of two one-story, multi-tenant
brick buildings aggregating 28,080 rentable square feet.

<TABLE>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C>
1991 100% $7.53
1992 100 7.53
1993 100 7.53
1994 100 7.53
1995 78 5.85
</TABLE>

As of June 17, 1996, Prospect Heights was 100% leased and 78% occupied.
Tenants leasing more than 10% of the total square footage currently include
Walgreens with 12,600 square feet, United Farm Stands Corp. with 4,680 square
feet and Blockbuster Video with 6,250 square feet.

The lease with Walgreens requires a base rent of $5.50 per square foot per
annum until July 31, 2005, $6.00 per square foot per annum from August 1, 2005
to July 31, 2015 and $6.50 per square foot per annum from August 1, 2015 to July
31, 2025. The lease also requires the payment of percentage rent annually based
on 1% of food item sales, 1.5% of liquor sales and 2% of other sales in excess
of monthly rent paid including their portion of CAM, real estate taxes and
insurance. In 1995, net percentage rent was $23,000. Walgreens has the option to
terminate the lease in 2005, 2010, 2015, and 2020 with a one year notice.

The lease with United Farm Stands Corp. requires a base rent of $12.00 per
square foot per annum until January 31, 1998 and contains three renewal options
of two years each. United Farm Stands Corp. sells fruits and vegetables.

<PAGE> 273

The lease with Blockbuster Video requires a base rent of $12.00 per square
foot per annum for three years and contains four renewal options of five years
each. Blockbuster Video sells and rents prerecorded audio and video products.
Blockbuster Video will begin paying rent three months after occupancy which is
anticipated to be in July 1996. The seller will master lease this space at
$12.00 per square foot per annum until Blockbuster Video begins paying rent.

For federal income tax purposes, the Company's depreciable basis in the
Prospect Heights buildings will be approximately $1,407,000. Depreciation
expense, for tax purposes, will be computed using the straight-line method.
Buildings and improvements are based upon estimated useful lives of 40 years.

Real estate taxes paid in 1995 for the tax year ended 1994 (the most
recent tax year for which information is available) were $127,033.

At June 1, 1996, Prospect Heights had five tenants. The following tables
set forth certain information with respect to the amount of and expiration of
leases at this Neighborhood Retail Center.

<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
- ------------ ----------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Walgreens 12,600 07/2025 None $72,450 $ 5.75
Blockbuster 6,250 07/1999 4/5 75,000 12.00
Power Motion 2,550 07/1998 1/3 27,600 10.82
Dr. W. Beck 2,000 12/1997 1/5 22,000 11.00
United Farm Stands 4,680 01/1998 3/2 56,160 12.00

</TABLE>

Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ --------- ------------- ----------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 -- -- -- $253,710 -- -- --
1997 1 2,000 $22,000 254,910 $11.00 7.12% 8.63%
1998 2 7,230 86,160 233,610 11.92 25.75 36.88
1999 1 6,250 75,000 147,450 12.00 22.26 50.86
2000-2004 -- -- -- 72,450 -- -- --
2005 -- -- -- 73,763 -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be
released at market rates.

The Company received an appraisal prepared by an independent appraiser who
is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a market value of Prospect Heights as of June 17, 1996,
of $2,190,000. It should be noted, however, that appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

93
<PAGE> 274

MONTGOMERY-SEARS SHOPPING CENTER

Montgomery-Sears, built in 1990, is a one-story, multi tenant concrete
masonry building aggregating 34,600 rentable square feet.

<TABLE>
<CAPTION>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C>

1991 95% $ 8.88
1992 95 9.50
1993 95 9.84
1994 95 10.48
1995 95 9.47
</TABLE>

As of June 14, 1996, Montgomery-Sears was 85% leased. Tenants leasing more
than 10% of the building's square footage include Sears Hardware with 20,000
square feet and Blockbuster Video with 7,000 square feet.

The lease with Sears requires a base rent of $10.50 per square foot per
annum until September 1, 1996, $11.44 per square foot per annum from October 1,
1996 to September 30, 1999 and $12.47 per square foot per annum from October 1,
1999 to July 30, 2000 and contains two renewal options of five years each.
Sears has the right to terminate the lease at any time after July 15, 1997 with
180 days notice and payment of one year's rent. Sears Hardware sells hardware
supplies and tools. The lease with Blockbuster requires a base rent of $13.20
per square foot per annum until August 31, 2000 and contains a renewal option
for an additional five years. Blockbuster Video sells and rents prerecorded
audio and video products.

The vacant space, totaling 5,100 square feet, at Montgomery-Sears will be
master leased by the seller for a period of 24 months or until such time as a
tenant begins paying rent at $12.00 per square foot per annum, on a net basis,
for 3600 square feet and $10.20 per square foot, on a net basis, for 1500
square feet.

For federal income tax purposes, the Company's depreciable basis in the
Montgomery-Sears building will be approximately $2,675,000. Depreciation
expense, for tax purposes, will be computed using the straight-line method.
Buildings and improvements are based upon estimated useful lives of 40 years.

Real estate taxes to be paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) are $65,310.

94
<PAGE> 275

At June 1, 1996, Montgomery-Sears had three tenants. The following tables
set forth certain information with respect to the amount of and expiration of
leases at this Neighborhood Retail Center.

<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
-------------- ------ ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C>

Sears Hardware 20,000 07/2000 2/5 $210,000 $10.50
Blockbuster 7,000 08/2000 1/5 92,400 13.20
Radio Shack 2,500 09/2000 1/5 25,000 10.00
Vacant* 3,600 06/1998 -- 43,200 12.00
Vacant* 1,500 06/1998 -- 15,300 10.20
</TABLE>

* The vacancies currently total 5,100 square feet, however, the vacant
space will be master leased by the seller for a two-year period at $12.00
per square foot, on a net basis, for 3,600 square feet and $10.20 per
square foot, on a net basis, for 1,500 square feet.

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

1996 -- -- -- $396,380 -- -- --
1997 -- -- -- 416,640 -- -- --
1998 1 5,100 $ 61,200 416,640 $12.00 14.74% 14.69%
1999 -- -- -- 362,178 -- -- --
2000 3 29,500 379,004 379,004 12.85 85.26 100.00
2001-2005 -- -- -- -- -- -- --
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be
released at market rates.

The Company received an appraisal prepared by an independent appraiser who
is a member in good standing of the American Institute of Real Estate
Appraisers reflecting a market value of Montgomery-Sears as of June 17, 1996 of
$3,450,000. It should be noted, however, that appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

THE ZANY BRAINY STORE

On July 1, 1996, the Company acquired fee simple title to a single-user
retail property in Wheaton, Illinois from an unaffiliated third party for a
purchase price of $2,455,000 on an all cash basis (the "Zany Brainy Store").
This facility has been leased 100% to Children's Concepts, Inc. which does
business as Zany Brainy ("Zany Brainy") and sells children's books, computer
software, toys, and related items.

The Zany Brainy Store, built in 1995, is a single tenant retail facility
aggregating 12,499 rentable square feet.

The lease with Zany Brainy requires a base rent of $22.00 per square foot
per annum until November 2000, which increases for the period December 2000 to
November 2006 to the lesser of $24

95
<PAGE> 276

per square foot per annum or a calculated amount using the consumer price index.
The lease with Zany Brainy contains two renewal options of five years each.

For federal income tax purposes, the Company's depreciable basis in the
Zany Brainy Store will be approximately $1,617,000. Depreciation expense, for
tax purposes, will be computed using the straight-line method. Buildings and
improvements are based upon estimated useful lives of 40 years.

Real estate taxes to be paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) are $1,292 for vacant land.
Real estate taxes to be paid in 1997 for the tax year ended 1996 are expected
to be $35,000 for improved land.

The following tables set forth certain information with respect to the
amount of and expiration of the Zany Brainy lease.

</TABLE>

Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ --------- ------------- ------------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996-1999 -- -- -- $274,978 -- -- --
2000 -- -- -- 289,560(2) -- -- --
2001-2004 -- -- -- 299,976 -- -- --
2005 1 12,499 $299,976 299,976 $ 24.00 100% 100%
</TABLE>

(1) No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be
released at market rates.

The Directors, including the Independent Directors, approved each of these
acquisitions as being fair and reasonable to the Company.

CAPITALIZATION

The following table sets forth the historical capitalization of the
Company as of March 31, 1996 and the pro forma capitalization of the Company as
of that date as adjusted to give effect to the sale of all Shares in the Prior
Offering and in this Offering (as if all 11,000,000 Shares including 1,000,000
Shares to be sold pursuant to the DRP are sold excluding those sold by the
Advisor), and the application of the estimated Net Proceeds as described in
"Estimated Use of Proceeds." The information set forth in the following table
should be read in conjunction with the historical financial statements of the
Company

<PAGE> 277

included elsewhere in this Prospectus and the discussion set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Mortgage notes payable ..................................... $ 748 $ 5,221

STOCKHOLDER'S EQUITY:
Preferred Stock, $.01 par value, 6,000,000 authorized,
none outstanding ........................................ -- --
Common Stock, $.01 par value, 24,000,000 authorized,
2,909,912 shares issued and outstanding historical;
17,000,000 shares issued and outstanding pro forma (1) .. 29 170
Paid-in capital ............................................ 29,954 148,637
Accumulated Distributions in Excess of Net Income .......... (482) (482)
Total stockholders' equity .............................. 24,501 148,325
Total capitalization .................................... 25,249 153,546
</TABLE>

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

(1) Does not include Shares issuable upon the exercise of outstanding
options granted under the Company's Stock Option Plan for Independent
Directors.

(2) The Company was originally capitalized in 1994 through the cash
contribution of $200,000 by the Advisor, for which the Advisor received 20,000
shares of Common Stock.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of the date of this Prospectus: (i) each
stockholder known by the Company to own beneficially in excess of 5% of the
outstanding shares of Common Stock; (ii) each Director; (iii) each executive
officer; and (iv) all Directors and executive officers as a group. Except as
otherwise indicated in the footnotes to the table, the persons named below have
sole voting and investment power with respect to the shares of Common Stock
beneficially owned by such person.

SHARES TO BE
BENEFICIALLY OWNED
AFTER COMPLETION
OF THE OFFERING
SHARES BENEFICIALLY (ASSUMING THE
OWNED AS OF THE DATE OF MAXIMUM OFFERING
THIS PROSPECTUS IS SOLD)
----------------------------- ---------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------ ----------------------------- ---------------------------
<S> <C> <C> <C> <C>
Robert D. Parks (a)(b) 8,945.6107 * 8,945.6107 *
G. Joseph Cosenza (a)(b) 22,500 * 22,500 *
Roland W. Burris (c)(f) -- * -- *
Douglas R. Finlayson, M.D. (d)(f) -- * -- *
Heidi N. Lawton (e)(f) -- * -- *
Cynthia M. Hassett (a) -- * -- *
Roberta S. Matlin (a) 116.8974 * 116.8974 *
Directors and Executive Officers
as a Group (seven persons)

</TABLE>

97
<PAGE> 278

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

(a) The business address of each of Messrs. Parks and Cosenza, Ms. Hassett
and Ms. Matlin is c/o The Inland Group, Inc., 2901 Butterfield Road, Oak
Brook, Illinois 60521.

(b) Includes 20,000 Shares owned by the Advisor, of which Messrs. Parks and
Cosenza disclaim beneficial ownership. The Advisor is a wholly-owned
subsidiary of IREIC, which is an affiliate of TIGI. Messrs. Parks and
Cosenza are control persons with respect to TIGI. See, generally,
"Management -- the Advisor."

(c) The business address of Mr. Burris is c/o Jones, Ware & Grenard, 180
North LaSalle Street, Suite 3800, Chicago, Illinois 60601.

(d) The business address of Dr. Finlayson is c/o Westlake Clinic, 214
Washington Street, Ingleside, Illinois 60041.

(e) The business address of Ms. Lawton is c/o Lawton Realty Group, 2100
Clearwater Drive, Suite 106, Oak Brook, Illinois 60521.

(f) Does not include 3,500, 4,000 and 4,000 Shares issuable upon exercise of
options granted to Mr. Burris, Dr. Finlayson and Ms. Lawton, respectively,
pursuant to the Company's Independent Director Stock Option Plan.

* Less than 1% of the Company's outstanding shares of Common Stock, as of the
date of this Prospectus.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1995 and March 31, 1996, the Company had a total of
2,000,073 Shares ($19,976,354) and 2,909,912 Shares ($29,060,946) outstanding,
in each case including 20,000 Shares held by the Advisor. At December 31,
1994, only the 20,000 Shares held by the Advisor were outstanding; however,
subscriptions for 189,938.145 Shares had been received as of that date.
Subscriber funds were held in an interest-bearing escrow account with the
Company's unaffiliated escrow agent until January 3, 1995 when subscriptions
for those Shares were accepted and the Shares were issued by the Company. The
Stockholders share in their portion of benefits of ownership of the Company's
real property investments according to the number of Shares held.

The Company's capital needs and resources are expected to undergo changes
through completion of this Offering as additional Shares are sold in this
Offering and additional properties are acquired. Operating cash flow is expected
to increase as these additional properties are added to the portfolio.
Distributions to Stockholders are determined by the Company's Board of Directors
and are dependent on a number of factors, including the amount of funds
available for distribution, the Company's financial condition, capital
expenditures and the annual distribution required to maintain REIT status under
the Code.

As of March 31, 1996, the Company had acquired seven properties, utilizing
approximately $22,700,000 and had cash and cash equivalents of $2,937,473
compared to two properties, utilizing approximately $6,026,023 and cash and
cash equivalents of $338,430 at March 31, 1995. The Company intends to use
these funds and funds from sales of additional Shares to purchase additional
properties, to make distributions and to pay offering costs. See "Subsequent
Events," below. To the extent that these sources are insufficient to meet the
Company's short- and long-term liquidity requirements, the Company may rely on
financing of one or more of the properties.

The properties owned by the Company are currently generating sufficient
cash flow to cover operating expenses of the Company plus pay a monthly
distribution of 8% per annum on weighted average

98
<PAGE> 279

shares. For the three months ended March 31, 1996, cash provided by operations
amounted to $596,106. Distributions declared for the period were $476,675, a
portion of which represents a return of capital for federal income tax purposes.
The return of capital portion of the distributions can be determined only at
year end.

Management monitors the various qualification tests the Company must meet
to maintain its status as a real estate investment trust. Large ownership of
the Company's stock is tested upon purchase to determine that no more than 50%
in value of the outstanding stock is owned directly, or indirectly, by five or
fewer persons or entities at any time. Management of the Company also
determines, on a quarterly basis, that the Gross Income, Asset and Distribution
Tests as described in the section of the Prospectus entitled "Federal Income
Tax Considerations--Taxation of the Company--REIT Qualification Tests" are met.
On an ongoing basis, as due diligence is performed by management of both the
Company and the Advisor on potential real estate purchases or temporary
investment of uninvested capital, management of both entities determines that
the income from the new asset will qualify for REIT purposes. For the year
ended December 31, 1995, the Company qualified as a REIT.

The Advisor has guaranteed payment of all public offering expenses
(excluding selling commissions, the marketing contribution and the due
diligence expense allowance fee) in excess of 5.5% of the Gross Offering
Proceeds of the Offering (the Gross Offering Proceeds") or all organization and
offering expenses (including such selling expenses) which together exceed 15%
of the Gross Offering Proceeds.

The Company provides the following programs to facilitate investment in
the Shares and to provide limited liquidity for Stockholders until such time as
a market for the Shares develops:

The Distribution Reinvestment Program allows Stockholders who purchase
Shares pursuant to the Offering to automatically reinvest distributions by
purchasing additional Shares from the Company. Such purchases will not be
subject to selling commissions or the Marketing Contribution and Due Diligence
Expense Allowance Fee and will be sold at a price of $9.05 per Share. As of
March 31, 1996, the Company had received $371,596 from the sale of
approximately 41,060 Shares through the DRP.

The Share Repurchase Program will, subject to certain restrictions,
provide existing Stockholders with limited, interim liquidity by enabling them
to sell shares back to the Company at a price of $9.05 per share. Shares
purchased by the Company will not be available for resale. As of March 31,
1996, the Company has repurchased 3,000 shares from Stockholders for an
aggregate price of $26,838, pursuant to the terms of the Share Repurchase
Program. The remaining $344,758 of DRP proceeds is available to the Company
for investment in additional properties, maintenance of existing properties or
the repurchase of additional shares pursuant to the terms of the Share
Repurchase Program.

RESULTS OF OPERATIONS

As of March 31, 1996, subscriptions for a total of 2,909,912 shares were
outstanding, including 20,000 Shares held by the Advisor. At March 31, 1996,
the Company owned six Neighborhood Retail Centers and one single user-retail
property. See also "-Subsequent Events," below.

<PAGE> 280

PURCHASE OF WALGREENS/DECATUR, DECATUR, ILLINOIS

On January 31, 1995, the Company acquired this single-user retail property
from Inland Property Sales, Inc. ("IPS"), an Affiliate of the Advisor, for the
purchase price of $1,209,053, including acquisition costs of $482. Although it
was originally anticipated that this property would be acquired on an all-cash
basis, management of the Company made the determination, based on the
recommendation of the Advisor, that the investment objectives of the Company
would be better met by assuming a portion of the mortgage loan secured by such
property, since: (i) the terms of the current first mortgage loan were more
favorable for the Company than mortgage rates then currently available from
unaffiliated third parties; and (ii) the Company was able to apply its
available cash towards the acquisition of a second property. The balance of
the assumed mortgage at December 31, 1995 was $750,727, and was $748,011 at
March 31, 1996. This mortgage has an interest rate of 7.655% and amortizes
over a 25-year period. The Company is responsible for monthly payments of
principal and interest of $5,689.

PURCHASE OF THE EAGLE CREST SHOPPING CENTER, NAPERVILLE, ILLINOIS

On March 1, 1995, the Company acquired this Neighborhood Retail Center
("Eagle Crest") from IPS for the purchase price of $4,816,970, including
acquisition costs of $11,059. Although it was originally anticipated that Eagle
Crest would be acquired on an all-cash basis, management of the Company made the
determination, based on the recommendation of the Advisor, that the investment
objectives of the Company would be better met by assuming a portion of the first
mortgage loan secured by such property, as well as entering into a loan
agreement with IPS for the balance of the purchase price. By utilizing seller
financing to purchase Eagle Crest, the Company was able to begin receiving the
net income, after debt service payments, from Eagle Crest on an expedited basis,
thus increasing the Company's earnings to be distributed to the Stockholders.
The balance of the assumed mortgage was paid in full in April 1995 with interest
at 9.5% per annum. In May 1995, the deferred portion of the purchase price,
totaling $1,212,427, was paid to IPS in full from gross offering proceeds from
the Prior Offering. In addition, accrued interest of $22,009 was paid from
Company operations.

PURCHASE OF THE MONTGOMERY-GOODYEAR SHOPPING CENTER, MONTGOMERY, ILLINOIS

On September 14, 1995, the Company acquired this Neighborhood Retail
Center from an unaffiliated third party for a purchase price of $1,145,992,
including acquisition costs of $5,992, a portion of which was evidenced by a
promissory note payable to Inland Mortgage Investment Corporation ("IMIC"), an
affiliate of the Advisor, in the gross amount of $600,000. The remainder of
the purchase price was funded with proceeds of the Prior Offering. The
promissory note was paid in full October 1995, with interest at a rate of 10.9%
per annum. The principal amount paid was $600,000 from gross offering proceeds
from the Prior Offering and interest of $4,260 was paid from Company
operations.

PURCHASE OF THE HARTFORD/NAPERVILLE PLAZA, NAPERVILLE, ILLINOIS

On September 14, 1995, the Company acquired this newly constructed
Neighborhood Retail Center from an unaffiliated third party for a purchase
price of $4,414,015, including acquisition costs of $14,015 and deposited
$150,000 in an escrow account to be paid to Blockbuster, Inc. to cover the cost
of its leasehold improvements. A portion of the purchase price was evidenced
by a promissory note payable to IMIC, in the gross amount of $600,000. The
remainder of the purchase price was funded with proceeds of the Prior Offering.
The promissory note was paid in full in October 1995, with interest at a rate
of

100
<PAGE> 281

10.9% per annum. The principal amount paid was $600,000 from gross offering
proceeds from the Prior Offering and interest of $5,102 was paid from Company
operations.

PURCHASE OF NANTUCKET SQUARE SHOPPING CENTER, SCHAUMBURG, ILLINOIS

On September 20, 1995, the Company acquired this Neighborhood Retail Center
from an unaffiliated third party for a purchase price of $4,257,918, including
acquisition costs of $4,913, a portion of which was evidenced by a promissory
note payable to IMIC, in the gross amount of $3,550,000. The remainder of the
purchase price was funded with proceeds of the Prior Offering. The promissory
note was paid in full in December 1995, with interest at a rate of 10.5% per
annum. In addition, as part of the purchase, the Company agreed to and has paid
$51,135 for tenant improvements for two tenants expanding their space, which was
added to the cost of the property.

In October 1995, the Company received notice from one of its tenants at
Nantucket Square of its intent to close its store, which it did on December 10,
1995. The lease for the 6,228 square feet of space currently expires January
31, 1998. The Company is pursuing a replacement tenant, however, in the
interim, the tenant continues to pay its monthly rent. A second tenant at
Nantucket Square, occupying 3,300 square feet, filed for financial and
reorganization protection under the federal bankruptcy laws. The tenant
continues to occupy the space and pay its monthly rent. The petition filed
with the bankruptcy court by the tenant stated that it is planning on closing a
number of its other stores but did not anticipate closing its store at
Nantucket Square.

PURCHASE OF ANTIOCH PLAZA, ANTIOCH, ILLINOIS

On December 28, 1995, the Company acquired this Neighborhood Retail Center
from an unaffiliated third party for a purchase price of $1,750,365, including
acquisition costs of $365, a portion of which was evidenced by a promissory
note payable to IREC, an affiliate of the Advisor, in the gross amount of
$660,000. The remainder of the purchase price, net of prorations, of
approximately $1,100,000 was funded with proceeds of the Prior Offering. As of
December 31, 1995, the unpaid balance of this note was $360,000. The note
which bore interest at a rate of 9.5% per annum was repaid in full on January
9, 1996. The total amount repaid was $661,163, of which $660,000 was principal
paid from gross offering proceeds from the Prior Offering and $1,163 was
interest paid from Company operations.

PURCHASE OF THE MUNDELEIN PLAZA, MUNDELEIN, ILLINOIS

On March 29, 1996, the Company acquired this Neighborhood Retail Center
from an unaffiliated third party for a purchase price of $5,658,230, including
acquisition costs of $8,230 on an all cash basis.

The following is a list of approximate physical occupancy levels for the
Company's properties held as of the end of each quarter during 1995 and the
first quarter of 1996 (N/A indicates the property was not owned by the Company
at the end of the quarter):

101
<PAGE> 282

<TABLE>
<CAPTION>
1995 1996
-------------------------------------------------
at at at at at
Properties 03/31 06/30 09/30 12/31 03/31
- ----------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Walgreens 100% 100% 100% 100% 100%
Decatur, Illinois

Eagle Crest 100% 100% 100% 100% 100%
Naperville, Illinois

Montgomery-Goodyear N/A N/A 100% 100% 100%
Montgomery, Illinois

Hartford/Naperville Plaza N/A N/A 48% 90% 100%
Naperville, Illinois

Nantucket Square N/A N/A 92% 81% 81%
Schaumburg, Illinois

Antioch Plaza N/A N/A N/A 33% 49%
Antioch, Illinois

Mundelein Plaza N/A N/A N/A N/A 100%
Mundelein, Illinois

Regency Point(1)
Lockport, Illinois N/A N/A N/A N/A N/A

Prospect Heights Plaza(1)
Prospect Heights, Illinois N/A N/A N/A N/A N/A

Montgomery-Sears(1)
Montgomery, Illinois N/A N/A N/A N/A N/A

Zany Brainy(1)
Wheaton, Illinois N/A N/A N/A N/A N/A
</TABLE>

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

(1) These properties were purchased after March 31, 1996. See "-- Subsequent
Events," below.

The increases in rental income, additional rental income, property
operating expenses to Affiliates and non-affiliates and depreciation for the
three months ended March 31, 1996, as compared to the three months ended
March 31, 1995, is due to the acquisition of properties during 1995. Rental
income is expected to increase as additional properties are added to the
portfolio.

The decrease in mortgage interest expense to affiliates and non-affiliates
for the three months ended March 31, 1996, as compared to the three months
ended March 31, 1995, is due to the payoff of the financing relating to the
acquisitions of the properties. The Company continues to have mortgage
indebtedness of $747,094 collateralized by the Walgreens/Decatur Property. See
also "-Subsequent Events" regarding mortgage indebtedness secured by Regency
Point.

During 1994, the Advisor advanced $193,300 to the Company for costs
incurred with the Prior Offering. These advances were repaid with a market
rate of interest to the Advisor in January 1995.

Interest income is the result of working capital being invested in
short-term investments until properties are purchased.

102

<PAGE> 283

The increases in professional services to affiliates and non-affiliates
and general and administrative expenses to affiliates and non-affiliates for
the three months ended March 31, 1996, as compared to the three months ended
March 31, 1995, is due to the Company entering the operational stage.

SUBSEQUENT EVENTS

On April 5, 1996, the Company acquired the Regency Point Shopping Center
located in Lockport, Illinois from an unaffiliated third party for a purchase
price of $5,700,000. As part of the acquisition, the Company assumed an
existing first mortgage loan of approximately $4,473,200 along with a related
interest rate swap agreement. The remainder of the purchase price of
approximately $1,226,800 was funded, after prorations, with proceeds of the
Prior Offering. On June 17, 1996, the Company acquired Prospect Heights Plaza
located in Prospect Heights, Illinois for $2,165,000 on an all cash basis. The
Company also purchased, on June 17, 1996, the Montgomery-Sears Shopping Center
located in Montgomery, Illinois for $3,419,000 on an all cash basis. On July 1,
1996, the Company acquired the Zany Brainy Store located in Wheaton, Illinois
for $2,455,000 on an all cash basis. See "Real Property Investments."

The Advisor is continuing to explore the purchase of additional properties
from unaffiliated third parties for the Company.

INFLATION

For the Company's Neighborhood Retail Centers, inflation is likely to
increase rental income from leases to new tenants and lease renewals, subject
to market conditions. Continued inflation may cause capital appreciation of
these properties over time as rental rates and the replacement cost of the
properties rise.

The Company's rental income and operating expenses for those properties
owned or to be owned and operated under triple-net leases, like the
Walgreens/Decatur property, are not likely to be directly affected by future
inflation, since property expenses are the responsibility of the tenants. The
capital appreciation of triple-net leased properties is likely to be influenced
by interest rate fluctuations. To the extent that inflation determines
interest rates, future inflation may have an effect on the capital appreciation
of triple-net leased properties.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

The Company has adopted the Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of"
which was issued in March 1995 and is effective for fiscal years beginning
after December 15, 1995.

The Company has adopted the Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation Plans" which was issued in
October 1995. The Statement is effective for fiscal years beginning after
December 15, 1995. As allowed by the new Statement, the Company plans to
continue to use Accounting Principles Board Option No. 25, "Accounting for
Stock Issued to Employees" in accounting for its stock options.

Neither of these accounting pronouncements are expected to have a material
effect on the financial position or results of operations of the Company.

103
<PAGE> 284

FEDERAL INCOME TAX CONSIDERATIONS

The Company has been organized and intends to operate in a manner that
will permit it to continue to qualify as a REIT under the applicable provisions
of the Code and Regulations (the "REIT Requirements") and receive the
beneficial tax treatment described below. However, no assurance can be given
that the activities and operations of the Company will allow it to continue to
meet the REIT Requirements, which are highly technical and complex. The
following discusses the rules the Company must comply with to receive REIT
treatment, the federal income tax consequences to the Company and its
Stockholders from the Company maintaining REIT status and all material federal
income tax consequences to an investor in the Offering. The discussion is
qualified in its entirety by the applicable REIT qualification provisions
contained in the Code, the rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof. Shefsky Froelich & Devine
Ltd. has acted and will act as tax counsel to the Company in connection with
the organization of the Company and its election to be taxed as a REIT for
federal income tax purposes and has rendered the opinion set forth below. The
tax implications of an investment in the Company's Shares is set forth in
"--Taxation of Stockholders" in this Section. Each prospective purchaser of
Shares, however, is urged to consult his tax advisor with respect to the
federal, state, local, foreign and other tax consequences of the purchase,
ownership and disposition of Shares which may be particular to his tax
situation.

In brief, a corporation that invests primarily in real estate can, if it
complies with the detailed REIT provisions in Code Sections 856-860, qualify as
a REIT and therefore claim tax deductions for the dividends it pays to its
stockholders. Such a corporation is, therefore, generally not taxed on its
"REIT taxable income" to the extent such income is currently distributed to
stockholders, thereby substantially eliminating the "double taxation" that a
corporation generally bears. However, as discussed in greater detail below,
such an entity could be subject to tax in certain circumstances even if it
qualifies as a REIT and would likely suffer adverse consequences, including
reduced cash available for distribution to its stockholders, if it failed to
qualify as a REIT. See "--Taxation of the Company--Failure to Qualify" in this
Section. The Company represents that it filed the election to be recognized as
a real estate investment trust with its tax return for the year ending December
31, 1995, which tax return was filed on a timely basis. The Company intends to
continue operating in a manner that permitted it to elect REIT status beginning
with its taxable year ending December 31, 1995 and to continue to maintain this
status in each taxable year thereafter, so long as REIT status remains
advantageous to the Company and the Stockholders.

Shefsky Froelich & Devine, Ltd. is of the opinion that as of July 17, 1996,
and based on the assumptions and representations described in this Section and
throughout the Prospectus, that the Company has been organized in conformity
with the requirements for qualification as a REIT, beginning with its taxable
year ending December 31, 1995 and that its prior, current and anticipated
methods of operation (as described in this Prospectus and represented by the
Company and its management) has enabled and will enable it to continue to
satisfy the REIT Requirements. This opinion has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and is based in
condition on various assumptions and certain representations made to Shefsky
Froelich & Devine, Ltd. by the Company and the Advisor as to certain factual
matters. The Company's qualification and taxation as a REIT will depend upon
the Company's ability to meet, through the operation of its current properties
and those properties it acquires in the future. Shefsky Froelich & Devine, Ltd.
will not review compliance with these tests on a continuing basis after the
initial effectiveness date of the Registration Statement or issue additional
opinions unless expressly requested to do so. Accordingly, no assurance can be
given that the actual

104

<PAGE> 285

operating results of the Company will allow the Company to satisfy the REIT
Requirements in each tax year. In addition, this opinion represents counsel's
legal judgment and is not binding on the Service.

Management of the Company and the Advisor currently expects that the
Company has operated and will continue to operate in a manner that permits the
Company to elect, and that it has elected, REIT status for its taxable year
ending December 31, 1995, and each taxable year thereafter. There can be no
assurance, however, that this expectation will be fulfilled, since
qualification as a REIT depends on the Company's ability to continue to satisfy
numerous asset, income and distribution tests described below, which in turn
will be dependant on part on the Company's operating results.

TAXATION OF THE COMPANY

General. In any year in which the Company qualifies as a REIT and has a
valid election in place, it will claim deductions for the dividends it pays to
the Stockholders, and therefore will not be subject to federal income tax on
that portion of its "REIT taxable income" or capital gain which is, in effect,
distributed to the Stockholders. The Company will, however, be subject to tax
at normal corporate rates on any taxable income or capital gain not
distributed.

Although the Company, if it maintains REIT status, can eliminate (or
substantially reduce) its federal income tax liability by maintaining its REIT
status and paying sufficient dividends, the Company could be subject to tax on
certain items of income. If the Company fails to satisfy either the 95% Test or
the 75% Test (as defined below), yet maintains its REIT status by meeting other
requirements, it will be subject to a 100% tax on the greater of the amount by
which the Company fails either test. The Company will also be subject to a 100%
tax on the net income from any "prohibited transaction," as described below. In
addition, if the Company fails to annually distribute at least the sum of: (i)
85% of its REIT ordinary income for such year; (ii) 95% of its REIT capital gain
net income for such year; and (iii) any undistributed taxable income from prior
years, it would be subject to an excise tax equal to 4% of the difference
between the amount required to be distributed under such formula and the amount
actually distributed. The Company may also be subject to the corporate
alternative minimum tax. Additionally, the Company will be subject to tax at
the highest corporate rate on any non-qualifying income from "foreclosure
property," although the Company will not own any "foreclosure property" unless
it makes loans secured by interests in real property and forecloses on the
property following a default on the loan.

If the Company acquires any asset from a C corporation (generally, a
corporation subject to full corporate-level tax) in a transaction in which the
basis of the assets in the Company's hands are determined by reference to the
basis of the assets (or any other property) in the hands of the transferor
corporation (or if a REIT such as the Company holds such an asset beginning on
the first day of the first taxable year for which the Company qualifies as a
REIT), and the Company recognizes gain on the disposition of such an asset
during the 10-year period beginning on the date on which such asset was
acquired by the Company (or the date that the Company first qualified as a
REIT) (the "Recognition Period"), then, pursuant to guidelines to be issued by
the Service, the excess of the fair market value as of the beginning of the
applicable Recognition Period over the Company's adjusted basis in such asset
at the beginning of such Recognition Period will be subject to tax at the
highest regular corporate tax rates.

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REIT Qualification Tests. The Code defines a REIT as a corporation, trust
or association:

(i) that is managed by one or more trustees or directors;

(ii) the beneficial ownership of which is evidenced by transferable
shares or by transferable certificates of beneficial interest;

(iii) that would be taxable as a domestic corporation but for its status
as a REIT;

(iv) that is neither a financial institution nor an insurance company;

(v) the beneficial ownership of which is held by 100 or more persons
on at least 335 days in each full taxable year, proportionately adjusted
for a partial taxable year;

(vi) at all times during the second half of each taxable year, no more
than 50% in value of the outstanding stock is owned, directly, or
indirectly, by five or fewer persons or entities; and

(vii) the Gross Income, Asset and Distribution Tests, described in
greater detail below, are met.

Conditions (i) through (iv) and (vii) must be met during each taxable year
for which REIT status is sought while conditions (v) and (vi) do not have to be
met until after the first taxable year for which a REIT election is made.

Although the Voting Test (as defined below) generally prevents a REIT from
owning more than 10% of the voting stock of an entity, the Code provides an
exception for ownership of voting stock in a qualified REIT subsidiary (a
"QRS"), a corporation that is wholly-owned by a REIT throughout the
subsidiary's existence. For purposes of the Asset and Gross Income Tests
described below, all assets, liabilities and tax attributes of a QRS are
treated as belonging to the REIT. A QRS is not subject to federal income tax,
but may be subject to state or local tax. The Company may in the future hold
direct or indirect interests in one or more partnerships or joint ventures. In
general, a partnership is not subject to federal income tax and instead,
allocates its tax attributes to its partners. The partners are subject to tax
on their allocable share of the income and gain, without regard to whether they
receive distributions from the partnership. Each partner's share of a
partnership's tax attributes is determined in accordance with the partnership
agreement. In addition, for purposes of the Asset and Income Tests, the
Company will be deemed to own and earn (based on its capital interest) an
undivided interest in each asset and a share of each item of gross income.

The Company, in satisfying the general tests described above, must meet,
among others, the following requirements:

A. Share Ownership Tests. The Shares and any other capital stock the
Company issues (with the Shares, "Capital Stock") must be held by a minimum of
100 persons (determined without attribution to the owners of any entity owning
Capital Stock) for at least 335 days in each full taxable year, proportionately
adjusted for partial taxable years. In addition, at all times during the
second half of each taxable year, no more than 50% in value of the Capital
Stock may be owned, directly or indirectly, by five or fewer individuals
(determined with attribution to the owners of any entity owning Capital Stock).

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However, these two requirements do not apply until after the first taxable year
an entity seeks REIT status. The Company represents that is has issued
sufficient Capital Stock pursuant to the Offering to allow the Company to
satisfy these requirements, did not admit investors as Stockholders until the
admission allowed there to be sufficient Stockholders to meet these requirements
and has thereafter admitted only those Stockholders that allow the Company to
continue to meet these requirements. In addition, the Company's Articles
contain provisions restricting the transfer of Capital Stock, which provisions
are intended to assist the Company in satisfying these requirements and the
Company utilizes computerized systems designed to prevent violations of these
requirements. Furthermore, the Distribution Reinvestment Program contains
provisions that prevent its operations from causing a violation of these tests
as do the terms of the options granted to the Independent Directors and the
terms of the Soliciting Dealer Warrants. Moreover, the Company maintains
records which disclose the actual ownership of the outstanding Capital Stock,
and the Company has demanded and will demand written statements each year from
the record holders of 5% or more of the Capital Stock disclosing the beneficial
owners thereof. Those Stockholders failing or refusing to comply with the
Company's written demand are required by the Code and the Articles to submit,
with their tax returns, a similar statement disclosing the actual ownership of
Capital Stock and certain other information. See "Description of
Securities--Restrictions on Transfer."

B. Asset Tests. The Company must satisfy, on the last day of each
calendar quarter, two tests based on the composition of its assets. After
initially meeting the Asset Tests at the close of any quarter, the Company will
not lose its status as a REIT for failure to satisfy the Asset Tests at the end
of a later quarter solely due to changes in value. In addition, if the failure
to satisfy the Asset Tests results from an acquisition during a quarter, the
failure can be cured by disposing of non-qualifying assets within 30 days after
the close of that quarter. The Company intends to maintain adequate records of
the value of its assets to insure compliance with the Asset Tests, and will
take such other actions within 30 days after the close of any quarter as may be
required to cure any non-compliance.

1. 75% Asset Test. At least 75% of the value of the Company's total
assets must be represented by "real estate assets," cash, cash items (including
receivables from the operations of the Company) and government securities (the
"75% Asset Test"). Real estate assets include interests in real property
(including undivided interests in real property, leaseholds of land and options
to acquire land), interests in mortgages on real property, shares in other
qualifying REITs and property attributable to certain temporary investments of
new capital for a one year period beginning on the date the REIT received the
new capital. Property will qualify as attributable to the temporary investment
of new capital if the property is stock or a debt instrument and the money used
to purchase such stock or debt instrument is received by the REIT in exchange
for stock in the REIT (other than amounts received pursuant to a dividend
reinvestment plan) or in a public offering of debt obligations which have a
maturity of at least five years. The Company owns the properties, and the
Company represents that the purchase contracts apportion no more than 5% of the
purchase price of any property to property other than "real property," as
defined in the Code. In addition, the Company represents that it does not and
will not rent personal property to any tenant at any property, and has
maintained and will maintain depreciation schedules which corroborate this
representation. In addition, the Company has and will invest funds not used to
acquire properties in cash sources, GNMA certificates, REMIC interests, "new
capital" investments or other liquid investments which will allow it to qualify
under the 75% Asset Test. Therefore, the Company's investment in the properties
will constitute "real estate assets" and should allow the Company to meet the
75% Asset Test.

2. Limitation Tests. The remaining 25% of the Company's assets
generally may be invested without restriction, although if invested in
securities, such securities may not exceed either: (i)

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5% of the value of the Company's total assets as to any one non-government
issuer; or (ii) 10% of the outstanding voting securities of any one issuer. A
partnership interest held by a REIT is not considered a "security" for purposes
of these tests. The Company represents that as of the date hereof, it does not
own any stock or securities of any other company, and will not acquire
securities which could cause the Company to violate these limitation tests.

C. Gross Income Tests. The Company must satisfy for each calendar year
three separate tests based on the composition of its gross income, as determined
under its method of accounting. For purposes of these tests, if the Company
invests in a partnership, it will be treated as receiving its share of the
income and loss of the partnership, and the gross income of the partnership will
retain the same character in the hands of the Company as it has in the hands of
the partnership.

1. The 75% Gross Income Test (the "75% Test"). At least 75% of the
Company's gross income for the taxable year must result from "rents from real
property" (as defined below), interest on obligations secured by real property
mortgages, gains from the sale of interests in real property and real estate
mortgages (other than gain from property held primarily for sale to customers in
the ordinary course of the Company's trade or business), dividends from other
qualifying REITs, certain other investments relating to real property or
mortgages thereon, and, for a limited time, income from the investment of new
capital. Income will qualify as attributable to the temporary investment of
"new capital" if the income is attributable to the ownership of a stock or debt
instrument, but only during the one year period beginning on the date the REIT
receives such "new capital." New capital is defined as amounts received in
exchange for the issuance of stock (other than amounts received pursuant to a
dividend reinvestment plan) or a public offering of debt obligations which have
a maturity of at least five years. The Company will invest funds not otherwise
invested in properties in cash sources, GNMA certificates, REMIC interests, "new
capital" investments or other liquid investments which will allow the Company to
qualify under the 75% Test.

Income attributable to a lease of real property will generally qualify as
"rent from real property" under the 75% Test (and the 95% Test described below)
subject to the rules discussed below:

(i) Rent from a particular tenant will not qualify if the
Company, or an owner of 10% or more of the stock of the Company,
directly or indirectly owns 10% or more of the stock, assets or net
profits of the tenant.

(ii) The portion of rent attributable to personal property rented
with real property will not qualify unless the portion attributable to
personal property is 15% or less of the total rent received under the
lease.

(iii) Rent will not qualify if it is based in whole, or in part,
on the income or profits of any person. However, rent will not fail
to qualify if it is based on a fixed percentage (or designated varying
percentages) of receipts or sales, including amounts above a base
amount so long as the base amount is fixed at the time the lease is
entered into, the provisions are in accordance with normal business
practice and the arrangement is not an indirect method for basing rent
on income or profits.

(iv) Rental income will not qualify if the Company furnishes or
renders services to tenants, other than through an "independent
contractor" from whom the Company derives no revenue. The
"independent contractor" requirement, however, does not apply to the

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extent that the services provided by the Company are "usually or
customarily rendered" in connection with the rental of space, and are not
otherwise considered "rendered to the occupant."

The Company represents that:

(i) The leases provided to Counsel represent the only arrangements
between the Company and tenants with regard to the rental of the properties
or any portion thereof;

(ii) It has not and will not directly or indirectly own 10% or more of
any tenant that leases space in the properties;

(iii) The portion of any payments received under each lease which are
attributable to personal property constitutes less than 15% of the total
rent received under such lease, and the depreciation schedules maintained
for each property corroborate this representation;

(iv) Has not and will not charge rent that is based on the income or
profits of any person in certain properties and that the percentage rent
clauses, if any, in its current leases are not intended to provide the
Company with a prohibited share of income or profits; and

(v) Services received by tenants in connection with their leases to
the properties are usually or customarily rendered in connection with the
rental of space, and therefore the provision of these services will not
cause the rents received with respect to the properties to fail to qualify
as rents from real property for purposes of the 75% and 95% Tests. The
Company intends to hire "independent contractors" to render services which
it believes are not "usually or customarily rendered" in connection with
the rental of space, including physical development or redevelopment
activities.

2. The 95% Gross Income Test (the "95% Test"). In addition to
deriving 75% of its gross income from the sources listed above, at least 95% of
the Company's gross income for the taxable year must be derived from the
above-described qualifying income, or from dividends, interest or gains from the
sale or disposition of stock or other securities that are not Dealer Property
(as defined below). Dividends and interest on obligations not collateralized by
an interest in real property qualify under the 95% Test, but not under the 75%
Test. The Company will invest funds not otherwise invested in properties in
cash sources, GNMA certificates, REMIC interests, "new capital" investments or
other liquid investments which will allow the Company to qualify under the 95%
Test. For purposes of determining whether the Company complies with the 75% and
95% Tests, gross income does not include income from prohibited transactions.

The Company's share of income from the properties will primarily give rise
to rental income qualifying under the 75% and 95% Tests, and gains on sales of
the properties, substantially all of which will generally qualify under the 75%
and 95% Tests. The Company's anticipated operating results indicate that it is
unlikely that the Company will have sufficient, if any, non-qualifying income to
cause adverse consequences. The Company represents that the only income it has
received has been from the leases entered into with tenants at the properties,
and interest income from the investment of amounts not otherwise invested in
properties.

If the Company fails to satisfy either the 75% or 95% Tests for any taxable
year, it may retain its status as a REIT for such year if the failure was due to
reasonable cause and not due to willful neglect,

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the Company attached to its return a schedule of the sources of its income, and
any incorrect information on the schedules was not due to fraud. If this relief
provision was available, the Company would remain subject to tax with respect to
the excess net income.

3. The 30% Test. The Company must derive less than 30% of its gross
income for each taxable year from the sale or other disposition of: (i) real
property held for less than four years (other than foreclosure property and
involuntary conversions); (ii) stock or securities held for less than one year;
and (iii) property in a prohibited transaction. The Company currently intends
to hold the properties for more than four years and not to own any property that
will cause a prohibited transaction and will structure its activities to comply
with this test. In addition, the Company will invest amounts not invested in
properties in investments that will allow it to comply with this test, and
therefore may maintain increased cash reserves or make relatively low earning
liquid investments in order to prevent violations of this test.

D. Annual Distribution Requirements (the "Distribution Test"). In addition
to the other tests described above, the Company is required to distribute
dividends (other than capital gain dividends) to the Stockholders each year in
an amount at least equal to the difference between: (i) the sum of: (a) 95% of
the Company's REIT taxable income (computed without regard to the dividends paid
deduction and the REIT's net capital gain); and (b) 95% of the net income (after
tax), if any, from foreclosure property; and (ii) the sum of certain items of
non-cash income. Whether sufficient amounts have been distributed is based on
amounts paid in the taxable year to which they relate, or in the following
taxable year if the Company files an election before it timely files its tax
return for such year and if paid on or before the first regular Distribution
payment after such declaration. If the Company fails to meet the Distribution
Test as a result of an adjustment to the Company's tax return by the Service,
the Company may cure the failure by paying a "deficiency dividend" (plus
penalties and interest to the Service) within a specified period. To the extent
that the Company does not distribute all of its net capital gain or distributes
at least 95%, but less than 100% of its REIT taxable income, as adjusted, it
will be subject to tax on the undistributed portion.
The Company intends to pay sufficient dividends each year to satisfy the
Distribution Test. See "Investment Objectives and Policies--Distributions." It
is possible that the Company may not have sufficient cash or other liquid assets
to meet the Distribution Test due to tax accounting rules and other timing
differences. The Company will closely monitor the relationship between its REIT
taxable income and cash flow and, if necessary to comply with the Distribution
Test, will borrow funds to provide cash flow needed to satisfy the distribution
requirement. The Company represents that to date, it has distributed dividends
in excess of its real estate investment trust taxable income, which thereby has
allowed it to meet the Distribution Test.

Failure to Qualify. If the Company fails to qualify for taxation as a REIT
in any taxable year and the relief provisions are not available or cannot be
met, the Company will not be able to deduct its dividends and will be subject to
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates, thereby reducing cash available for Distributions. In
such event, all Distributions to Stockholders (to the extent of current and
accumulated earnings and profits), will be taxable as ordinary income. Unless
entitled to relief under specific statutory provisions, the Company will not be
eligible to elect REIT status for the four taxable years following the year
during which qualification was lost.

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Prohibited Transactions. As discussed above, the Company will be subject
to a 100% tax on any net income from "prohibited transactions". Net income
from a prohibited transaction arises from the sale or exchange of property held
for sale to customers in the ordinary course of its trade or business ("Dealer
Property") unless such property is foreclosure property. In addition, there is
an exception for certain sales of Dealer Property so long as the property sold:
(i) is a real estate asset under the 75% Asset Test; (ii) has been held for at
least four years; (iii) has capitalized expenditures not in excess of 30% of
the net sales price; (iv) was held for production of rental income for at least
four years; and (v) when combined with other sales in the year, does not cause
the REIT to have made more than seven sales of Dealer Property during the
taxable year. Although the Company will eventually sell each of the
properties, its primary intention in acquiring and operating the properties is
the production of rental income and it does not expect to hold any property for
sale to customers in the ordinary course of its trade or business.

TAXATION OF STOCKHOLDERS

Taxation of Taxable Domestic Stockholders. As long as the Company
qualifies as a REIT, Distributions paid to the Company's taxable domestic
Stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be ordinary dividend income.
Dividend income is characterized as "portfolio" income under the passive loss
rules and cannot be offset by a Stockholder's current or suspended passive
losses. Corporate Stockholders cannot claim the dividends received deduction
for such dividends unless the Company loses its REIT status. Distributions
that are designated as capital gain dividends will be taxed as long-term
capital gains (to the extent they do not exceed the Company's actual net
capital gain for the taxable year). However, corporate Stockholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and
profits are treated first as a tax-deferred return of capital to the
Stockholder, reducing the Stockholder's tax basis in its Shares by the amount
of such distribution. Because earnings and profits are reduced for
depreciation and other non-cash items, it is possible that a portion of each
Distribution will constitute a tax-deferred return of capital. Distributions
in excess of the Stockholder's tax basis are taxable as capital gains.
Although Stockholders generally recognize taxable income in the year that a
Distribution is received, any Distribution declared by the Company in October,
November or December of any year and payable to a Stockholder of record on a
specific date in any such month shall be treated as both paid by the Company
and received by the Stockholder on December 31 of the year it was declared even
if paid by the Company during January of the following calendar year. Because
the Company is not a pass-through entity for tax purposes, Stockholders may not
use any operating or capital losses of the Company to reduce their tax
liabilities.

In general, the sale of Shares held for more than 12 months will produce
long-term capital gain or loss, while all other sales will produce short-term
gain or loss, in each case with the gain or loss equal to the difference
between the amount of cash received form the sale and the Stockholder's basis
in the Shares sold. However, any loss from a sale or exchange of Shares by a
Stockholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss, to
the extent of distributions from the Company that the Stockholder treated as
long-term capital gains. In addition, please note that Distributions in excess
of earnings and profits that reduce a Stockholder's basis will tend to increase
the gain or sale.

Backup Withholding. The Company will report to its domestic Stockholders
and to the Service the amount of dividends paid during each calendar year, and
the amount (if any) of tax it withheld. A Stockholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such
Stockholder: (a) is a corporation or comes within other exempt categories; or
(b) provides a taxpayer

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identification number, certifies as to no loss of exemption, and otherwise
complies with applicable requirements. A Stockholder that does not provide
the Company with its correct taxpayer identification number may also be subject
to penalties imposed by the Service. Any amount paid as backup withholding can
be credited against the Stockholder's income tax liability. In addition, the
Company may be required to withhold a portion of capital gain distributions
made to any Stockholders who fail to certify their non-foreign status to the
Company. See "--Taxation of Foreign Stockholders" in this Section.

Taxation of Tax-Exempt Stockholders. Distributions by the Company to a
Stockholder that is a tax-exempt entity should not constitute UBTI unless the
tax-exempt entity borrows funds to acquire its Shares (or otherwise incurs
acquisition indebtedness within the meaning of the Code with respect to its
acquisition of the Shares), or the Shares are otherwise used in an unrelated
trade or business of the tax-exempt entity.

Notwithstanding the foregoing, if the Company constitutes a "Pension-Held
REIT", certain Qualified Plans that are Stockholders could recognize UBTI even
without incurring debt to acquire their Shares. The Company will constitute a
Pension-Held REIT if either: (i) at least one Qualified Plan holds more than
25% (by value) of the Shares; or (ii) one or more Qualified Plans (each of
which owns more than 10% by value of the Shares) hold an aggregate of more than
50% (by value) of the Shares. If the Company constitutes a Pension-Held REIT,
then a portion of the dividends received by any Qualified Plan that holds 10%
or more of the Shares will constitute UBTI based on the ratio of the Company's
gross income (less allowable deductions) which is considered UBTI itself, bears
to the Company's total gross income (less allowable deductions).
Notwithstanding the foregoing, the Ownership Limit contained in the Articles
should prevent the Company from unintentionally constituting a Pension-Held
REIT because no Stockholder, whether a Qualified Plan or otherwise, is
permitted to own more than 9.8% (by value) of the Shares without requesting and
obtaining prior Board approval.

Taxation of Foreign Stockholders. The following discussion is intended
only as a summary of the rules governing income taxation of non-resident alien
individuals, foreign corporations, foreign partnerships, and foreign trusts and
estates (collectively, "Foreign Stockholders"). Prospective Foreign
Stockholders should consult with their own tax advisors to determine the impact
of federal, state, and local income tax laws on an investment in the Company,
including any reporting requirements.

In general, Foreign Stockholders will be subject to regular U.S. income
tax with respect to their investment in the Company if the investment is
"effectively connected" with the conduct of a trade or business in the U.S. A
corporate Foreign Stockholder that receives income that is treated as
effectively connected with a U.S. trade or business may also be subject to the
"branch profits tax" under Code Section 884. The following discussion applies
to Foreign Stockholders whose investment in the Company is not considered
"effectively connected."

Generally, any dividend that constitutes ordinary income for tax purposes
will be subject to a U.S. tax equal to the lesser of 30% of the dividend or the
rate in an applicable tax treaty. A Distribution in excess of the Company's
earnings and profits is treated first as a return of capital that will reduce a
Foreign Stockholder's basis in its Shares (but not below zero) and then as gain
from the disposition of such Shares, subject to the rules discussed below for
dispositions.

Distributions by the Company that are attributable to gain from the sale
or exchange of a U.S. real property interest are taxed to a Foreign Stockholder
as if the Distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Foreign Stockholder will be taxed at

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the capital gain rates applicable to a U.S. stockholder (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of non-resident alien individuals). In addition, such dividends may also
be subject to a 30% branch profits tax when made to a corporate Foreign
Stockholder that is not entitled to treaty exemptions.

Although tax treaties may reduce the Company's withholding obligations,
the Company will generally be required to withhold from dividends to Foreign
Stockholders, and remit to the Service, 34% of designated capital gain
dividends and 30% of ordinary dividends paid out of earnings and profits. In
addition, if the Company designates prior dividends as capital gain dividends,
subsequent dividends, up to the amount of such prior dividends, will be treated
as capital gain dividends for purposes of withholding. If the amount of tax
withheld by the Company with respect to a distribution to a Foreign Stockholder
exceeds its U.S. tax liability with respect to such distribution, the Foreign
Stockholder may file for a refund of such excess from the Service. The 34%
withholding tax rate on capital gain dividends currently corresponds to the
maximum income tax rate applicable to corporations, but is higher than the 28%
maximum rate on capital gains of individuals.

Unless the Shares constitute a U.S. real property interest under Code
Section 897, a sale of Shares by a Foreign Stockholder generally will not be
subject to U.S. income taxation. The Shares will not constitute a U.S. real
property interest if the Company is a "domestically controlled REIT." A
domestically controlled REIT is a REIT in which at all times during a specified
testing period less than 50% in value of its shares is held directly or
indirectly by Foreign Stockholders. It is currently anticipated that the
Company will be a domestically controlled REIT, and therefore that the sale of
Shares will not be subject to such taxation. However, because the Shares may be
publicly traded, no assurance can be given that the Company will continue to be
a domestically controlled REIT. Notwithstanding the foregoing, capital gain not
subject to such rules will be taxable to a Foreign Stockholder if the Foreign
Stockholder is a non-resident alien individual who is present in the U.S. for
183 days or more during the taxable year and certain other conditions apply, in
which case the non-resident alien individual will be subject to a 30% tax on his
or her U.S. source capital gains. If the Company did not constitute a
domestically-controlled REIT, whether a Foreign Stockholder's sale of stock
would be subject to tax as a sale of a U.S. real property interest would depend
on whether the Shares were "regularly traded" on an established securities
market and on the size of the selling Stockholder's interest in the Company. If
the gain on the sale of Shares was subject to taxation under these rules, the
Foreign Stockholder would be subject to the same treatment as a U.S. Stockholder
with respect to the gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of non-resident alien individuals).
In addition, Distributions that are treated as gain from the disposition of
stock and are subject to tax under Code Section 897 may also be subject to a 30%
branch profits tax when made to a foreign corporate stockholder that is not
entitled to treaty exemptions. In any event, a purchaser of Shares from a
Foreign Stockholder will not be required to withhold on the purchase price if
the purchased shares are "regularly traded" on an established securities market
or if the Company is a domestically-controlled REIT. Otherwise, the purchaser
of stock may be required to withhold 10% of the purchase price and remit this
amount to the Service.

If the proceeds of a disposition of Shares are paid by or through a U.S.
office of a broker-dealer, the payment is subject to information reporting and
to backup withholding unless the disposing Foreign Stockholder certifies as to
his name, address and non-U.S. status or otherwise establishes an exemption.
Generally, U.S. information reporting and backup withholding will not apply to
a payment of disposition proceeds if the payment is made outside the U.S.
through a non-U.S. office of a non-U.S. broker-dealer. U.S. information
reporting requirements (but not backup withholding) will apply, however, to a
payment

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of disposition proceeds outside the U.S. if (i) the payment is made through an
office outside the U.S. of a broker-dealer that is either (a) a U.S. person, (b)
a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the U.S. or (c) a "controlled
foreign corporation" for U.S. federal income tax purposes, and (ii) the
broker-dealer fails to initiate documentary evidence that the Stockholder is a
Foreign Stockholder and that certain conditions are met or that the Foreign
Stockholder otherwise is entitled to an exemption.

OTHER TAX CONSIDERATIONS

Distribution Reinvestment Program. Stockholders who purchased Shares
pursuant to the Company's Prior Offering as well as Stockholders who purchase
shares in the Offering and participate in the Distribution Reinvestment Program
will recognize taxable dividend income in the amount they would have received
had they not elected to participate, even though they receive no cash. These
deemed dividends will be treated as actual dividends from the Company to the
participating Stockholders and will retain the character and tax effects
applicable to all dividends. See "--Taxation of Stockholders" in this Section.
Capital Stock received under the program will have a holding period beginning
with the day after purchase, and a tax basis equal to their cost, which is the
gross amount of the deemed Distribution.

State and Local Taxes. The Company and its Stockholders may be subject to
state or local taxation in various jurisdictions, including those in which it
or they transact business or reside. The state and local tax treatment of the
Company and its Stockholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective Stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
on a investment in the Shares of the Company.

ERISA CONSIDERATIONS

The following is a summary of material considerations arising under ERISA
and the prohibited transaction provisions of Code Section 4975 that may be
relevant to a prospective purchaser. This discussion does not deal with all
aspects of ERISA or Code Section 4975 or, to the extent not preempted, state
law that may be relevant to particular employee benefit plan Stockholders
(including plans subject to Title I of ERISA, other employee benefit plans and
IRAs subject to the prohibited transaction provisions of Code Section 4975, and
governmental plans and church plans that are exempt from ERISA and Code Section
4975 but that may be subject to state law requirements) in light of their
particular circumstances.

In considering whether to invest a portion of the assets of a pension,
profit-sharing, retirement or other employee benefit plan ("Plan"), fiduciaries
of the Plan should consider, among other things whether the investment: (i)
will be in accordance with the documents and instruments covering the
investments by such Plan; (ii) will allow the Plan to satisfy the
diversification requirements of ERISA, if applicable; (iii) will result in UBTI
to the Plan (see "Federal Income Tax Considerations--Taxation of
Stockholders--Taxation of Tax-Exempt Stockholders"); (iv) will provide
sufficient liquidity; and (v) is prudent under the general ERISA standards. In
addition to imposing general fiduciary standards of investment prudence and
diversification, ERISA and the corresponding provisions of the Code prohibit a
wide range of transactions involving the assets of the Plan and persons who
have certain specified relationships to the Plan ("parties in interest" within
the meaning of ERISA, "disqualified persons" within the meaning of the Code).
Thus, a designated Plan fiduciary considering an investment in the Shares
should also consider whether the acquisition or the continued holding of the
Shares might constitute or give rise to a direct or indirect prohibited
transaction.

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The fiduciary of an IRA or of an employee benefit 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, not prohibited under Code Section 4975 and
permitted under applicable state law.

The Department of Labor (the "DOL") has issued final regulations (the "DOL
Regulations") which provide guidance on the definition of Plan assets under
ERISA. Under the DOL Regulations, if a Plan acquires an equity interest in an
entity, which is neither a "publicly-offered security" nor a security issued by
an investment company registered under the Investment Company Act of 1940, as
amended, the Plan's assets would include, for ERISA purposes, both the equity
interest and an undivided interest in each of the entity's underlying assets
unless certain specified exceptions apply. The DOL 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 Act (provided the
securities are registered under the Exchange Act within 190 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 Act and will be
registered under the Exchange Act.

The DOL 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 offering as a result of events beyond the issuer's
control. The Company represents that the Shares are held by over 100
independent investors and therefore are currently considered "widely-held."

The DOL 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 DOL Regulations further provide that
when 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 the finding that such
securities are freely-transferable. One type of restriction that will not
affect a finding that securities are freely transferable is a restriction or
prohibition against a transfer or assignment which would result in a
termination or reclassification of an entity for federal or state income tax
purposes. The Company believes that the Ownership Limit imposed under the
Articles on the transfer of the Shares are designed to prevent violations of
the five-or-fewer rule (which would cause a termination of REIT status for tax
purposes) or which are otherwise permitted under the DOL Regulations and,
therefore, will not cause the Shares to not be "freely-transferable." The DOL
Regulations are interpretive in nature and, therefore, no assurance can be
given that the DOL and the United States Department of the Treasury will not
conclude that the Shares are not freely-transferable.

Assuming that the Shares are "widely-held," the Company believes that the
Shares will be "publicly offered securities" for purposes of the Regulations and
that the assets of the Company will not be deemed to be "plan assets" of any
Plan that invests in the Shares.

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DESCRIPTION OF SECURITIES

GENERAL

The total number of Shares of stock which the Company has authorized is
30,000,000 of which 24,000,000 shares are common stock, $.01 par value per
share (the "Common Stock"), and 6,000,000 shares are preferred stock, $.01 par
value per share (the "Preferred Stock"). The Shares of Common Stock offered
hereby will be duly authorized, fully paid and nonassessable.

Stockholders have no preemptive rights to purchase or subscribe for
securities of the Company, and the Common Stock is not convertible or subject
to redemption at the option of the Company. The Common Stock is entitled to
one vote per share and Shares do not have cumulative voting rights. Subject to
the rights of the holders of any class of capital stock of the Company having
any preference or priority over the Common Stock, the Stockholders are entitled
to Distributions in such amounts as may be declared by the Board from time to
time out of funds legally available for such payments and, in the event of
liquidation, to share ratably in any assets of the Company remaining after
payment in full of all creditors and provisions for any liquidation preferences
on any outstanding Preferred Stock.

The Company may, at the discretion of the Board, authorize the listing,
issuance and sale of Shares on a national securities exchange or market. It is
not the present intention of the Company to list the Shares prior to the
termination of this Offering. However, the Company anticipates that by 1999 it
will apply to have the Shares listed, provided the Company meets the applicable
listing requirements and the Board determines such action to be in the best
interests of the Company.

Generally, the Directors, without further action by the Stockholders, are
authorized to issue up to 6,000,000 shares of Preferred Stock in one or more
series and to determine and fix, as to any series, all the relative rights and
preferences of shares including, without limitation, preferences, limitations
or relative rights with respect to redemption rights, conversion rights, if
any, voting rights, if any, dividend rights and preferences on liquidation.

It is the current intention of the Company to issue only the Shares and
Soliciting Dealer Warrants as described below, although it may from time to
time issue other securities through public offerings or private placements.
The Company may also issue shares of either Common Stock or Preferred Stock in
whole or partial payment for a property if, in the judgment of the Board, such
a transaction would be advantageous to the Company.

All Shares are fully transferable, subject only to restrictions which
would cause loss of REIT status. See "--Restrictions on Transfer" in this
Section. However, each person acquiring Shares must notify the Company of any
such transfer and provide his name, address, taxpayer identification number,
number of Shares acquired, Service Form W-9 and the name of the transferor
Stockholder prior to any Share transfer being recorded on the books and records
of the Company. Additionally, the transferee Stockholder must present the
stock certificate representing such Shares or an affidavit of lost certificate.
Such properly executed documentation must be presented one calendar month
prior to the last date of the current quarter to be effective as of the first
day of the next quarter. Failure to provide such information could result in a
transfer not being recognized by the Company on a timely basis.

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SOLICITING DEALER WARRANTS

The Company has agreed to issue and sell, and the Dealer Manager has
agreed to purchase, for the price of $.0008 per warrant, warrants (the
"Soliciting Dealer Warrants") to purchase one Share per Soliciting Dealer
Warrant in the Company equal to 2.5% of the total number of Shares sold by the
Dealer Manager (and/or the Soliciting Dealers) up to a maximum of 250,000
Soliciting Dealer Warrants. The Soliciting Dealer Warrants will be issued on a
quarterly basis commencing 60 days after the date on which the Shares are first
sold pursuant to this Offering. The Dealer Manager may retain or reallow all
Soliciting Dealer Warrants to the Soliciting Dealers, unless such issuance of
the Soliciting Dealer Warrants is prohibited by either federal or state
securities laws. The Soliciting Dealer Warrants which were to be but have not
been issued to the Dealer Manager in connection with the Prior Offering and the
Soliciting Dealer Warrants to be issued in connection with this Offering, as
well as the Shares issuable upon exercise of the Soliciting Dealer Warrants,
are being registered as part of this Offering.

Each Soliciting Dealer will receive from the Dealer Manager one Soliciting
Dealer Warrant for each 40 Shares sold by such Soliciting Dealer during this
Offering. All Shares sold by the Company other than through the Distribution
Reinvestment Program will be included in the computation of the number of Shares
sold to determine the number of Soliciting Dealer Warrants to be issued. The
holder of a Soliciting Dealer Warrant will be entitled to purchase one Share
from the Company at a price of $12 (120% of the public offering price per Share)
during the time period beginning from the date the Soliciting Dealer Warrants
are issued and ending upon October 13, 2000 (the "Exercise Period"). A
Soliciting Dealer Warrant may not be exercised unless the Shares to be issued
upon the exercise of the Soliciting Dealer Warrant have been registered or are
exempt from registration in the state of residence of the holder of the
Soliciting Dealer Warrant or if a prospectus required under the laws of such
state cannot be delivered to the buyer on behalf of the Company. Notwithstanding
the foregoing, no Soliciting Dealer Warrants will be exercisable until one year
from the date of issuance. In addition, holders of Soliciting Dealer Warrants
may not exercise the Soliciting Dealer Warrants to the extent such exercise
would jeopardize the Company's status as a REIT under the Code.

The terms of the Soliciting Dealer Warrants, including the exercise price
and the number and type of securities issuable upon exercise of a Soliciting
Dealer Warrant and the number of such Warrants may be adjusted in the event of
stock dividends, certain subdivisions, combinations and reclassification of
Shares or the issuance to Stockholders of rights, options or warrants entitling
them to purchase Shares or securities convertible into Shares. The terms of the
Soliciting Dealer Warrants also may be adjusted if the Company engages in
certain merger or consolidation transactions or if all or substantially all of
the Company's assets are sold. Soliciting Dealer Warrants are not transferable
or assignable except by the Dealer Manager, the Soliciting Dealers, their
successors in interest, or to individuals who are both officers and directors of
such a person. Exercise of these Soliciting Dealer Warrants will be under the
terms and conditions detailed in this Prospectus and in the Warrant Purchase
Agreement, which is an exhibit to the Registration Statement.

As holders of Soliciting Dealer Warrants, persons do not have the rights
of Stockholders, may not vote on Company matters and are not entitled to
receive Distributions.

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ISSUANCE OF ADDITIONAL SECURITIES AND DEBT INSTRUMENTS

The Directors are authorized to issue additional shares or convertible
securities for cash, property or other consideration on such terms as they may
deem advisable and to classify or reclassify any unissued shares of capital
stock of the Company without approval of the holders of such outstanding
securities. The Directors may cause the Company to issue debt obligations with
conversion privileges on more than one class of capital stock. The Directors
may issue debt obligations with conversion privileges on such terms and
conditions as the Directors may determine whereby the holders thereof may
acquire Shares. Subject to certain restrictions, the Directors may also cause
the Company to issue warrants, options and rights to buy Shares on such terms
as they deem advisable (notwithstanding the possible dilution in the value of
the outstanding Shares which may result from the exercise of such warrants,
options or rights to buy Shares) as part of a ratable issue to Stockholders, as
part of a public or private offering or as part of a financial arrangement with
parties other than the Advisor or Directors, officers or employees of the
Company or the Advisor.

RESTRICTIONS ON TRANSFER

For the Company to qualify as a REIT under the Code, Shares must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months (other than the first year) or during a proportionate part of
a shorter taxable year. Further, not more than 50% of the value of the issued
and outstanding shares of capital stock may be owned, directly or indirectly,
by five or fewer individuals during the last half of a taxable year (other than
the first year) or during a proportionate part of a shorter taxable year.

Since the Board believes it is essential for the Company to continue to
qualify as a REIT, the Articles provide that no person may own, or be deemed
to own by virtue of the attribution provisions of the Code, more than
9.8% (the "Ownership Limit") of the number or value of any class of the issued
and outstanding stock of the Company. The Directors, upon receipt of a ruling
from the Service, an opinion of counsel or other evidence satisfactory to the
Directors and upon other conditions as the Directors may direct, may also
exempt a proposed transferee from the Ownership Limit. As a condition of this
exemption, the intended transferee must give written notice to the Company of
the proposed transfer no later than 15 days prior to any transfer which, if
effected, would result in the intended transferee owning shares in excess of
the Ownership Limit. The Directors may require opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary or advisable in
order to determine or ensure the Company's status as a REIT. Any transfer of
Shares that would: (i) create a direct or indirect ownership of Shares in
excess of the Ownership Limit; (ii) result in the Shares being owned by fewer
than 100 persons; or (iii) result in the Company being "closely-held" within
the meaning of Code Section 856(b), shall be null and void, and the intended
transferee will acquire no right to the Shares. The foregoing restrictions on
transferability and ownership will not apply if the Directors determine that it
is no longer in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT.

Any purported transfer of Shares that would result in a person owning
Shares in excess of the Ownership Limit or cause the Company to become
"closely-held" under Code Section 856(b) that is not otherwise permitted as
provided above will constitute excess shares ("Excess Shares"). Upon the
Company determining the existence of Excess Shares, it shall make a demand upon
such Stockholders to sell such Excess Shares. Within 30 days after the Company
requests such holder to sell such Excess Shares, the Excess Shares shall be
deemed to have been offered for sale to the Company, or its designee, at a
price per Share equal to the lesser of: (a) the price per Share in the
transaction that created such Excess Shares

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(or, in the case of a devise or gift, the market price at the time of
such devise or gift); and (b) the market price of the equity shares to which
such Excess Shares relates on the date the Company, or its designee, accepts
such offer. The Company shall have the right to accept such offer for a period
of 30 days after the later of: (i) the date of Transfer which resulted in such
Excess Shares; and (ii) the date the Board determines in good faith that a
Transfer resulting in Excess Shares has occurred, if the Company does not
receive a notice of such Transfer pursuant to the terms of the Articles but in
no event later than a permitted Transfer pursuant to and in compliance with the
terms of the Articles. If the Company accepts such offer, it shall be required
to pay the full purchase price for such Shares within such 30 day period.

All persons who own, directly or by virtue of the attribution provisions
of the Code, more than 9.8% (or such other percentage between 1/2 of 1% and 5%,
as provided in the rules and regulations promulgated under the Code) of the
number or value of the outstanding Shares must give the Company written notice
by January 31st of each year. In addition, each Stockholder shall, upon
demand, be required to disclose to the Company in writing all information
regarding the direct, indirect and constructive ownership of Shares as the
Directors deem reasonably necessary to comply with the provisions of the Code
applicable to a REIT, to comply with the requirements of any taxing authority
or governmental agency or to determine any such compliance.

These ownership limitations could have the effect of discouraging a
takeover or other transaction in which holders of some, or a majority, of the
Shares might receive a premium for their Shares over the then prevailing market
price or a price which such holders might believe to be otherwise in their best
interest.

SUMMARY OF THE ORGANIZATIONAL DOCUMENTS

Each Stockholder shall be bound by and deemed to have agreed to the terms
of the Organizational Documents by his, her or its election to become a
Stockholder. The Organizational Documents, consisting of the Articles and
Bylaws, were reviewed and ratified by a majority of the Directors (including a
majority of the Independent Directors) at the first meeting of such Directors.
The following is a summary of certain provisions of the Organizational
Documents and does not purport to be complete. This summary is qualified in
its entirety by specific reference to the Organizational Documents filed as
Exhibits to the Company's Registration Statement.

CERTAIN ARTICLE AND BYLAW PROVISIONS

Stockholders' rights and related matters are governed by the Maryland
General Corporation Law ("MGCL"), the Articles and Bylaws. Certain provisions
of the Articles and Bylaws, which are summarized below, may make it more
difficult to change the composition of the Board and may discourage or make
more difficult any attempt by a person or group to obtain control of the
Company.

STOCKHOLDERS' MEETINGS

An annual meeting of the Stockholders will be held not less than 30 days
after the delivery of the Company's annual report, but within six months after
the end of each fiscal year, for the purpose of electing Directors and for the
transaction of such other business as may become before the meeting. A special
meeting of the Stockholders may be called by the chief executive officer, a
majority of the Directors or a majority of the Independent Directors, and shall
be called by an officer of the Company

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upon written request of the Stockholders holding in the aggregate not
less than 10% of the outstanding Shares. Upon receipt of a written request,
either in person or by mail, stating the purpose(s) of the meeting, the Company
shall provide all Stockholders, 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 15 nor more than 60 days after
the distribution of such notice, at a time and place specified in the request,
or if none is specified, at a time and place convenient to the Stockholders.
At any meeting of the Stockholders, each Stockholder is entitled to one vote
for each Share owned of record on the applicable record date. In general, the
presence in person or by proxy of a majority of the outstanding Shares shall
constitute a quorum, and the majority vote of the Stockholders will be binding
on all Stockholders of the Company.

BOARD OF DIRECTORS

The Articles and Bylaws provide that the number of directors of the
Company may not be fewer than three nor more than nine, a majority of which
will be independent. This provision may only be amended by a vote of a
majority of the Board. A vacancy in the Board caused by the death, resignation
or incapacity of a Director or by an increase in the number of Directors
(within the limits described above) may be filled by the vote of a majority of
the remaining Directors. With respect to a vacancy created by the death,
resignation or incapacity of an Independent Director, the remaining Independent
Directors shall nominate a replacement. Vacancies occurring as a result of the
removal of a Director by Stockholders shall be filled by a majority vote of the
Stockholders. Any Director may resign at any time and may be removed with or
without cause by the Stockholders owning at least a majority of the outstanding
Shares.

A Director shall have had at least three years of relevant experience
demonstrating the knowledge and experience required to successfully acquire and
manage the type of assets being acquired by the Company. At least one of the
Independent Directors shall have three years of relevant real estate
experience.

STOCKHOLDER VOTING RIGHTS

Except as otherwise provided, all Shares shall have equal voting rights.
Stockholders are entitled to vote by written consent and do not have cumulative
voting rights. The voting rights per share of equity securities of the Company
(other than the Shares) sold in a private offering shall not exceed voting
rights which bear the same relationship to the voting rights of the Shares of
the Company as the consideration paid to the Company for each privately offered
Company share bears to the book value of each Share.

All elections for Directors shall be decided by the affirmative vote of a
majority of votes cast at a meeting or without a meeting, provided that a
quorum is present (defined as a majority of the aggregate number of votes
entitled to be cast thereon). Any or all Directors may be removed, with or
without cause, by the affirmative vote of the holders of at least a majority of
the outstanding Shares entitled to vote at an annual or special meeting. All
other questions shall be decided by a majority of the votes cast at a meeting.
If no meeting is held, 100% of the Stockholders must consent in writing.

Without concurrence of a majority of the outstanding Shares, the Directors
may not: (a) amend the Articles, except for amendments which do not adversely
affect the rights, preferences and privileges of the Stockholders, including
amendments to provisions relating to Director qualifications, fiduciary duty,
liability and indemnification, conflicts of interest, investment policies or
investment restrictions; (b) sell all or substantially all of the Company's
assets other than in the ordinary course of the Company's business

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or in connection with liquidation and dissolution; (c) cause a merger or
other reorganization of the Company; or (d) dissolve or liquidate the Company,
other than before the initial investment in a property by the Company. For
purposes of the above provision, a sale of all or substantially all of the
Company's assets shall mean the sale of two-thirds or more of the Company's
assets based on the total number of properties or the current fair market value
of these assets.

With respect to Shares owned by the Advisor, the Sponsor, the Directors or
any Affiliate, neither the Advisor, the Sponsor, the Directors, nor any
Affiliate may vote or consent on matters submitted to the Stockholders
regarding the removal of the Advisor, the Sponsor, the Directors or any
Affiliate or any transaction between the Company and any of them. In
determining the requisite percentage and interest of Shares necessary to
approve a matter on which the Advisor, the Sponsor, the Directors and any
Affiliate may not vote or consent, any Shares owned by them shall not be
included.

Each Stockholder entitled to vote may do so: (i) at a meeting in person,
by written proxy or by a signed writing or consent directing the manner in
which he or she desires that his or her vote be cast (which must be received by
the Directors prior to such meeting); or (ii) without a meeting by a signed
writing or consent directing the manner in which he or she desires that his or
her vote be cast (which must be received by the Directors prior to the date the
votes of the Stockholders are to be counted).

STOCKHOLDER LISTS; INSPECTION OF BOOKS AND RECORDS

An alphabetical list of names, record addresses and business telephone
numbers (if any) of all Stockholders with the number of Shares held by each,
shall be maintained as part of the books and records of the Company at the
Company's principal office. Such list shall be updated at least quarterly and
shall be open for inspection by a Stockholder or his designated agent upon such
Stockholder's request. Such list shall also be mailed to any Stockholder
requesting the list within ten days of receipt of a request. The Company may
impose a reasonable charge for expenses incurred in reproducing such list and
may require the Stockholder requesting such Stockholder's list to represent
that the list is requested with respect to matters relating to Stockholders'
voting rights under the Articles and the exercise of Stockholders' rights under
federal proxy laws.

Any Stockholder and any designated representative thereof shall be
permitted access to all records of the Company at all reasonable times and may
inspect and copy any of them. In addition, the books and records of the
Company shall be open for inspection by state securities administrators upon
reasonable notice and during normal business hours at the principal place of
business of the Company.

AMENDMENT OF THE ORGANIZATIONAL DOCUMENTS

The Articles may be amended by the affirmative vote of a majority of
the then outstanding Shares, without the necessity for concurrence by the
Directors. Unless otherwise stated in the Articles, the Bylaws may be amended
in a manner not inconsistent with the Articles by a majority vote of the
Directors, except that an amendment of any matter which requires greater than a
majority vote of the Directors must be amended by the requisite vote and no
Bylaw adopted by the Stockholders may be amended by the Directors if the
provision of such Bylaw provides that it may not be amended without a
Stockholder vote.

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DISSOLUTION OR TERMINATION OF THE COMPANY

The Company is an infinite-life REIT which may be dissolved pursuant to
the procedures set forth in the MGCL at any time by the affirmative vote of a
majority of the Stockholders. However, the Company anticipates that, by 1999,
the Board of Directors will determine whether it is in the best interests of
the Company to: (i) apply to have the Shares listed for trading on a national
stock exchange or included for quotation on a national market system, provided
the Company meets the then applicable listing requirements; and/or
(ii) commence a subsequent public offering after completion of this Offering.
If listing of the Shares is not feasible by 1999, the Board may decide to:
(i) sell the Company's assets individually; (ii) list the Shares at a future
date to provide liquidity for Stockholders; or (iii) liquidate the Company
within ten years of the date thereof.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws provide that: (a) with respect to an annual meeting of
Stockholders, nominations of persons for election to the Board and the proposal
of business to be considered by Stockholders may be made only: (i) pursuant to
the Company's notice of the meeting; (ii) by the Board; or (iii) by a
Stockholder who is entitled to vote at the meeting and has complied with the
advance notice procedures set forth in the Bylaws; and (b) with respect to
special meetings of Stockholders, only the business specified in the Company's
notice of meeting may be brought before the meeting of Stockholders, and
nominations of persons for election to the Board may be made only: (i)
pursuant to the Company's notice of the meeting; (ii) by the Board; or (iii)
provided that the Board has determined that directors shall be elected at such
meeting, by a Stockholder who is entitled to vote at the meeting and has
complied with the advance notice provisions set forth in the Bylaws.

RESTRICTIONS ON CERTAIN CONVERSION TRANSACTIONS AND ROLL-UPS

The Articles require that 66 2/3% in interest of the Stockholders and all
the Independent Directors approve certain exchange offers, mergers,
consolidations or similar transactions involving the Company in which the
Stockholders receive securities in a surviving entity having a substantially
longer duration or materially different investment objectives and policies, or
that provides significantly greater compensation to management from that which
is described in this Prospectus, except for any such transaction effected
because of changes in applicable law, or to preserve tax advantages for a
majority in interest of the Stockholders. In should be noted that standards
such as "substantially longer life," "materially different investment objectives
and policies" or "provides significantly greater compensation to management" are
not defined and are by their nature potentially ambiguous. Any ambiguities will
be resolved by the Directors.

In connection with a proposed Roll-Up, as defined below, an appraisal of
all of the Company's assets shall be obtained from a person with no current or
prior business or personal relationship with the Advisor or the Directors and
who is engaged, to a substantial extent, in the business of rendering opinions
regarding the value of assets of the type held by the Company (an "Independent
Expert"). The appraisal will be included in a prospectus used to offer the
securities of a Roll-Up Entity, as defined below, and shall be filed with the
Commission and the state regulatory commissions as an exhibit to the
registration statement for the offering. Accordingly, an issuer using the
appraisal shall be subject to liability for violation of Section 11 of the Act
and comparable provisions under state laws for any material misrepresentations
or material omissions in the appraisal. The Company's assets shall be
appraised in a consistent manner. The appraisal shall be based on an
evaluation of all relevant information, and shall

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indicate the value of the Company'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 the Company's 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 the Company and its Stockholders. A summary of
the independent appraisal, indicating all material assumptions underlying the
appraisal, shall be included in a report to the Stockholders in connection with
a proposed Roll-Up. A Roll-Up is a transaction involving the acquisition,
merger, conversion or consolidation, either directly or indirectly, of the
Company and the issuance of securities of a Roll-Up Entity, as defined below. A
Roll-Up does not include: (i) a transaction involving securities of the Company
that have been for at least 12 months listed on a national securities exchange
or traded through the Nasdaq National Market; or (ii) a transaction involving
the conversion to corporate, trust or association form of only the Company if,
as a consequence of the transaction, there will be no significant adverse change
in any of the following: (a) Stockholders' voting rights; (b) the term and
existence of the Company; (c) Sponsor or Advisor compensation; or (d) the
Company's investment objectives. A Roll-Up Entity is a partnership, real estate
investment trust, corporation, trust or other entity that would be created or
would survive after the successful completion of a proposed Roll-Up.

Notwithstanding the foregoing, the Company may not participate in any
proposed Roll-Up which would:

(i) result in the Stockholders having rights to meetings less
frequently or which are more restrictive to Stockholders than those
provided in the Articles;

(ii) result in the Stockholders having voting rights that are less
than those provided in the Articles;

(iii) result in the Stockholders having greater liability than as
provided in the Articles;

(iv) result in the Stockholders having rights to receive reports
that are less than those provided in the Articles;

(v) result in the Stockholders having access to records that are
more limited than those provided in the Articles;

(vi) include provisions which would operate to materially impede
or frustrate the accumulation of Shares by any purchaser of the
securities of the Roll-Up Entity (except to the minimum extent
necessary to preserve the tax status of the Roll-Up Entity);

(vii) limit the ability of an investor to exercise the voting rights of
its securities in the Roll-Up Entity on the basis of the number of
the Shares held by that investor;

(viii) result in investors in the Roll-Up Entity having rights of access
to the records of the Roll-Up Entity that are less than those
provided in the Articles; or

(ix) place any of the costs of the transaction on the Company if
the Roll-Up is not approved by the Stockholders;

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provided, however, that nothing herein shall be construed to prevent
participation in any proposed Roll-Up which would result in Stockholders having
rights and restrictions comparable to those contained in the Articles, with the
prior approval of a majority of the Stockholders.

Stockholders who vote "no" on the proposed Roll-Up shall have the choice
of:

(i) accepting the securities of the Roll-Up Entity offered in
the proposed Roll-Up; or

(ii) one of either:

(a) remaining as Stockholders of the Company and preserving their
interests therein on the same terms and conditions as
previously existed; or

(b) receiving cash in an amount equal to the Stockholders' pro rata
share of the appraised value of the net assets of the Company.

The foregoing provisions in the Articles, Bylaws and the MGCL could have
the effect of discouraging a takeover or other transaction in which holders of
some, or a majority, of the Shares might receive a premium for their Shares over
the then prevailing market price or which these holders might believe to be
otherwise in their best interests.

LIMITATION ON TOTAL OPERATING EXPENSES

The Articles provide that, subject to the conditions described in the
following paragraph, the annual Total Operating Expenses of the Company shall
not exceed in any fiscal year the greater of 2% of the Average Invested Assets
of the Company or 25% of the Company's Net Income. The Independent Directors
have a fiduciary responsibility to limit the Company's annual Total Operating
Expenses to amounts that do not exceed the foregoing limitations. The
Independent Directors may, however, determine that a higher level of Total
Operating Expenses is justified for such period because of unusual and
non-recurring expenses. Any such finding by the Independent Directors and the
reasons in support thereof shall be recorded in the minutes of the meeting of
Directors. Within 60 days after the end of any fiscal quarter of the Company
for which Total Operating Expenses (for the 12 months then ended) exceed 2% of
Average Invested Assets or 25% of Net Income, whichever is greater, there shall
be sent to the Stockholders a written report of such fact, together with an
explanation of the facts the Independent Directors considered in arriving at
the conclusion that such higher operating expenses were justified. In the
event the Total Operating Expenses exceed the limitations described above and
if the Directors are unable to conclude that such excess was justified then,
within 60 days after the end of the Company's fiscal year, the Advisor shall
reimburse the Company in the amount by which the aggregate annual Total
Operating Expenses paid or incurred by the Company exceed the limitation.

TRANSACTIONS WITH AFFILIATES

The Articles impose certain restrictions upon dealings between the Company
and the Advisor, the Sponsor, any Director or Affiliates thereof. In
particular, the Company may not:

(i) borrow money from the Advisor, the Sponsor, any Director or
Affiliates thereof, unless a majority of the Directors (including a
majority of the Independent Directors) not otherwise interested in
such transaction determines that such transaction is fair and

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reasonable and no less favorable to the Company than from
unaffiliated parties under the same or similar circumstances;

(ii) invest in joint ventures with an Affiliated program except in
compliance with the requirements set forth in the Articles.
See "Investment Objectives and Policies--Joint Ventures";

(iii) enter into any other transaction with the Advisor, the Sponsor,
any Director or Affiliates thereof, unless a majority of the
Directors (including a majority of the Independent Directors)
not otherwise interested in such transaction determines that
the transaction is fair and reasonable to the Company and is on
terms and conditions no less favorable than from unaffiliated
third parties, except for advisory arrangements with the
Advisor. Notwithstanding the above, the Company was allowed to
acquire the Eagle Crest Shopping Center and the
Walgreens/Decatur property from IPS. See "Conflicts of
Interest--Acquisitions from Affiliates" and "--Non-Arm's-Length
Agreements" and "Real Property Investments"; or

(iv) sell property to or loan money to the Advisor, the Sponsor, any
Director or Affiliates thereof (except as provided in the
Articles).

RESTRICTIONS ON BORROWING

The Company may not incur indebtedness to enable it to make Distributions
except as necessary to satisfy the requirement that the Company distribute at
least 95% of its REIT Taxable Income, or otherwise as necessary or advisable to
assure that the Company maintains its qualification as a REIT for federal
income tax purposes. The aggregate borrowing of the Company, secured and
unsecured, shall be reasonable in relation to the Net Assets of the Company and
shall be reviewed by the Board at least quarterly. The Company anticipates
that aggregate borrowings related to all of the Company's properties will not
exceed 50% of their combined fair market values, however, the maximum amount of
borrowings in relation to Net Assets shall, in the absence of a satisfactory
showing that a higher level of borrowing is appropriate, not exceed 300% of Net
Assets. Any borrowings in excess of such 300% level shall only occur with the
consent of a majority of the Stockholders. See "Investment Objectives and
Policies--Borrowing." The Company shall not borrow funds from the Advisor, the
Sponsor, any Director or Affiliates thereof, unless a majority of the Directors
(including a majority of the Independent Directors), not otherwise interested
in such transaction, determines that such transaction is fair and reasonable
and no less favorable to the Company than from unaffiliated parties under the
same or similar circumstances.

RESTRICTIONS ON INVESTMENTS

The investment policies set forth in the Articles shall be approved by a
majority of Independent Directors. The Articles prohibit investments in: (i)
any foreign currency or bullion; (ii) short sales; and (iii) any security in
any entity holding investments or engaging in activities prohibited by the
Articles.

In addition to other investment restrictions imposed by the Directors from
time to time consistent with the Company's objective to qualify as a REIT, the
Company will observe the following restrictions on its investments set forth in
its Articles:

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(i) not more than 10% of the Company's total assets will be
invested in unimproved real property or mortgage loans on
unimproved real property. For purposes of this paragraph,
"unimproved real properties" does not include properties under
construction, under contract for development or plan for
development within one year;

(ii) the Company may not invest in commodities or commodity future
contracts. Such limitation is not intended to apply to
interest rate futures, when used solely for hedging purposes;

(iii) the Company shall not invest in or make mortgage loans unless
an appraisal is obtained concerning the underlying property.
Mortgage indebtedness on any property shall not exceed such
property's appraised value. In cases in which the majority of
Independent Directors so determine, and in all cases in which
the mortgage loan involves the Advisor, the Sponsor, the
Directors or any Affiliates, such appraisal must be obtained
from an Independent Expert concerning the underlying property.
The appraisal shall be maintained in the Company's records for
at least five years, and shall be available for inspection and
duplication by any Stockholder. In addition to the appraisal,
a mortgagee's or owner's title insurance policy or commitment
as to the priority of the mortgage or condition of the title
must be obtained. The Company may not invest in real estate
contracts of sale otherwise known as land sale contracts;

(iv) the Company may 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 the Company, 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 provided that such
loans would in no event exceed the appraised value of the
property at the date of the loans;

(v) the Company may not make or invest in any mortgage loans that
are subordinate to any mortgage or equity interest of the
Advisor, the Sponsor, any Director or Affiliates thereof;

(vi) the Company shall not invest in equity securities unless a
majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in such
transaction approves the transaction as being fair, competitive
and commercially reasonable. Investments in entities affiliated
with the Advisor, the Sponsor, any Director or Affiliates
thereof are subject to the restrictions on joint venture
investments. Notwithstanding these restrictions, the Company
may purchase its own securities, when traded on a secondary
market or on a national securities exchange or market, if a
majority of the Directors (including a majority of the
Independent Directors) determine such purchase to be in the
best interests of the Company;

(vii) the Company shall not issue: (a) redeemable equity securities;
(b) debt securities unless the historical debt service coverage
(in the most recently completed fiscal year) as adjusted for
known charges is sufficient to properly service the higher
level of debt; (c) options or warrants to purchase Shares to
the Advisor, the Sponsor, any Director or Affiliates thereof
except on the same terms as sold to the general public,
provided that the Company may issue options or warrants to
persons not affiliated with the Company at

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exercise prices not less than the fair market value of such
securities on the date of grant and for consideration (which
may include securities) that in the judgment of the Independent
Directors have a market value not less than the value of such
option on the date of grant); options or warrants issuable to
the Advisor, the Sponsor, any Director or Affiliates thereof
shall not exceed an amount equal to ten percent (10%) of the
outstanding Shares on the date of grant of any options or
warrants; or (d) issue Shares on a deferred payment basis or
similar arrangement;

(viii) to the extent the Company invests in real property acquired
from an Affiliate, a majority of the Directors (including a
majority of the Independent Directors) shall determine the
consideration paid for such real property, based on the fair
market value of the property; in such event, an appraisal by a
qualified independent real estate appraiser selected by the
Independent Directors shall be obtained;

(ix) the Company may not invest in indebtedness (herein called
"Junior Debt") secured by a mortgage on real property which is
subordinate to the lien of other indebtedness (herein called
"Senior Debt"), except where the amount of such Junior Debt,
plus the outstanding amount of the Senior Debt, does not exceed
90% of the appraised value of such property, if after giving
effect thereto, the value of all such investments of the
Company (as shown on the books of the Company in accordance
with generally accepted accounting principles, after all
reasonable reserves but before provision for depreciation)
would not then exceed 25% of the Company's tangible assets.
The value of all investments in Junior Debt of the Company
which does not meet the aforementioned requirements would be
limited to 10% of the Company's tangible assets (which would be
included within the 25% limitation);

(x) engage in trading, as compared with investment activities; and

(xi) engage in underwriting or the agency distribution of securities
issued by others.

Subject to the above restrictions, a majority of the Independent Directors may
alter the investment policies if they determine that such change is in the best
interests of the Company.

PLAN OF DISTRIBUTION

GENERAL

Of the 11,375,000 Shares offered by this Prospectus, the Company is
offering 10,000,000 Shares on a "best efforts" basis at a purchase price of
$10.00 per Share with a minimum initial investment of $3,000 ($1,000 in the
case of Tax-Exempt Entities, except for Iowa where the minimum investment for
IRAs will be $3,000 and for Minnesota where the minimum investment for IRAs and
qualified plan accounts will be $2,000); 1,000,000 Shares at a purchase price
of $9.05 per Share are being offered through the Distribution Reinvestment
Program; and 375,000 Shares which may be issued upon the exercise of warrants
granted to the Dealer Manager. The warrants are also offered by means of this
Prospectus. See "Description of Securities - - Soliciting Dealer Warrants."
"Best efforts" means that no one is guaranteeing that any specified amount of
capital will be raised. The Offering will

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commence as of the date of this Prospectus and will terminate not later than
July 23, 1998. The Company reserves the right to terminate the Offering at any
time.

ESCROW CONDITIONS

Subscription proceeds for qualified subscriptions will be deposited in a
segregated escrow account with the LaSalle National Bank, N.A., 120 South
LaSalle Street, Chicago, Illinois, and will be held in trust for the benefit of
the subscribers pending release to the Company, and will not be commingled.
Subscription proceeds are expected to be released to the Company as
subscriptions are accepted. All subscriptions will be accepted or rejected
within ten days (and generally within 24 hours) after receipt by the Company.

ADVISOR CAPITAL CONTRIBUTION

The Advisor made a capital contribution to the Company in the amount of
$200,000 prior to the commencement of the Prior Offering, for which the Advisor
received 20,000 Shares. The Advisor may not sell this initial investment while
it remains the Advisor but may transfer the Shares to an Affiliate. The
Advisor and its Affiliates may purchase additional Shares for their own
accounts. However, at no time will the Advisor own 9.8% or more of the total
number of the Company's Shares outstanding. Any purchases of Shares by the
Advisor during the Offering will be for investment purposes only and not with a
view toward immediate resale.

SUBSCRIPTION PROCESS

The Shares are being offered to the public through the Dealer Manager and
the Soliciting Dealers. The form of Soliciting Dealers Agreement between the
Dealer Manager and the Soliciting Dealers requires the broker-dealers to make
diligent inquiries, as required by law, of all prospective purchasers in order
to ascertain whether a purchase of Shares is suitable for such person and
transmit promptly to the Company the completed subscription documentation and
any supporting documentation reasonably required by the Company.

The Shares are being sold when, as and if subscriptions therefor are
received and accepted by the Company, subject to the satisfaction by the
Company of certain other conditions and approval by counsel of certain legal
matters. The Company has the unconditional right to accept or reject any
subscription. Subscriptions will be accepted or rejected within ten days (and
generally within 24 hours) after its receipt of a copy of the Subscription
Agreement, fully completed, and payment in good funds for the number of
subscribed Shares. If the subscription is accepted, a confirmation will be
mailed not more than five days after acceptance of the investor as a
Stockholder. A sale of the Shares may not be completed until at least five
business days after the date the subscriber receives a Prospectus and, as may
be required by certain state regulatory authorities, a copy of the
Organizational Documents. If for any reason the subscription is rejected, the
check and subscription agreement will be returned to the subscriber, without
interest or deduction, within ten days after receipt.

Shares will only be sold to persons who initially purchase a minimum of
300 Shares ($3,000) or Tax-Exempt Entities which purchase a minimum of 100
Shares ($1,000), except for Iowa where the minimum investment for IRAs will be
300 Shares ($3,000) and for Minnesota where the minimum investment for IRAs and
qualified plan accounts will be 200 Shares ($2,000). Subscriptions will be
accepted for fractional Shares only in the discretion of the Company.

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DETERMINATION OF INVESTOR SUITABILITY

The Company, the Dealer Manager and each Soliciting Dealer shall make every
reasonable effort to determine that those persons being offered or sold the
Shares are appropriate in light of the suitability standards set forth herein
and are appropriate to such investor's investment objectives and financial
situation. The Soliciting Dealers shall ascertain that the investors can
reasonably benefit from the Company, and the following shall be relevant to such
determination: (i) the investor has the capability of understanding the
fundamental aspects of the Company, which capacity may be evidenced by the
following: (a) the nature of employment experience; (b) educational level
achieved; (c) access to advice from qualified sources, such as attorneys,
accountants, tax advisors, etc.; and (d) prior experience with investments of a
similar nature; (ii) the investor has apparent understanding of: (a) the
fundamental risks and possible financial hazards of this type of investment; (b)
the lack of liquidity of this investment; (c) the Advisor's role in directing or
managing the investment; and (d) the tax consequences of the investment; and
(iii) the investor has the financial capability to invest in the Company.

By executing the subscription agreement, each Soliciting Dealer
acknowledges his determination that the Shares are a suitable investment for
the investor, and will be required to represent and warrant his compliance with
the applicable laws requiring the determination of the suitability of the
Shares as an investment for the subscriber. The Company and its Affiliates
will, in addition to the foregoing, coordinate the processes and procedures
utilized by the Dealer Manager and Soliciting Dealers and, where necessary,
implement such additional reviews and procedures deemed necessary to determine
that investors meet the suitability standards set forth herein. The Dealer
Manager and/or the Soliciting Dealers shall maintain for at least six years a
record of the information obtained to determine that an investor meets the
suitability standards imposed on the offer and sale of Shares and a
representation of the investor that the investor is investing for the
investor's own account or, in lieu of such representation, information
indicating that the investor for whose account the investment was made met the
suitability standards.

COMPENSATION

The Company will pay the Dealer Manager selling commissions equal to up to
seven percent (7%) on all Shares sold for serving as a dealer manager of the
Offering and for the sale of Shares through its efforts, of which such
compensation may be retained or reallowed to Soliciting Dealers, as
compensation for their services in soliciting and obtaining subscribers for the
purchase of Shares, further described below. Up to an additional 2.0% of the
Gross Offering Proceeds, a portion of which may be reallowed to Soliciting
Dealers, may be paid as a Marketing Contribution for marketing fees,
wholesaling fees, expense reimbursements, bonuses and incentive compensation
and volume discounts. In addition, the Dealer Manager and the Soliciting
Dealers may be reimbursed for bona fide due diligence expenses not to exceed a
maximum of 0.5% of the Gross Offering Proceeds. The Dealer Manager may award
sales incentive items to Soliciting Dealers in connection with their sales
activities. The value of each item will be less than $50 per annum per
participating salesperson. The Dealer Manager may pay incentive compensation
to its regional marketing representatives for their activities as wholesalers
in connection with the distribution of the Shares, subject to the overall
restrictions on commissions described herein. The Dealer Manager will reallow
commissions to Soliciting Dealers who sell 100,000 or more Shares during the
Offering, as an incentive. This incentive commission, equal to 1% of the price
of the Shares initially will be paid following the sale of 100,000 Shares by a
Soliciting Dealer and, thereafter, will be paid quarterly in the event
additional Shares are sold. The incentive compensation will be reduced by the
amount of any

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marketing costs paid by the Dealer Manager on behalf of, or to, the Soliciting
Dealers. Soliciting Dealers will also receive one Soliciting Dealer Warrant for
each 40 Shares sold by such Soliciting Dealer during the Offering, subject to
federal and state securities laws. The holder of a Soliciting Dealer Warrant
will be entitled to purchase one Share from the Company at a price of $12 during
the period commencing with the first date upon which the Soliciting Dealer
Warrants are issued and ending on October 13, 2000 (the "Exercise Period").
Subject to certain limitations, the Soliciting Dealer Warrants may not be
transferred, assigned, pledged or hypothecated for a period of one year
following issuance thereof. In addition, no Soliciting Dealer Warrants will be
exercisable until one year from the date of issuance. The Soliciting Dealer
Warrants which were to be but have not been issued to the Dealer Manager in
connection with the Prior Offering and the Soliciting Dealer Warrants to be
issued in connection with the Offering, as well as the Shares issuable upon
exercise of the Soliciting Dealer Warrants, are being registered as part of this
Offering. For the life of the Soliciting Dealer Warrants, the holders are
given, at nominal cost, the opportunity to profit from a rise in the market
price for the Common Stock without assuming the risk of ownership, with a
resulting dilution in the interest of other security holders. Moreover, the
holders of the Soliciting Dealer Warrants might be expected to exercise them at
a time when the Company would, in all likelihood, be able to obtain needed
capital by a new offering of its securities on terms more favorable than those
provided by the Soliciting Dealer Warrants. See "Description of
Securities--Soliciting Dealer Warrants." The maximum compensation to be paid in
connection with the Offering will not exceed: (i) a total of 7% of the Gross
Offering Proceeds for selling commissions; and (ii) a total of 2% of the Gross
Offering Proceeds for marketing fees, wholesaling fees, expense reimbursements,
bonuses and incentive compensation and volume discounts. The aggregate of these
commissions and expenses plus the value attributable to the warrants that may be
issued to the Dealer Manager and the Soliciting Dealers will not exceed 10% of
the Gross Offering Proceeds. In addition, the Dealer Manager and the Soliciting
Dealers may be reimbursed for bona fide due diligence expenses not to exceed a
maximum of 0.5% of the Gross Offering Proceeds.

The Company shall not pay or award, directly or indirectly, any
commissions or other compensation to any person engaged by a potential investor
for investment advice as an inducement to such advisor to advise the investor
to purchase Shares, provided, however, that this provision shall not prohibit
the normal sales commission payable to a registered broker-dealer or other
properly licensed person for selling the Shares.

VOLUME DISCOUNTS

Commissions will be reduced below 7% for obtaining subscriptions from
Stockholders in accordance with the following:

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<TABLE>
<CAPTION>
Amount of
Purchaser's Investment Maximum Commission
From To per Share
----------- ----------- ------------------
<S> <C> <C>
$ 250,000 499,999 5.5%
500,000 999,999 4.0%
1,000,000 and over 2.5%
</TABLE>

Any reduction from the up to 7% commission otherwise payable to the Dealer
Manager, some or all of which may be reallowable to a Soliciting Dealer in
respect of a purchaser's subscription will be credited to such purchaser in the
form of additional whole Shares or fractional Shares purchased net of
commissions.

Subscriptions may be combined for the purpose of crediting a purchaser
with additional Shares and determining commissions payable to the Dealer
Manager and reallowable to Soliciting Dealers so long as all such purchases are
made through the same Soliciting Dealer. Tax-Exempt Entities may be combined
in computing amounts invested if they each have the same person who exercises
investment discretion. If the Subscription Agreement/Signature Page fails to
indicate by marking the "Additional Purchase" space that subscriptions are to
be combined, the Company cannot be held responsible for failing to properly
combine subscriptions.

Employees and associates of the Company and its Affiliates will be
permitted to purchase Shares net of sales commissions and the Marketing
Contribution and Due Diligence Expense Allowance Fee ($9.05 per Share).

TRANSFER OF SHARES

A Stockholder may assign all or some of his Shares, subject to the
Ownership Limit contained in the Articles. This assignment shall confer upon
the assignee the right to become a Stockholder in the following manner and
subject to certain conditions, including the following: (i) an instrument of
assignment executed by both the assignor and assignee of the Shares
satisfactory in form to the Company shall be delivered to the Company; (ii)
reimbursement of the Company for reasonable expenses and filing costs incurred
in connection with such transfer, which amount shall not exceed $100; (iii) no
assignment shall be effective until the first day of the month following the
month in which the Company actually receives the instrument of assignment which
complies with the requirements of (i) and (ii) above; (iv) no assignment shall
be effective if such assignment would, in the opinion of counsel to the
Company, result in the termination of the Company's status as a REIT under the
Code; (v) an assignment may be rejected if such assignment would cause 25% or
more of the issued and outstanding Shares to be held by Tax-Exempt Entities
that are considered "benefit plan investors" under ERISA or otherwise cause the
assets of the Company to be Plan assets; and (vi) no assignment shall be
effected if the assignment would, to the knowledge of the Company, violate the
provisions of any applicable federal or state securities laws.

The Shares will not initially be listed on a national stock exchange or
included for quotation on a national market system. The Company anticipates
that by 1999 the Board will determine whether it is in the best interests of the
Company to: (i) apply to have the Shares listed for trading on a national stock
exchange or included for quotation on a national market system, provided the
Company meets the then applicable listing requirements; and/or (ii) commence a
subsequent public offering.

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INDEMNIFICATION

The Company will indemnify the Dealer Manager and the Soliciting Dealers
against certain liabilities, including liabilities under the Act; provided,
however, that the Company shall not indemnify the Dealer Manager or any
Soliciting Dealer from any losses, liabilities or expenses arising from or out
of an alleged violation of federal or state securities laws unless one or more
of the following conditions are met: (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee and a court of competent
jurisdiction has approved indemnification of the litigation costs; or (ii) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee and the court has approved
indemnification of the litigation costs; or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee and the court has approved indemnification of the settlement and
related costs and the court considering the request has been advised of the
position of the Commission and the published opinions of any state securities
regulatory authority in which securities of the Company were offered and sold
as to indemnification for securities law violations. The Soliciting Dealer
will be required to indemnify the Company and the Advisor against certain such
liabilities. In the opinion of the Commission, indemnification for liabilities
arising under the Act is against public policy and, therefore, unenforceable.
The Dealer Manager and each of the Soliciting Dealers may be deemed to be an
"underwriter" as that term is defined in the Act. See "Distribution
Reinvestment and Share Repurchase Programs."

HOW TO SUBSCRIBE

Shares may be purchased by an investor who meets the suitability standards
described above under "Plan of Distribution--Suitability of the Investment" by
proceeding as follows:

1. Read the entire Prospectus and the current supplement(s), if any,
accompanying the Prospectus.

2. Complete the execution copy of the Subscription Agreement. A specimen
copy of the Subscription Agreement, including instructions for completing the
Subscription Agreement, is included in the Prospectus as Exhibit I.

3. Deliver a check for the full purchase price of the Shares being
subscribed for, payable to "LNB/Escrow Agent for IREC," along with the
completed Subscription Agreement to the Soliciting Dealer whose name appears on
the Subscription Agreement.

4. By executing the Subscription Agreement and by paying the full purchase
price for the Shares subscribed for, each investor attests that he meets the
suitability standards as stated in the Subscription Agreement and will be bound
by all of the terms of the Subscription Agreement.

Within ten days (and generally within 24 hours) of the Company's receipt
of each completed Subscription Agreement, the Company will accept or reject the
subscription. If the subscription is accepted, a confirmation will be mailed
within five days. If for any reason the subscription is rejected, the check
and Subscription Agreement will be promptly returned to the subscriber, without
interest or deduction, within ten days after receipt.

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Subscriptions on behalf of IRAs, Keogh plans and 401(k) plans must be
processed through and forwarded to the Company by an approved trustee. In the
case of IRA, Keogh plans and 401(k) plan Stockholders, the confirmation will be
sent to the trustee.

SALES LITERATURE

In addition to and apart from this Prospectus, the Company may use certain
supplemental sales material in connection with the Offering. This material,
prepared by the Advisor may consist of a brochure describing the Advisor and
its Affiliates and the objectives of the Company. It would contain pictures and
summary descriptions of properties similar to those to be acquired by the
Company that Affiliates of the Company have previously acquired. This material
may also include pictures and summary descriptions of properties similar to
those to be acquired by the Company as well as a brochure, audiovisual
materials and taped presentations highlighting and explaining various features
of the Offering, properties of prior real estate programs and real estate
investments in general; and articles and publications concerning real estate.
Business reply cards, introductory letters and seminar invitation forms may be
sent to Soliciting Dealers and prospective investors. No person has been
authorized to prepare for, or furnish to, a prospective investor any sales
literature other than: (i) that described herein; and (ii) newspaper
advertisements or solicitations of interest limited to identifying the Offering
and the location of sources of further information.

The use of any sales materials is conditioned upon filing with and, if
required, clearance by appropriate regulatory agencies. Such clearance (if
provided), however, does not indicate that the regulatory agency allowing the
use of the materials has passed on the merits of the Offering or the adequacy
or accuracy of the materials.

This Offering is made only by means of this Prospectus. Except as described
herein, the Company has not authorized the use of other supplemental literature
or sales material in connection with this Offering. Although it is believed that
the information contained in such literature does not conflict with any of the
information set forth in this Prospectus, such material does not purport to be
complete, and should not be considered as a part of this Prospectus, or as
incorporated in this Prospectus by reference, or as forming the basis of the
Offering described herein.

DISTRIBUTION REINVESTMENT AND SHARE REPURCHASE PROGRAMS

DISTRIBUTION REINVESTMENT PROGRAM

The Distribution Reinvestment Program (the "DRP") allows Stockholders who
purchased Shares pursuant either to the Prior Offering or to this Offering
("Participants") to automatically reinvest Distributions in the Company by
permitting purchase of additional Shares. Stockholders who purchased Shares
pursuant to the Prior Offering or who purchase Shares pursuant to this Offering
and elect to take part in the DRP will authorize the Company to use
Distributions payable to them to purchase additional Shares. However, a
Participant will not be able to acquire Shares under the DRP to the extent such
purchase would cause it to exceed the Ownership Limit.

Purchases under the DRP will not be subject to selling commissions or the
Marketing Contribution and Due Diligence Expense Allowance Fee. Participants
in the DRP may also purchase fractional Shares,

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so that 100% of Distributions will be used to acquire Shares. Shares will be
purchased under the DRP on the record date for the Distribution used to purchase
the Shares. Distributions for Shares acquired under the DRP are currently paid
monthly and are calculated with a daily record and Distribution declaration
date. Each Participant agrees that if, at any time prior to listing of the
Shares on a national stock exchange or inclusion of the Shares for quotation on
a national market system, he fails to meet the suitability requirements for
making an investment in the Company or cannot make the other representations or
warranties set forth in the Subscription Agreement, he will promptly so notify
the Company in writing.

Commencing with the first Distribution paid after the effective date of the
Offering of Shares pursuant to the Prospectus and continuing until the
termination of the Offering, Participants will acquire Shares from the Company
at a fixed price of $9.05 per Share. It is possible that a secondary market
will develop for the Shares, and that Shares may be bought and sold on the
secondary market at prices lower or higher than the $9.05 per Share price which
will be paid under the DRP. Neither the Company nor its Affiliates will receive
a fee for selling Shares under the DRP. The Company does not warrant or
guarantee that Participants will be acquiring Shares at the lowest possible
price. A Participant may terminate participation in the DRP at any time without
penalty, by delivering written notice to the Company. Prior to listing of the
Shares on a national stock exchange or including the Shares for quotation on a
national market system, any transfer of Shares by a Participant to a
non-Participant will terminate participation in the DRP with respect to the
transferred Shares. Upon termination, Distributions will be distributed to the
Stockholder instead of being used to purchase Shares under the DRP. Within 90
days after the end of the Company's fiscal year, the Company will: (i) issue
certificates evidencing ownership of Shares purchased through the DRP during the
prior fiscal year (ownership of said Shares will be in book-entry form prior to
the issuance of certificates); and (ii) provide each Participant with an
individualized report on his or her investment, including the purchase date(s),
purchase price and number of Shares owned, as well as the dates of distribution
and amounts of Distributions received during the prior fiscal year. The
individualized statement to Participants will include receipts and purchases
relating to each Participant's participation in the DRP including the tax
consequences relative thereto. The Directors by majority vote (including a
majority of Independent Directors) may amend or terminate the DRP upon 30 days'
notice to Participants. It is anticipated that the Directors will amend or
terminate the DRP upon completion of this Offering.

Stockholders who participate in the Distribution Reinvestment Program will
recognize taxable dividend income in the amount they would have received had
they not elected to participate, even though they receive no cash. These
deemed dividends will be treated as actual dividends from the Company to the
participating Stockholders and will retain the character and tax effects
applicable to all dividends. Shares received under the program will have a
holding period beginning with the day after purchase, and a tax basis equal to
their cost, which is the gross amount of the deemed Distribution. See "Federal
Income Tax Considerations--Taxation of Stockholders--Taxation of Taxable
Domestic Stockholders" for a full discussion of the tax effects of dividend
distributions.

If the Company's Shares are listed on a national stock exchange or
included for quotation on a national market system, Shares purchased by the
Company for the DRP will be purchased on such exchange or market, at the
prevailing market price, and will be sold to Stockholders at such price. The
reservation of any Shares from this Offering remaining for issuance under the
DRP will be cancelled. The Shares will continue to have the status of
authorized but unissued Shares. These Shares will not be issued

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unless they are first registered with the Commission under the Act and under
appropriate state securities laws or are otherwise issued in compliance with
such laws.

SHARE REPURCHASE PROGRAM

The Share Repurchase Program ("SRP") may, subject to certain restrictions,
provide eligible Stockholders with limited, interim liquidity by enabling them
to sell Shares back to the Company at a price of $9.05 per Share (a reduction
of $.95 from the $10 Offering price, reflecting selling commissions and the
Marketing Contribution and Due Diligence Expense Allowance Fee).

Repurchases under the SRP will be made quarterly by the Company on a
first-come, first-served basis, and will be limited in the following ways: (i)
not more than $500,000 worth of the outstanding Shares will be repurchased in
any given year; and (ii) the funds available for repurchase will be limited to
available proceeds received by the Company from the sale of Shares under the
DRP. The determination of available funds from sales under the DRP will be at
the sole discretion of the Board. In making this determination, the Board will
consider the need to use proceeds from the Share sales under the DRP for
investment in additional properties, or for maintenance or repair of existing
properties. Such property-related uses will have priority over the need to
allocate funds to the SRP. To be eligible to offer Shares for purchase to the
SRP, the Stockholder must have beneficially held the Shares for at least one
year.

The Company cannot guarantee that funds will be available for repurchase.
If no funds are available for the SRP at the time when repurchase is requested,
the Stockholder could: (i) withdraw his request for repurchase; or (ii) ask
that the Company honor the request at such time, if any, when funds are
available. Such pending requests will be honored on a first come, first served
basis. There is no requirement that Stockholders sell their Shares to the
Company. The SRP is only intended to provide interim liquidity for
Stockholders until a secondary market develops for the Shares. No such market
presently exists and no assurance can be given that one will develop. The SRP
will exist during the Offering period and will be terminated following the
close of the Offering period upon: (i) the development of a secondary market
for the Shares (i.e., at such time as a secondary market-maker quotes a bid and
ask price for at least 30 continuous trading days); or (ii) the listing of the
Shares on a national securities exchange or inclusion for quotation on a
national market system.

Shares purchased by the Company under the SRP will be cancelled, and will
have the status of authorized but unissued Shares. Shares acquired by the
Company through the SRP will not be reissued unless they are first registered
with the Commission under the Act and under appropriate state securities laws
or otherwise issued in compliance with such laws.

In the event that the Company begins selling its properties, the purchase
price paid by the SRP for Shares will be adjusted accordingly. Because the
availability of purchase funds for the SRP cannot be predetermined, and because
the demand for repurchase by Stockholders cannot be predetermined, there can be
no assurance that the Company will be able to establish and maintain the SRP.

REPORTS TO STOCKHOLDERS

The Advisor will keep, or cause to be kept, full and true books of account
on an accrual basis of accounting, in accordance with generally accepted
accounting principles ("GAAP"). All of such books of account, together with a
copy of the Articles and any amendments thereto, will at all times be
maintained

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at the principal office of the Company, and will be open to
inspection, examination and duplication at reasonable times by the Stockholders
or their agents.

The Advisor will submit to each Stockholder audited annual reports of the
Company within 120 days following the close of each fiscal year. The annual
reports will contain the following: (i) audited financial statements; (ii) the
ratio of the costs of raising capital during the period to the capital raised;
(iii) the aggregate amount of advisory fees and the aggregate amount of fees
paid to the Advisor and any Affiliate of the Advisor by the Company and
including fees or charges paid to the Advisor and any Affiliate of the Advisor
by third parties doing business with the Company; (iv) the Total Operating
Expenses of the Company, stated as a percentage of the Average Invested Assets
and as a percentage of Net Income; (v) a report from the Independent Directors
that the policies being followed by the Company are in the best interests of
its Stockholders and the basis for such determination; and (vi) separately
stated, full disclosure of all material terms, factors and circumstances
surrounding any and all transactions involving the Company, the Directors, the
Advisor and any Affiliate thereof occurring in the year for which the Annual
Report is made. Independent Directors shall be specifically charged with the
duty to examine and comment in the report on the fairness of such transactions.

In addition, unaudited quarterly reports containing the information
required by Form 10-Q will be submitted to each Stockholder within 60 days
after the end of the first three fiscal quarters of each fiscal year.

Concurrently with any Distribution, the Company shall provide Stockholders
with a statement disclosing the source of the funds distributed. If such
information is not available concurrently with the making of a Distribution, a
statement setting forth the reasons why such information is not available shall
be provided concurrently. In no event shall such information be provided to
Stockholders more than 60 days of making such Distribution.

Within 60 days following the end of any calendar quarter during the period
of the Offering in which the Company has closed an acquisition of a property, a
report will be submitted to each Stockholder containing: (i) the location and
a description of the general character of the property acquired during the
quarter; (ii) the present or proposed use of such property and its suitability
and adequacy for such use; (iii) the terms of any material lease affecting the
property; (iv) the proposed method of financing, if any, including estimated
down payment, leverage ratio, prepaid interest, balloon payment(s), prepayment
penalties, "due-on-sale" or encumbrance clauses and possible adverse effects
thereof and similar details of the proposed financing plan; and (v) a statement
that title insurance has been or will be obtained on the property acquired. In
addition, a report will be sent to each Stockholder and submitted to
prospective investors at such time as the Advisor believes a reasonable
probability exists that a property will be acquired: (i) on specified terms
(i.e., upon completion of due diligence which includes review of the title
insurance commitment, appraisal and environmental analysis); and (ii) involving
the use of 10% or more, on a cumulative basis, of the net proceeds of this
Offering.

After the completion of the last acquisition, the Advisor shall, upon
request, send to the Commissioner of Corporations of the State of California a
schedule, verified under the penalty of perjury, reflecting: (i) each
acquisition made; (ii) the purchase price paid; (iii) the aggregate of all
Acquisition Fees paid on each transaction; and (iv) a computation showing
compliance with the Articles. The Company shall, upon request, submit to the
Commissioner of Corporations of the State of California or to any of the
various state securities administrators any report or statement required to be
distributed to Stockholders pursuant to the Articles or any applicable law or
regulation.

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The Company's federal tax return (and any applicable state income tax
returns) will be prepared by the accountants regularly retained by the Company.
Appropriate tax information will be submitted to the Stockholders within 30
days following the end of each fiscal year of the Company. A specific
reconciliation between GAAP and income tax information will not be provided to
the Stockholders; however, such reconciling information will be available in
the office of the Company for inspection and review by any interested
Stockholder. Concurrent with the dissemination of appropriate tax information
to Stockholders, the Company will annually provide each Stockholder with an
individualized report on his or her investment, including the purchase date(s),
purchase price and number of Shares owned, as well as the dates of distribution
and amounts of Distributions received during the prior fiscal year. The
individualized statement to Stockholders will include any purchases of Shares
under the DRP. Stockholders requiring individualized reports on a more frequent
basis may request such reports. The Company will make every reasonable effort
to supply more frequent reports, as requested, but the Company, at its sole
discretion, may require payment of an administrative charge which will be paid:
(i) directly by the Stockholder; or (ii) through pre-authorized deductions
from Distributions payable to the Stockholder making the request.

LEGAL MATTERS

The legality of the Shares offered hereby will be passed upon for the
Company by Shapiro and Olander, Baltimore, Maryland. Legal matters in
connection with the Company's status as REIT for federal income tax purposes
have been passed upon, on behalf of the Company, by Shefsky Froelich & Devine
Ltd. (counsel to the Company). Shefsky Froelich & Devine Ltd. does not purport
to represent Stockholders or potential investors who should consult their own
counsel. See "Conflicts of Interest--Legal Counsel for the Company and the
Advisor is the Same Law Firm."

The statements in the section in the Prospectus titled "Federal Income Tax
Considerations" and elsewhere as they relate to federal income tax matters and
the statements in the section in the Prospectus titled "ERISA Considerations"
have been reviewed by Shefsky Froelich & Devine Ltd.

EXPERTS

The financial statements of the Company as of DecemberE31, 1995, and 1994,
and for the year ended December 31, 1995 and for the period from May 12, 1994
(formation date) to December 31, 1994, the historical summaries of gross income
and direct operating expenses of the Walgreens/Decatur Property for each of the
years in the three-year period ended June 30, 1994, the historical summaries of
gross income and direct operating expenses of Eagle Crest/Naperville for each
of the years in the three-year period ended June 30, 1994 and the historical
summary of gross income and direct operating expenses of the Regency Point
Shopping Center for the year ended December 31, 1995, have been included herein
in reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.

The statement of gross income and direct operating expenses for the year
ended December 31, 1994 for Nantucket Square Shopping Center included in this
Prospectus has been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and is included
herein in reliance upon the authority of said firm as experts in giving said
report.

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The statement of gross income and direct operating expenses for the year
ended December 31, 1995 for Mundelein Plaza, Prospect Heights Plaza and
Montgomery-Sears Shopping Center have been included herein in reliance upon the
report of Bruce Gorlick, C.P.A., Ltd., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

ADDITIONAL INFORMATION

This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto with respect to the offer and
sale of Shares which the Company has filed with the Commission and which may be
inspected and copied at the Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, http://www.sec.gov, and at the Regional Offices of the
Commission at 500 West Madison Street, Fourteenth Floor, Chicago, Illinois
60661 and 75 Park Place, Suite 1400, New York, New York 10007. This material,
as well as copies of all other documents filed with the Commission, may be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 upon payment of the fee prescribed by the Commission.

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GLOSSARY

The definitions used in the Prospectus are set forth below:

"ACQUISITION EXPENSES" means expenses related to the Company's selection,
evaluation and acquisition of, and investment in, properties, whether or not
acquired or made, including but not limited to legal fees and expenses, travel
and communications expenses, cost of appraisals and surveys, non-refundable
option payments on property not acquired, accounting fees and expenses,
computer use related expenses, architectural and engineering reports,
environmental and asbestos audits, title insurance and escrow fees, and
personnel and miscellaneous expenses related to the selection and acquisition
of properties.

"ADA" means the Americans with Disabilities Act of 1990.

"ADVISOR" means the person(s) or entity responsible for directing or performing
the day-to-day business affairs of the Company, including a person or entity to
which an Advisor subcontracts substantially all such functions. The Advisor is
Inland Real Estate Advisory Services, Inc. or anyone which succeeds it in such
capacity.

"ADVISOR ASSET MANAGEMENT FEE" means an amount equal to 1% of the Average
Invested Assets.

"ADVISORY AGREEMENT" means the agreement between the Company and the Advisor
pursuant to which the Advisor will act as the Sponsor of the Company.

"AFFILIATE" means: (i) any Person directly or indirectly owning, controlling
or holding, with the power to vote 10% or more of the outstanding voting
securities of such other Person; (ii) any Person 10% or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held, with the power to vote, by such other Person; (iii) any Person directly
or indirectly controlling, controlled by or under common control with such
other Person; (iv) any executive officer, director, trustee or general partner
of such other Person; and (v) any legal entity for which such Person acts as an
executive officer, director, trustee or general partner.

"AFFILIATED DIRECTORS" means those Directors affiliated with the Company or its
Affiliates.

"ANCHOR TENANT" means tenants generally occupying approximately 30% or more of
the GLA of a Neighborhood Retail Center, or the tenant of any single-user
property.

"ARTICLES" means the Company's Articles of Incorporation, as amended and
restated to date.

"AVERAGE INVESTED ASSETS" shall mean, for any period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests and in 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" means the Board of Directors of the Company.

"BYLAWS" means the Amended and Restated Bylaws of the Company.

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"CASH FLOW" means, with respect to any period: (i) all cash receipts derived
from investments made by the Company; plus (ii) cash receipts from operations
(including any interest from temporary investments of the Company) without
deduction for depreciation or amortization; less (iii) cash receipts used to
pay operating expenses (including the Advisor Asset Management Fee).

"CODE" means the Internal Revenue Code of 1986, as amended, or corresponding
provisions of subsequent revenue laws.

"COMMISSION" means the Securities and Exchange Commission.

"COMPANY" means Inland Real Estate Corporation f/k/a Inland Monthly Income Fund
III, Inc., a Maryland corporation.

"COMPETITIVE REAL ESTATE COMMISSION" means the 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.

"COMPANY FIXED ASSETS" means the real estate, together with the buildings,
leasehold interests, improvements, equipment, furniture, fixtures and personal
property associated therewith, used by the Company in the conduct of its
business.

"CONTRACT PRICE FOR THE PROPERTY" means the amount actually paid or allocated
to the purchase, development, construction or improvement of a property
exclusive of Acquisition Expenses.

"CONTROL SHARES" means voting shares of stock which, if aggregated with all
other such shares of stock previously acquired by the acquirer, or in respect
of which the acquirer is able to exercise or direct the exercise of voting
power except solely by virtue of irrevocable proxy, would entitle the acquirer
to exercise voting power in electing directors within one of the following
ranges of voting power: (i) 1/5 or more but less than 1/3; (ii) 1/3 or more but
less than a majority; or (iii) a majority of all voting power.

"CONTROL SHARE ACQUISITION" means the acquisition of Control Shares subject to
certain exceptions.

"COUNSEL" means Shefsky Froelich & Devine Ltd.

"CUMULATIVE RETURN" means a cumulative, non-compounded return, equal to 8% per
annum on Invested Capital commencing upon acceptance of the investor's
subscription.

"CURRENT RETURN" means a non-cumulative, non-compounded return, equal to 8% per
annum on Invested Capital.

"DEALER MANAGER" means Inland Securities Corporation.

"DEVELOPMENT FEE" means a fee for the packaging of a property of the Company,
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.

"DIRECTORS" means the members of the Board of Directors of the Company
(including the Independent Directors).

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"DISTRIBUTIONS" means any cash distributed to Stockholders arising from their
interest in the Company.

"DUE DILIGENCE EXPENSE ALLOWANCE FEE" means an amount up to 0.5% of the Gross
Offering Proceeds paid to the Dealer Manager, a portion of which may be
reallowed to Soliciting Dealers, to reimburse the Dealer Manager or Soliciting
Dealers for bona fide due diligence expenses.

"EQUITY STOCK" shall mean stock that is either Common Stock and/or Preferred
Stock.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"EXCESS SHARES" means shares held by a Stockholder in excess of 9.8% of the
outstanding Shares entitled to vote.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"EXERCISE PERIOD" means the period commencing upon the issuance of the
Soliciting Dealer Warrants and ending upon October 13, 2000.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980.

"FUNDS FROM OPERATIONS OR FFO" means 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.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis.

"GAAP" means generally accepted accounting principles.

"GLA" means gross leasable area.

"GROSS DOLLARS INVESTED IN PROPERTIES" means the amount actually paid or
allocated to the purchase, development, construction or improvement of
properties acquired by the Company.

"GROSS OFFERING PROCEEDS" means the total proceeds from the sale of Shares
during the initial public offering period (and from sales under the
Distribution Reinvestment Program during such period) before deductions for
Organization and Offering Expenses. For purposes of calculating Gross Offering
Proceeds, the purchase price for all Shares, including those for which volume
discounts apply, shall be deemed to be $10 per Share, except for Shares
purchased under the Distribution Reinvestment Program in which case the
purchase price for such Shares shall be $9.05 per Share.

"GROSS REVENUES FROM PROPERTIES" means all cash receipts derived from the
operation of Company Fixed Assets.

"INCENTIVE ADVISORY FEE" means an amount equal to 15% of the net proceeds from
the sale of a property after the Stockholders have first received: (i) their
Cumulative Return; and (ii) a return of their Invested Capital.

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"INDEPENDENT DIRECTORS" means the Directors who: (i) are not affiliated,
directly or indirectly, with the Company or the Advisor, whether by ownership
of, ownership interest in, employment by, any material business or professional
relationship with, or as an officer or director of the Company, the Advisor or
its Affiliates; (ii) do not serve as a director for more than two other REITs
organized by the Company or the Advisor; and (iii) perform no other services
for the Company, except as Directors. For this purpose, an indirect
relationship shall include circumstances in which a member of the immediate
family of a Director has one of the foregoing relationships with the Company or
the Advisor. For purposes of determining whether or not the business or
professional relationship is material, the gross revenue derived by the
prospective Independent Director from the Sponsor and Advisor and Affiliates
shall be deemed material per se if it exceeds five percent of the prospective
Independent Directors: (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.

"INDEPENDENT EXPERT" shall mean a person with no current or prior business or
personal relationship with the Advisor or the Directors and who is engaged, to
a substantial extent, in the business of rendering opinions regarding the value
of assets of the type held by the Company.

"INTERESTED STOCKHOLDER" means for purposes of the MGCL, any person who owns
10% or more of the voting power of the then outstanding voting stock of the
Company.

"INVESTED CAPITAL" means the original issue price of the Shares reduced by
prior distributions from the sale or financing of Company fixed assets.

"IRA" means an individual retirement account established pursuant to Code
Section 408.

"LEVERAGE" shall mean the aggregate amount of indebtedness of the Company for
money borrowed (including purchase money mortgage loans) outstanding at any
time, both secured and unsecured.

"MANAGEMENT AGENT" means an entity which provides property management services
to the Company. The Management Agent is Inland Commercial Property Management,
Inc., an Affiliate of the Advisor, or anyone which succeeds it in such
capacity.

"MARKETING CONTRIBUTION" means an amount up to 2.0% of the Gross Offering
Proceeds paid to the Dealer Manager, a portion of which may be reallowed to
Soliciting Dealers to pay expenses associated with marketing fees, wholesaling
fees, expense reimbursements, bonuses and incentive compensation and volume
discounts.

"MINIMUM INITIAL PURCHASE" means the minimum amount which must be purchased by
a person who is not a Stockholder at the time of purchase.

"MAXIMUM OFFERING" means 11,375,000 Shares (which includes 1,000,000 Shares
available under the Distribution Reinvestment Program and 375,000 Shares which
may be issued upon the exercise of warrants granted to the Dealer Manager).

"MGCL" means the Maryland General Corporation Law, as amended from time to
time.

"NASD" shall mean the National Association of Securities Dealers, Inc.

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"NEIGHBORHOOD RETAIL CENTER" shall mean any property located primarily within
an approximate 150-mile radius of the Oak Brook, Illinois headquarters of the
Advisor leased primarily to one or more retail tenants providing for the sale
of household goods (food, drugs, apparel, etc.) and personal services (laundry,
dry cleaning, etc.) for the day-to-day living needs of the immediate
neighborhood with GLA ranging from approximately 5,000 to 150,000 square feet.

"NET ASSETS" or "NET ASSET VALUE" means the total assets of the Company (other
than intangibles) at cost before deducting depreciation or other non-cash
reserves less total liabilities of the Company, calculated at least quarterly
on a basis consistently applied.

"NET INCOME" means, for any period, total revenues applicable to such period,
less the expenses applicable to such period other than additions to or
allowances for reserves for depreciation, amortization or bad debts or other
similar non-cash reserves; provided, however, that Net Income shall not include
the gain from the sale of the Company's assets.

"NET PROCEEDS" means the proceeds received by the Company with respect to the
sale of Shares less Organization and Offering Expenses.

"NON-U.S. STOCKHOLDER" means a Stockholder which is a foreign corporation or a
nonresident alien of the United States.

"OFFERING" means the offering of 10,000,000 Shares of the Company pursuant to
this Prospectus.

"ORGANIZATION AND OFFERING EXPENSES" means those expenses incurred by and to be
paid from the assets of the Company in connection with and in preparing the
Company for registration and subsequently offering and distributing 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, depositaries, experts, expenses of qualification of the sale of the
securities under federal and state laws, including taxes and fees, and
accountants' and attorneys' fees.

"OTHER OPERATING EXPENSES" means Total Operating Expenses less the Advisor
Asset Management Fee.

"OWNERSHIP LIMIT" means the beneficial ownership of no more than 9.8% of the
outstanding Shares of the Company.

"PARTICIPANT" means a Stockholder who purchased Shares pursuant to the Prior
Offering or purchases Shares pursuant to this Offering and elects to
participate in the DRP.

"PERSON" means any natural person, partnership, corporation, association,
trust, limited liability company or other legal entity.

"PRIOR OFFERING" means the Company's public offering of 6,000,000 Shares (which
includes 1,000,000 Shares available under the Company's distribution
reinvestment program) which commenced October 14, 1994 and was completed July
22, 1996.

"PROPERTY DISPOSITION FEE" means a real estate disposition fee, payable (under
certain conditions) to the Advisor and its Affiliates upon the sale of the
Company's property in an amount equal to the lesser of:

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(i) 3% of the contracted for sales price of the property; or (ii) 50%
of the commission paid to third parties which is reasonable, customary and
competitive in light of the size, type and location of such property.

"PROPERTY MANAGEMENT FEE" shall mean any fee paid to an Affiliate or third
party as compensation for management of the Company's properties. The Property
Management Fee shall be a percentage of the aggregate gross revenues from the
properties, not to exceed 5.0% if paid to a third party or 4.5% if paid to an
Affiliate of the Advisor.

"PROSPECTUS" means the final prospectus of the Company as may be supplemented
in connection with the initial registration of Shares filed with the
Commission on Form S-11, as amended.

"QUALIFIED PLAN" means any qualified pension, profit-sharing or other
retirement plan (including a Keogh plan) and any trust, bank commingled trust
fund for such a plan.

"REGISTRATION STATEMENT" means the initial registration of Shares on Form S-11
and related exhibits, as amended, filed by the Company with the Commission.

"REIMBURSABLE EXPENSES" means those certain expenses of the Advisor and its
Affiliates which will be reimbursed by the Company.

"REIT" means 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.

"REIT PROVISIONS" means Code Sections 856 through 860.

"REIT TAXABLE INCOME" means the taxable income as computed for a corporation
which is not a REIT: (i) without the deductions allowed by Code Sections 241
through 247, 249 and 250 (relating generally to the deduction for dividends
received); (ii) excluding amounts equal to: (a) the net income from
foreclosure property; and (b) the net income derived from prohibited
transactions; (iii) deducting amounts equal to: (x) any net loss derived from
prohibited transactions; and (y) the tax imposed by Code Section 857(b)(5) upon
a failure to meet the 95% and/or the 75% gross income tests; and (iv)
disregarding the dividends paid, computed without regard to the amount of the
net income from foreclosure property which is excluded from REIT Taxable
Income.

"REMICS" means real estate mortgage investment conduits.

"ROLL-UP" means a transaction involving the acquisition, merger, conversion or
consolidation either directly or indirectly of the Company and the issuance of
securities of a Roll-Up Entity. Such term does not include:

(i) a transaction involving securities of the Company that have
been for at least 12 months listed on a national securities exchange
or traded through The Nasdaq Stock Market - Nasdaq National Market;
or

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

144
<PAGE> 325

(a) Stockholders' voting rights;

(b) the term and existence of the Company;

(d) the Company's investment objectives.

"ROLL-UP ENTITY" means a partnership, real estate investment trust,
corporation, trust or other entity that would be created or would survive after
the successful completion of a proposed Roll-Up transaction.

"SELLING COMMISSION" means an amount equal to up to 7% of the Gross Offering
Proceeds payable to the Dealer Manager which may be retained, or reallowed to
Soliciting Dealers for each Share sold.

"SERVICE" means the Internal Revenue Service of the United States of America.

"SHARES" means the common stock, par value $.01 per share, of the Company.

"SOLICITING DEALERS" means the dealer members of the National Association of
Securities Dealers, Inc. designated by the Dealer Manager.

"SPONSOR" means any Person directly or indirectly instrumental in organizing,
wholly or in part, the Company or any Person who will control, manage or
participate in the management of the Company, and any Affiliate of such Person.
Not included is any Person whose only relationship with the Company is as that
of an independent property manager of the Company's 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
Company by:

i. taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the Company, either alone
or in conjunction with one or more other Persons;

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

iii. having a substantial number of relationships and contacts with the
Company;

iv. possessing significant rights to control Company properties;

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

vi. providing goods or services to the Company on a basis which was
not negotiated at arm's-length with the Company.

"STOCKHOLDERS" means holders of shares of Common Stock.

145
<PAGE> 326

"TAX-EXEMPT ENTITIES" means any investor that is exempt from federal income
taxation, including without limitation a Qualified Plan, an endowment fund or a
charitable, religious, scientific or education organization.

"TERMINATION DATE" means July 23, 1998.

"TOTAL OPERATING EXPENSES" means the aggregate expenses of every character paid
or incurred by the Company as determined under generally accepted accounting
principles, including Advisor Asset Management 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 taxes incurred in connection with the issuance,
distribution, transfer, registration and stock exchange listing of
the Shares;

b. interest payments;

c. taxes;

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

e. incentive fees payable to the Advisor; and

f. 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).

"UBTI" means unrelated business taxable income as described in the Code.

"USRPI" means a United States real property interest described in Code Section
897. Generally, such an interest would be a direct interest in real property
located in the United States or an interest in a domestic corporation which
owns other USRPI's with a fair market value equal to at least 50% of the sum of
the fair market value of its USRPI's, foreign real property and assets used in
a trade or business.

146
<PAGE> 327

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in the
Prospectus and supplemental literature authorized by the Company and referred
to in this Prospectus, and, if given or made, such information and
representations must not be relied upon. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such
offer. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates at which
information is given herein, or the date hereof. However, if any material
change in the affairs of the Company shall occur during the time when a copy of
this Prospectus is required to be delivered, the Company will amend or
supplement this Prospectus to reflect such change.

TABLE OF CONTENTS

Page

<TABLE>
<S> <C>
PROSPECTUS SUMMARY ............................. 1
ORGANIZATIONAL CHART ........................... 15
RISK FACTORS ................................... 16
ESTIMATED USE OF PROCEEDS OF OFFERING .......... 26
WHO MAY INVEST ................................. 28
COMPENSATION TABLE ............................. 29
CONFLICTS OF INTEREST .......................... 37
FIDUCIARY RESPONSIBILITY OF DIRECTORS AND
THE ADVISOR; INDEMNIFICATION ................... 40
PRIOR PERFORMANCE OF THE COMPANY'S AFFILIATES .. 42
MANAGEMENT ..................................... 56
SELECTED FINANCIAL DATA ........................ 67
INVESTMENT OBJECTIVES AND POLICIES ............. 69
REAL PROPERTY INVESTMENTS ...................... 76
CAPITALIZATION ................................. 96
PRINCIPAL STOCKHOLDERS ......................... 97
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE FINANCIAL CONDITION OF THE COMPANY ......... 98
FEDERAL INCOME TAX CONSIDERATIONS .............. 104
ERISA CONSIDERATIONS ........................... 114
DESCRIPTION OF SECURITIES ...................... 116
SUMMARY OF THE ORGANIZATIONAL DOCUMENTS ........ 119
PLAN OF DISTRIBUTION ........................... 127
HOW TO SUBSCRIBE ............................... 132
SALES LITERATURE ............................... 133
DISTRIBUTION REINVESTMENT AND SHARE REPURCHASE
PROGRAMS ....................................... 133
REPORTS TO STOCKHOLDERS ........................ 135
LEGAL MATTERS .................................. 137
EXPERTS ........................................ 137
ADDITIONAL INFORMATION ......................... 138
GLOSSARY ....................................... 139
INDEX TO FINANCIAL STATEMENTS .................. F-i
PRIOR PERFORMANCE TABLES ....................... A-1
DISTRIBUTION REINVESTMENT PROGRAM .............. B-1
SUBSCRIPTION AGREEMENT ......................... I-1
</TABLE>

Until October 21, 1996, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may
be required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver prospectuses when acting as Soliciting Dealers with respect
to their unsold allotments or subscriptions.

INLAND
REAL ESTATE
CORPORATION

11,375,000 Shares

_________________

PROSPECTUS
July 24, 1996
_________________

Inland Securities
Corporation
_________________

<PAGE> 328

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Balance Sheets for the Company (unaudited) at March 31, 1996 and
December 31, 1995 ........................................................... F-1

Statements of Operations (unaudited) for the three months ended March 31,
1996 and 1995 ............................................................... F-3

Statements of Stockholders' Equity at March 31, 1996 and December 31, 1995 .. F-4

Statement of Cash Flows (unaudited) for the three months ended March 31,
1996 and 1995 ............................................................... F-5

Notes to Financial Statements ............................................... F-6

Independent Auditors' Report ................................................ F-14

Balance Sheets for the Company as of December 31, 1995 and 1994 ............. F-15

Statement of Operations for the year ended December 31, 1995 ................ F-17

Statement of Stockholders' Equity for the year ended December 31, 1995 and
for the period from May 12, 1994 (formation of the Company) to December 31,
1994 ........................................................................ F-18

Statement of Cash Flows for the year ended December 31, 1995 and for
the period May 12, 1994 (formation of the Company) to December 31, 1994 ..... F-19

Notes to Financial Statements ............................................... F-21

Historical Summary of Gross Income and Direct Operating
Expenses (unaudited) of the Walgreens/Decatur property for the six-month
period ended December 31, 1994 .............................................. F-30

Independent Auditor's Report ................................................ F-31

Historical Summaries of Gross Income and Direct Operating Expenses unaudited
of the Walgreens/Decatur property for each of the three years in
the three year period ended June 30, 1994 ................................... F-32

Notes to Historical Summaries of Gross Income and Direct Operating
Expenses .................................................................... F-33

Historical Summary of Gross Income and Direct Operating Expenses (unaudited)
of the Eagle Crest Shopping Center for the six-month period ended
December 31, 1994 ........................................................... F-35

</TABLE>

F-i

<PAGE> 329

Independent Auditor's Report ......................................... F-36

Historical Summaries of Gross Income and Direct Operating Expenses
of the Eagle Crest/Naperville property for each of the three years
in the three year period ended June 30, 1994 ......................... F-37

Notes to the Historical Summaries of Gross Income and Direct Operating
Expenses ............................................................. F-38

Report of Independent Public Accountants ............................. F-40

Statement of Gross Income and Direct Operating Expenses for the year
ended December 31, 1994 of Nantucket Square Shopping Center .......... F-41

Notes to the Statement of Gross Income and Direct Operating Expenses
for the year ended December 31, 1994 of Nantucket Square Shopping
Center................................................................ F-42

Statement of Gross Income and Direct Operating Expenses for the
seven-month period ended July 31, 1995 of Nantucket Square Shopping
Center (unaudited) ................................................... F-44

Report of Independent Public Accountants ............................. F-45

Statement of Gross Income and Direct Operating Expenses
for the Year Ended December 31, 1995 of Mundelein Plaza............... F-46

Notes to the Statement of Gross Income and Direct Operating Expenses
for the year ended December 31, 1995 of Mundelein Plaza............... F-47

Independent Auditors' Report ......................................... F-49

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1995 of the Regency Point
Shopping Center ...................................................... F-50

Notes to Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1995 of the Regency Point
Shopping Center ....................................................... F-51

Report of Independent Public Accountants .............................. F-53

Statement of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 of Prospect Heights Plaza ..................... F-54

Notes to the Statement of Income and Direct Operating Expenses
for the year ended December 31, 1995 of Prospect Heights Plaza ........ F-55

Report of Independent Public Accountants .............................. F-57

F-ii
<PAGE> 330

Statement of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 of Montgomery-Sears Shopping
Center ............................................................... F-58

Notes to the Statement of Gross Income and Direct Operating Expenses
for the year ended December 31, 1995 of Montgomery-Sears
Shopping Center ...................................................... F-59

Pro Forma Balance Sheet of the Company (unaudited) at December 31,
1995 ................................................................. F-61

Notes to Pro Forma Balance Sheet of the Company (unaudited) at December
31, 1995.............................................................. F-63

Pro Forma Statement of Operations of the Company (unaudited) for the
year ended December 31, 1995 ......................................... F-68

Notes to Pro Forma Statement of Operations of the Company (unaudited)
for the year ended December 31, 1995 ................................. F-70

Pro Forma Balance Sheet of the Company (unaudited) at March 31, 1996 . F-78

Notes to Pro Forma Balance Sheet of the Company (unaudited) at
March 31, 1996 ....................................................... F-80

Pro Forma Statement of Operations of the Company (unaudited) for the
three months ended March 31, 1996 .................................... F-84

Notes to Pro Forma Statement of Operations of the Company (unaudited)
for the three months ended March 31, 1996 ............................ F-86

F-iii
<PAGE> 331

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Balance Sheets

March 31, 1996 and December 31, 1995
(unaudited)

Assets

1996 1995
---- ----
<S> <C> <C>
Investment properties (Notes 1, 4 and 5):
Land............................................ $ 7,240,948 5,437,948
Building and improvements....................... 15,982,166 12,074,484
----------- ----------
23,223,114 17,512,432
Less accumulated depreciation................... 272,985 169,894
----------- ----------

Net investment properties....................... 22,950,129 17,342,538
----------- ----------

Cash and cash equivalents including amounts
held by property manager (Note 1)............... 2,937,473 738,931
Restricted cash (Note 1).......................... - 150,000
Accounts and rents receivable (Note 5)............ 492,081 333,823
Deposits and other assets......................... 22,309 158,123
Deferred organization costs (Note 1).............. 26,089 27,462
----------- ----------

Total assets.................................. $26,428,081 18,750,877
=========== ===========

</TABLE>

See accompanying notes to financial statements.

F-1

<PAGE> 332

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Balance Sheets
(continued)

March 31, 1996 and December 31, 1995
(unaudited)

Liabilities and Stockholders' Equity

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Liabilities:
Accounts payable................................ $ 43,544 6,875
Accrued offering costs to Affiliates............ 269,570 222,353
Accrued offering costs to non-affiliates........ 31,000 6,444
Accrued interest payable to Affiliates.......... 4,771 5,242
Accrued real estate taxes....................... 463,751 374,180
Distributions payable (Note 7).................. 183,457 129,532
Security deposits............................... 71,133 54,483
Note payable to Affiliates (Note 6)............. - 360,000
Mortgage payable (Note 6)....................... 748,011 750,727
Unearned income................................. 13,268 39,846
Other liabilities............................... 28,852 178,852
Due to Affiliates (Note 2)...................... 69,508 7,277
----------- ----------

Total liabilities............................. 1,926,865 2,135,811
----------- ----------

Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 24,000,000 Shares
authorized; 2,909,912 and 2,000,073, issued and
outstanding at March 31, 1996 and
December 31, 1995, respectively............... 29,103 19,996
Additional paid-in capital (net of offering
costs of $4,078,208 at March 31, 1996, of
which $2,896,271 was paid to Affiliates)...... 24,953,635 16,835,183
Accumulated distributions in excess
of net income................................. (481,522) (240,113)
----------- ----------

Total stockholders' equity.................... 24,501,216 16,615,066
----------- ----------

Total liabilities and stockholders' equity........ $26,428,081 18,750,877
=========== ===========

</TABLE>

See accompanying notes to financial statements.

F-2

<PAGE> 333

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Statements of Operations

For the three months ended March 31, 1996 and 1995
(unaudited)

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Income:
Rental income (Notes 1 and 5)................... $ 475,038 70,733
Additional rental income........................ 242,290 8,790
Interest income................................. 43,751 21,598
----------- ----------

761,079 101,121
----------- ----------

Expenses:
Professional services to Affiliates............. 2,000 -
Professional services to non-affiliates......... 26,068 -
General and administrative expenses
to Affiliates................................. 7,903 -
General and administrative expenses
to non-affiliates............................. 2,197 415
Advisor asset management fee.................... 48,540 -
Property operating expenses to Affiliates....... 29,136 2,882
Property operating expenses to non-affiliates... 281,477 8,825
Mortgage interest to Affiliates................. 15,043 20,398
Mortgage interest to non-affiliates............. - 14,499
Depreciation.................................... 103,091 14,444
Amortization.................................... 1,373 -
Acquisition costs expensed...................... 8,985 162
----------- ----------

525,813 61,625
----------- ----------

Net income.................................... $ 235,266 39,496
=========== ===========

Net income per weighted average common stock shares
outstanding (2,394,092 and 343,119 for the
three months ended March 31, 1996 and 1995,
respectively.................................... $ .12 .12
=========== ===========

</TABLE>

See accompanying notes to financial statements.

F-3

<PAGE> 334

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Statements of Stockholders' Equity

March 31, 1996 and December 31, 1995

<TABLE>
<CAPTION>
Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
------ ---------- ------------- -----
<S> <C> <C> <C> <C>
Balance January 1, 1995..... $ 200 199,800 - 200,000

Net income.................. - - 496,514 496,514

Distributions declared
($.78 per weighted average
common stock shares
outstanding).............. - - (736,627) (736,627)

Proceeds from Offering (net
of Offering costs of
$3,121,175)............... 19,826 16,662,162 - 16,681,988

Repurchases of Shares....... (30) (26,779) - (26,809)
---------- ---------- ----------- ----------

Balance December 31, 1995... 19,996 16,835,183 (240,113) 16,615,066

Net income.................. - - 235,266 235,266

Distributions declared
($.20 per weighted average
common stock shares
outstanding).............. - - (476,675) (476,675)

Proceeds from Offering (net
of Offering costs of
$957,033)................. 9,107 8,118,452 - 8,127,559
---------- ---------- ----------- ----------

Balance March 31, 1996...... $ 29,103 24,953,635 (481,522) 24,501,216
========== ========== =========== ==========
</TABLE>

See accompanying notes to financial statements.

F-4

<PAGE> 335

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Statement of Cash Flows

For the three months ended March 31, 1996 and 1995
(unaudited)

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 235,266 39,496
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................ 103,091 14,444
Amortization................................ 1,373 -
Rental income under master lease agreements. 109,333 -
Changes in assets and liabilities:
Accounts and rents receivable............... (158,258) (74,855)
Other assets................................ 135,814 1,075
Accrued interest payable.................... (471) 30,052
Accrued real estate taxes................... 89,571 95,225
Accounts payable............................ 36,669 -
Unearned income............................. (26,578) -
Due to Affiliates........................... 53,646 -
Security deposits........................... 16,650 13,853
----------- -----------
Net cash provided by operating activities......... 596,106 119,290
----------- -----------

Cash flows from investing activities:
Additions to investment properties.............. (153,450) -
Purchase of investment properties............... (5,657,980) (218,418)
----------- -----------

Net cash used in investing activities............. (5,811,430) (218,418)
----------- -----------

Cash flows from financing activities:
Repayment of note to Affiliate.................. (360,000) -
Repayment of loan from Advisor.................. - (193,300)
Proceeds from offering.......................... 9,084,592 4,842,205
Payments of offering costs...................... (885,260) (613,424)
Distributions paid.............................. (422,750) -
Principal payments of debt...................... (2,716) (2,508,857)
----------- -----------

Net cash provided by financing activities......... 7,413,866 1,526,624
----------- -----------

Net increase in cash and cash equivalents......... 2,198,542 1,427,496

Cash and cash equivalents at beginning of period.. 738,931 10,934
----------- -----------

Cash and cash equivalents at end of period........ $ 2,937,473 1,438,430
=========== ===========

Distributions payable............................. $ 183,457 (58,495)
=========== ===========

</TABLE>

See accompanying notes to financial statements.

F-5

<PAGE> 336

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements

March 31, 1996
(unaudited)

Readers of this Quarterly Report should refer to the Company's audited
financial statements for the fiscal year ended December 31, 1995, which are
included in the Company's 1995 Annual Report, as certain footnote disclosures
which would substantially duplicate those contained in such audited financial
statements have been omitted from this Report.

(1) Organization and Basis of Accounting

Inland Monthly Income Fund III, Inc. (the "Company") was formed on May 12, 1994
to invest in neighborhood retail centers located within an approximate 150-mile
radius of its headquarters in Oak Brook, Illinois. The Company may also
acquire single-user retail properties in locations throughout the United
States, certain of which may be sale and leaseback transactions, net leased to
creditworthy tenants. On October 14, 1994, the Company commenced an initial
public offering (the "Offering") of 5,000,000 shares of common stock (the
"Shares") at a price of $10 per Share and the issuance of 1,000,000 Shares at a
price of $9.05 per Share which may be distributed pursuant to the Company's
distribution reinvestment program (the "DRP"). Inland Real Estate Advisory
Services, Inc. (the "Advisor"), an Affiliate of the Company, is the advisor to
the Company. Subscriber funds were held in an interest-bearing escrow account
with the Company's unaffiliated escrow agent until January 3, 1995. Offering
proceeds were released from escrow on January 3, 1995 when subscriptions were
accepted and Shares issued by the Company. Subscribers received their pro rata
share of interest income earned on their subscriptions while in escrow. As of
March 31, 1996, the Company has repurchased 3,000 Shares. At March 31, 1996,
subscriptions for a total of 2,909,912 Shares have been received, resulting in
$29,088,408 in Gross Offering Proceeds.

F-6

<PAGE> 337

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1996
(unaudited)

The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents and are carried at cost, which
approximates fair value. Included in cash and equivalents is $249,890 held by
the Company's affiliated property manager which is unrestricted and held in the
Company's name.

Deferred organization costs are amortized over a 60-month period.

Offering costs were offset against the Stockholders' equity accounts once the
Shares sold exceeded the Minimum Number of Shares and Gross Offering Proceeds
were released from escrow. Offering costs consist principally of printing,
selling and registration costs.

The investment properties are carried at the lower of aggregate cost or net
realizable value. Periodically, the Company will review its real estate
portfolio and if investment properties suffer an impairment in value which is
deemed to be other than temporary, the investment in properties would be
reduced to the net realizable value of the properties. As of March 31, 1996,
there have been no such impairments. Depreciation expense is computed using
the straight-line method. Buildings and improvements are based upon estimated
useful lives of 30 years. Tenant improvements will be depreciated over the
related lease period.

The Company believes that the interest rate associated with the mortgage
payable approximates the market interest rates for this type of debt
instrument, and as such, the carrying amount of the mortgage payable
approximates its fair value.

F-7

<PAGE> 338

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1996
(unaudited)

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

(2) Transactions with Affiliates

As of March 31, 1996, the Company had incurred $4,105,670 of organization and
offering costs. Pursuant to the terms of the Offering, the Advisor is required
to pay organization and offering expenses (excluding sales commissions, the
marketing contribution and the due diligence expense allowance fee) in excess
of 5.5% of the gross proceeds of the Offering (the "Gross Offering Proceeds")
or all organization and offering expenses (including such selling expenses)
which together exceed 15% of Gross Offering Proceeds. As of March 31, 1996,
organizational and offering costs did exceed the 5.5% and 15% limitations. The
Company anticipates that these costs will not exceed these limitations upon
completion of the Offering, however, any excess amounts will be reimbursed by
the Advisor.

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
Offering and to the administration of the Company. In addition, an Affiliate
of the Advisor serves as dealer manager of the Offering and is entitled to
receive selling commissions, a marketing contribution and a due diligence
expense allowance fee from the Company in connection with the Offering. Such
commissions incurred were $2,526,845 and $1,719,406 as of March 31, 1996 and
December 31, 1995, respectively, of which $192,632 and $102,084 were unpaid as
of March 31, 1996 and December 31, 1995, respectively. Other costs to
Affiliates incurred relating to the Offering were $369,426 and $409,858 as of
March 31, 1996 and December 31, 1995, respectively, of which $76,938 and
$120,269 were unpaid as of March 31, 1996 and December 31, 1995, respectively.

F-8

<PAGE> 339

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1996
(unaudited)

As of March 31, 1996, the Advisor has contributed $200,000 to the capital of
the Company for which it received 20,000 Shares.

During 1994, the Advisor advanced $193,300 to the Company for costs incurred
with the Offering. These advances were repaid with a market rate of interest
to the Advisor in January 1995 with interest ranging from 7.75% to 9.50%. The
principal of $193,300 and interest totaling $3,162 were paid from Gross
Offering Proceeds.

The Advisor may receive an annual Advisor Asset Management Fee of not more than
1% of the Average Invested Assets, paid quarterly. For any year in which the
Company qualifies as a REIT, the Advisor must reimburse the Company: (i) to
the extent that the Advisor Asset Management Fee plus Other Operating Expenses
paid during the previous calendar year exceed 2% of the Company's Average
Invested Assets for that calendar year or 25% of the Company's Net Income for
that calendar year; and (ii) to the extent that Stockholders have not received
an annual Distribution equal to or greater than the 8% Current Return. As of
March 31, 1996, the Company has incurred $48,540 of such fees, all of which
remains unpaid at March 31, 1996. (Defined terms in this paragraph have the
same definitions from the prospectus.)

An Affiliate of the Advisor is entitled to receive Property Management Fees for
management and leasing services. The Company incurred and paid property
management fees of $29,136 and $2,882 for the three months ended March 31, 1996
and 1995, respectively.

F-9

<PAGE> 340

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1996
(unaudited)

(3) Commitments and Contingencies

The Company adopted an Independent Director Stock Option Plan which granted
each Independent Director an option to acquire 3,000 Shares as of October 14,
1994 and an additional 500 Shares on the date of each annual stockholders'
meeting commencing with the annual meeting in 1995 if the Independent Director
is a member of the Board on such date. The options for the initial 3,000 Share
grant are exercisable as follows: 1,000 Shares on the date of grant and 1,000
Shares on each of the first and second anniversaries of the date of grant. The
succeeding options are exercisable on the second anniversary of the date of
grant. No options have been exercised.

In addition to sales commissions, Soliciting Dealers will also receive one
Soliciting Dealer Warrant for each 40 Shares sold by such Soliciting Dealer
during the Offering, subject to state and federal securities laws. The holder
of a Soliciting Dealer Warrant will be entitled to purchase one Share from the
Company at a price of $12 during the period commencing with the first date upon
which the Soliciting Dealer Warrants are issued and ending upon the first to
occur of: (i) October 14, 1999; or (ii) the closing date of a secondary
offering of the Shares by the Company. Notwithstanding the foregoing, no
Soliciting Dealer Warrant will be exercisable until one year from the date of
issuance.

On the behalf of the Company, the Advisor is currently exploring the purchase
of additional shopping centers from unaffiliated third parties.

F-10

<PAGE> 341

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1996
(unaudited)

(4) Investment Properties

<TABLE>
<CAPTION>
Gross amount at which carried
Initial Cost (A) at end of period
--------------------- ----------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------ ------ ------------ ----------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Single-user Retail

Walgreens/Decatur
Decatur, IL............. 01/95 $ 78,330 1,130,723 - 78,330 1,130,723 1,209,053

Neighborhood Retail Centers

Eagle Crest Shopping Center
Naperville, IL.......... 03/95 1,878,618 2,938,352 - 1,878,618 2,938,352 4,816,970

Montgomery-Goodyear
Montgomery, IL.......... 09/95 315,000 832,909 (6,632) 315,000 826,277 1,141,277

Hartford/Naperville Plaza
Naperville, IL.......... 09/95 990,000 3,426,211 22,082 990,000 3,448,293 4,438,293

Nantucket Square
Schaumburg, IL.......... 09/95 1,908,000 2,352,833 (15,026) 1,908,000 2,337,807 4,245,807

Antioch Plaza
Antioch, IL............. 12/95 268,000 1,487,372 (41,638) 268,000 1,445,734 1,713,734

Mundelein Plaza
Mundelein, IL........... 03/96 1,803,000 3,854,980 - 1,803,000 3,854,980 5,657,980
----------- ----------- ----------- ------------ ----------- -----------

$ 7,240,948 16,023,380 (41,214) 7,240,948 15,982,166 23,223,114
=========== =========== =========== =========== =========== ===========
</TABLE>

(B) Adjustments to basis includes additions to investment properties and
payments received under master lease agreements. As part of the
Montgomery-Goodyear, Hartford/Naperville Plaza, Nantucket Square and Antioch
Plaza purchases, the Company will receive rent under master lease
agreements on the spaces currently vacant for periods ranging from one year
to eighteen months or until the spaces are leased. Generally accepted
accounting principles require that as these payments are received, they be
recorded as a reduction in the purchase price of the properties rather than
as rental income. As of March 31, 1996, the Company has recorded $242,349
of such payments.

F-11

<PAGE> 342

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1996
(unaudited)

(5) Operating Leases

Master Lease Agreements

As part of the Montgomery-Goodyear, Hartford/Naperville Plaza, Nantucket Square
and Antioch Plaza purchases, the Company will receive rent under master lease
agreements on the spaces currently vacant for periods ranging from one year to
eighteen months or until the spaces are leased. Generally Accepted Accounting
Principles require that as these payments are received, they be recorded as a
reduction in the purchase price of the properties rather than as rental income.
Hartford/Naperville Plaza is fully leased and tenant improvements are
substantially completed. Master lease payments amounted to $29,114 for the
three months ended March 31, 1996.

The seller of Nantucket Square entered into a master lease agreement with the
Company for 4,500 square feet at $15 per square foot for 12 months or until the
space is leased. In addition, the Company received a credit at closing for
rent abatement agreements under current leases. Master lease payments amounted
to $37,268 for the three months ended March 31, 1996.

At March 31, 1996, Antioch Plaza was 49% leased and tenant improvements are
being completed. Certain tenants have begun paying rent. The master lease
payments amounted to $39,921 for the three months ended March 31, 1996. The
master lease agreement on this property expires June 1997.

Master lease payments at Montgomery-Goodyear amounted to $3,030 for the three
months ended March 31, 1996.

Certain tenant leases contain provisions providing for stepped rent increases.
Generally accepted accounting principles require that rental income be recorded
for the period of occupancy using the effective monthly rent, which is the
average monthly rent for the entire period of occupancy during the term of the
lease. The accompanying financial statements include $7,284 and $740 for the
three months ended March 31, 1996 and 1995, respectively, of rental income for
the period of occupancy for which stepped rent increases apply and $19,697 and
$740 in related accounts receivable as of March 31, 1996 and December 31, 1995,
respectively. These amounts will be collected over the terms of the related
leases as scheduled rent payments are made.

F-12

<PAGE> 343

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1996
(unaudited)

(6) Mortgage Payable and Note Payable to Affiliates

Mortgage payable and note payable to Affiliates consist of the following at
March 31, 1996 and December 31, 1995:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
7.655% first mortgage secured by Walgreens,
Decatur, Illinois, monthly principal and
interest payments of $5,689, with the
remaining balance due May 2004............ $ 748,011 750,727
----------- -----------

Mortgage payable............................ $ 748,011 750,727
=========== ===========

9.5% promissory note payable to Inland
Real Estate Investment Corporation, paid
in full on January 9, 1996................ - 360,000
----------- -----------

Note payable to Affiliates.................. $ - 360,000
=========== ===========

</TABLE>

(7) Subsequent Events

During April 1996, the Company paid distributions of $183,457 to the
Stockholders of record at March 31, 1996 on a weighted average basis for the
month.

On April 5, 1996, the Company completed the acquisition of the Regency Point
Shopping Center located in Lockport, Illinois ("Regency Point"), from a third
party unaffiliated with the Company, for a purchase price of $5,700,000. In
connection with the acquisition of Regency Point, the Company assumed the
existing first mortgage loan of approximately $4,473,200, along with a related
interest rate swap agreement which has the effect of fixing the interest rate
on the mortgage loan at 7.91% per annum. The remainder of the purchase price
was funded, after prorations, with proceeds of the Offering. The related
interest rate swap agreement was terminated on April 18, 1996 resulting in
$48,419 proceeds to the Company. As a result, the first mortgage loan has a
floating interest rate of 180 basis points over the 30-day LIBOR rate, which
rate is adjusted monthly (currently 7.2375%), amortizes over 25 years and
matures August 2000.

F-13
<PAGE> 344

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Inland Monthly Income Fund III, Inc.:

We have audited the financial statements of Inland Monthly Income Fund III,
Inc. (the Company) as listed in the accompanying index. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Inland Monthly Income Fund
III, Inc. as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the year ended December 31, 1995 and for the period from
May 12, 1994 (formation date) to December 31, 1994 in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 19, 1996

F-14

<PAGE> 345

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Balance Sheets

December 31, 1995 and 1994

Assets

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Investment properties (Notes 1 and 4):
Land............................................ $ 5,437,948 -
Building and improvements....................... 12,074,484 -
----------- ---------

17,512,432 -
Less accumulated depreciation................... 169,894 -
----------- ---------

Net investment properties....................... 17,342,538 -
----------- ---------

Cash and cash equivalents including amounts
held by property manager (Note 1)............... 738,931 10,934
Restricted cash (Note 1).......................... 150,000 -
Escrowed funds (Note 1)........................... - 1,699,381
Accounts and rents receivable (Note 5)............ 333,823 -
Deposits and other assets (Note 4)................ 158,123 4,117
Offering costs (Note 1)........................... - 687,941
Deferred organization costs (Note 1).............. 27,462 -
----------- ---------

Total assets.................................. $18,750,877 2,402,373
=========== =========
</TABLE>

See accompanying notes to financial statements.

F-15

<PAGE> 346

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Balance Sheets
(continued)

December 31, 1995 and 1994

Liabilities and Stockholders' Equity

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Liabilities:
Liability for subscriptions received (Note 1)... $ - 1,699,381
Accounts payable................................ 6,875 -
Accrued offering costs to Affiliates (Note 2)... 222,353 54,981
Accrued offering costs to non-affiliates........ 6,444 254,711
Accrued interest payable to Affiliates.......... 5,242 -
Accrued real estate taxes....................... 374,180 -
Distributions payable (Note 7).................. 129,532 -
Security deposits............................... 54,483 -
Notes payable to Affiliates (Notes 4 and 7)..... 360,000 -
Mortgage payable (Notes 4 and 6)................ 750,727 -
Unearned income................................. 39,846 -
Other liabilities............................... 178,852 -
Due to Affiliates (Note 2)...................... 7,277 193,300
----------- ---------

Total liabilities............................. 2,135,811 2,202,373
----------- ---------

Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 24,000,000 Shares
authorized; 2,000,073 and 20,000 issued and
outstanding at December 31, 1994 and
December 31, 1995, respectively.............. 19,996 200
Additional paid-in capital (net of offering
costs of $3,121,175 at December 31, 1995, of
which $2,129,264 was paid to Affiliates)...... 16,835,183 199,800
Accumulated distributions in excess
of net income................................. (240,113) -
----------- ---------

Total stockholders' equity.................... 16,615,066 200,000
----------- ---------

Commitments and contingencies (Notes 3, 5 and 7)..
----------- ---------

Total liabilities and stockholders' equity........ $18,750,877 2,402,373
=========== =========
</TABLE>

See accompanying notes to financial statements.

F-16

<PAGE> 347

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Statement of Operations

For the year ended December 31, 1995

<TABLE>
<S> <C>
Income:
Rental income (Notes 1 and 5).................... $ 869,485
Additional rental income......................... 228,024
Interest income.................................. 82,913
-----------
1,180,422
-----------

Expenses:
Professional services to Affiliates.............. 7,277
Professional services to non-affiliates.......... 1,615
General and administrative expenses
to non-affiliates.............................. 13,880
Property operating expenses to Affiliates........ 46,791
Property operating expenses to non-affiliates.... 279,930
Mortgage interest to Affiliates.................. 146,821
Mortgage interest to non-affiliates.............. 17,340
Depreciation..................................... 169,894
Acquisition costs expensed....................... 360
-----------

683,908
-----------

Net income..................................... $ 496,514
===========

Net income per weighted average
common stock shares outstanding
(943,156 for the year ended
December 31, 1995)............................... $ .53
============
</TABLE>

See accompanying notes to financial statements.

F-17

<PAGE> 348

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Statement of Stockholders' Equity

For the year ended December 31, 1995 and
for the period from May 12, 1994 (formation of the Company)
to December 31, 1994

<TABLE>
<CAPTION>
Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
---------- ---------- ------------- --------
<S> <C> <C> <C> <C>
Proceeds from initial
offering.................. $ 200 199,800 - 200,000
---------- ---------- -------- ----------
Balance December 31, 1994... 200 199,800 - 200,000

Net income.................. - - 496,514 496,514

Distributions declared
($.78 per weighted average
common stock shares
outstanding).............. - - (736,627) (736,627)

Proceeds from Offering (net
of Offering costs of
$3,121,175).............. 19,826 16,662,162 - 16,681,988

Repurchases of Shares....... (30) (26,779) - (26,809)
---------- ---------- -------- ----------

Balance December 31, 1995... $ 19,996 16,835,183 (240,113) 16,615,066
========== ========== ======== ==========
</TABLE>

See accompanying notes to financial statements.

F-18

<PAGE> 349

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Statement of Cash Flows

For the year ended December 31, 1995
and for the period from May 12, 1994 (formation of the Company)
to December 31, 1994

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 496,514
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 169,894 -
Rental income under master lease agreements... 133,016 -
Changes in assets and liabilities:
Accounts and rents receivable............... (333,823) -
Deposits and other assets................... (4,006) -
Accounts payable............................ 6,875 -
Accrued interest payable.................... 5,242 -
Accrued real estate taxes................... 374,180 -
Security deposits........................... 54,483 -
Other liabilities........................... 28,852 -
Due to Affiliates........................... 7,277 -
Unearned income............................. 39,846 -
------------ ---------
Net cash provided by operating activities......... 978,350 -
------------ ---------

Cash flows from investing activities:
Escrowed funds.................................. - (1,699,381)
Payments for acquisition expenses............... - (4,117)
Purchase of investment properties............... (6,376,708) -
Tenant improvements............................. (51,135) -
Deposit for tenant improvements................. (150,000) -
------------ ---------

Net cash used in investing activities............. (6,577,843) (1,703,498)
------------ ---------

Cash flows from financing activities:
Repayment of loan from Advisor.................. (193,300) 193,300
Proceeds from offering.......................... 19,803,163 200,000
Repurchase of Shares............................ (26,809) -
Subscriptions received.......................... - 1,699,381
Payments of offering costs...................... (2,514,129) (378,249)
Distributions paid.............................. (607,095) -
Principal payments of debt...................... (10,106,878) -
Payment of deferred organization costs.......... (27,462) -
------------ ---------

Net cash provided by financing activities......... 6,327,490 1,714,432
------------ ---------

Net increase in cash and cash equivalents......... 727,997 10,934
Cash and cash equivalents at beginning of period.. 10,934 -
------------ ---------

Cash and cash equivalents at end of period........ $ 738,931 10,934
============ =========
</TABLE>

See accompanying notes to financial statements.

F-19

<PAGE> 350

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Statement of Cash Flows
(continued)

For the year ended December 31, 1995

Supplemental schedule of noncash investing and financing activities:

<TABLE>
<S> <C>
Purchase of Walgreens, Decatur, Illinois:
Purchase price of investment property......................... $ (1,209,053)
Assumption of debt (Note 4)................................... 1,061,409
------------
(147,644)
------------

Purchase of the Eagle Crest Shopping Center, Naperville, Illinois:
Purchase price of investment property......................... (4,816,970)
Assumption of debt............................................ 3,533,769
Note payable (Note 4)......................................... 1,212,427
------------

(70,774)
------------

Purchase of Montgomery-Goodyear, Montgomery, Illinois:
Purchase price of investment property......................... (1,145,992)
Note payable (Note 4)......................................... 600,000
------------

(545,992)
------------

Purchase of Hartford/Naperville Plaza, Naperville, Illinois:
Purchase price of investment property......................... (4,414,015)
Note payable (Note 4)......................................... 600,000
------------

(3,814,015)
------------

Purchase of Nantucket Square, Schaumburg, Illinois:
Purchase price of investment property......................... (4,257,918)
Note payable (Note 4)......................................... 3,550,000
------------

(707,918)
------------

Purchase of Antioch Plaza, Antioch, Illinois:
Purchase price of investment property......................... (1,750,365)
Note payable (Note 4)......................................... 660,000
------------

(1,090,365)
------------

Purchase of investment properties............................... $ (6,376,708)
============

Distributions payable........................................... $ 129,532
============

Cash paid for interest.......................................... $ 158,919
============
</TABLE>

See accompanying notes to financial statements.

F-20

<PAGE> 351

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements

For the year ended December 31, 1995 and
for the period from May 12, 1994 (formation of the Company)
to December 31, 1994

(1) Organization and Basis of Accounting

Inland Monthly Income Fund III, Inc. (the "Company") was formed on May 12, 1994
to invest in neighborhood retail centers located within an approximate 150-mile
radius of its headquarters in Oak Brook, Illinois. The Company may also
acquire single-user retail properties in locations throughout the United
States, certain of which may be sale and leaseback transactions, net leased to
creditworthy tenants. On October 14, 1994, the Company commenced an initial
public offering ("Offering") of 5,000,000 shares of common stock ("Shares") at
a price of $10 per Share and the issuance of 1,000,000 Shares at a price of
$9.05 per Share which may be distributed pursuant to the Company's distribution
reinvestment program (the "DRP"). Inland Real Estate Advisory Services, Inc.
(the "Advisor"), an Affiliate of the Company, is the advisor to the Company.
At December 31, 1994, subscriptions for a total of 189,938.145 Shares had been
received from the public resulting in $1,899,381 in Gross Offering Proceeds,
which includes $200,000 received from the Advisor for 20,000 Shares.
Subscriber funds were held in an interest-bearing escrow account with the
Company's unaffiliated escrow agent until January 3, 1995. At December 31,
1994, escrowed funds of $1,699,381 were reflected as escrowed deposits, along
with the corresponding liability for subscriptions received, in the
accompanying financial statements. Offering proceeds were released from escrow
on January 3, 1995 when subscriptions were accepted and Shares issued by the
Company. Subscribers received their pro rata share of interest income earned
on their subscriptions while in escrow. At December 31, 1995, subscriptions
for a total of 2,000,073 Shares have been received, resulting in $19,976,354 in
Gross Offering Proceeds. As of December 31, 1995, the Company has repurchased
30 Shares.

F-21

<PAGE> 352

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

The Company considers all highly liquid investments purchased with a maturity
of three months of less to be cash equivalents and are carried at cost, which
approximates fair value. Included in cash and equivalents is $142,720 held by
the Company's affiliated property manager which is unrestricted and held in the
Company's name.

Restricted cash represents amounts held in escrow for tenant improvements at
Naperville/Hartford Plaza. The Company has recorded a corresponding payable as
a component of other liabilities.

Deferred organization costs will be amortized over a 60-month period.

The investment properties are carried at the lower of aggregate cost or net
realizable value. Periodically, the Company will review its real estate
portfolio and if investment properties suffer an impairment in value which is
deemed to be other than temporary, the investment in properties would be
reduced to the net realizable value of the properties. As of December 31,
1995, there have been no such impairments. Depreciation expense is computed
using the straight-line method. Buildings and improvements are based upon
estimated useful lives of 30 years. Tenant improvements will be depreciated
over the related lease period.

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

Certain amounts in the 1994 financial statements have been reclassified to
conform with the 1995 presentation. Such reclassifications did not change the
1994 reported results.

F-22

<PAGE> 353

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of" was issued in March 1995 and
is effective for fiscal years beginning after December 15, 1995.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation Plans" was issued in October 1995. The Statement is
effective for fiscal years beginning after December 15, 1995. As allowed by
the new Statement, the Company plans to continue to use Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting
for its stock options.

Neither of these accounting pronouncements are expected to have a material
effect on the financial position or results of operations of the Company.
Inflation

(2) Transactions with Affiliates

Pursuant to the terms of the Offering, the Advisor is required to pay
organizational and offering expenses (excluding sales commissions, the
marketing contribution and the due diligence expense allowance fee) in excess
of 5.5% of the gross proceeds of the Offering (the "Gross Offering Proceeds")
or all organization and offering expenses (including selling commissions) which
together exceed 15% of Gross Offering Proceeds. As of December 31, 1995,
organizational and offering costs did exceed the 5.5% and 15% limitations. The
Company anticipates that these costs will not exceed these limitations upon
completion of the Offering, however, any excess amounts will be reimbursed by
the Advisor.

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
Offering and to the administration of the Company. In addition, an Affiliate
of the Advisor serves as dealer manager of the Offering and is entitled to
receive selling commissions, a marketing contribution and a due diligence
expense allowance fee from the Company in connection with the Offering. Such
commissions incurred were $1,719,406 for the year ended December 31, 1995, of
which $102,084 was unpaid as of December 31, 1995. Other costs to Affiliates
incurred relating to the Offering were $409,858 for the year ended December 31,
1995, of which $120,269 was unpaid as of December 31, 1995. Other costs to
Affiliates incurred relating to the administration of the Company were $7,277,
all of which was unpaid at December 31, 1995.

As of December 31, 1995, the Advisor has contributed $200,000 to the capital of
the Company for which it received 20,000 Shares.

F-23

<PAGE> 354

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

The Advisor may receive an annual Advisor Asset Management Fee of not more than
1% of the Average Invested Assets, paid quarterly. For any year in which the
Company qualifies as a REIT, the Advisor must reimburse the Company: (i) to
the extent that the Advisor Asset Management Fee plus Other Operating Expenses
paid during the previous calendar year exceed 2% of the Company's Average
Invested Assets for the calendar year or 25% of the Company's Net Income for
that calendar year; and (ii) to the extent that Stockholders have not received
an annual Distribution equal to or greater than the 8% Current Return. As of
December 31, 1995, the Company has not incurred or paid any of such fees.

An Affiliate of the Advisor is entitled to receive Property Management Fees for
management and leasing services. The Company incurred and paid Property
Management Fees of $46,791 for the year ended December 31, 1995.

(3) Commitments and Contingencies

In addition to sales commissions, Soliciting Dealers will also receive one
Soliciting Dealer Warrant for each 40 Shares sold by such Soliciting Dealer
during the Offering, subject to state and federal securities laws. The holder
of a Soliciting Dealer Warrant will be entitled to purchase one Share from the
Company at a price of $12 during the period commencing with the first date upon
which the Soliciting Dealer Warrants are issued and ending upon the first to
occur of: (i) October 14, 1999 or (ii) the closing date of a secondary offering
of the Shares by the Company. Notwithstanding the foregoing no Soliciting
Dealer Warrant will be exercisable until one year from the date of issuance.

On behalf of the Company, the Advisor is currently exploring the purchase of
additional Neighborhood Retail Centers and single-user retail properties from
unaffiliated third parties.

F-24

<PAGE> 355

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties

Purchase of Walgreens, Decatur, Illinois

On January 31, 1995, the Company acquired this property from Inland Property
Sales, Inc. ("IPS"), an Affiliate of the Advisor, for the total purchase price
of $1,209,053, including acquisition costs of $482, and the assumption of the
first mortgage loan with a balance of $750,727 at December 31, 1995, which is
secured by the property. This mortgage has an interest rate of 7.655% and
amortizes over a 25-year period and matures May 31, 2004. The Company is
responsible for monthly payments of principal and interest of $5,689.

Purchase of Eagle Crest Shopping Center, Naperville, Illinois

On March 1, 1995, the Company acquired this property from IPS for the purchase
price of $4,816,970, including acquisition costs of $11,059, and the assumption
of the first mortgage loan which was secured by the property. The Company made
monthly principal payments of $500,000 on the first mortgage loan. The balance
of the purchase price as funded through a loan from IPS, totaling $1,212,427,
with interest accruing at 10.5%. On April 20, 1995, the Company paid off the
first mortgage totaling approximately $1,328,000 secured by this property. The
deferred portion of the purchase price, totaling $1,212,427, was paid to IPS in
May 1995 from Gross Offering Proceeds. In addition, accrued interest of
$22,009 was paid from Company operations.

Purchase of Montgomery-Goodyear Shopping Center, Montgomery, Illinois

On September 14, 1995, the Company acquired this property from an unaffiliated
third party for a purchase price of $1,145,992, including closing costs of
$5,992, a portion of which was evidenced by a promissory note payable to Inland
Mortgage Investment Corporation ("IMIC"), an affiliate of the Advisor, in the
gross amount of $600,000. The remainder of the purchase price was funded with
proceeds of the Offering. The promissory note was paid in full in October
1995, with interest at a rate of 10.9% per annum. The principal amount paid
was $600,000 from Gross Offering Proceeds and interest of $4,260 was paid from
Company operations.

Purchase of Hartford Plaza, Naperville, Illinois

On September 14, 1995, the Company acquired this newly constructed property
from an unaffiliated third party for a purchase price of $4,414,015 including
closing costs of $14,015, and deposited $150,000 in an escrow account for
future tenant buildout. A portion of the purchase price was evidenced by a
promissory note payable to IMIC, in the gross amount of $600,000. The
remainder of the purchase price was funded with proceeds of the Offering. The
promissory note was paid in full in October 1995, with interest at a rate of
10.9% per annum. The principal amount paid was $600,000 from Gross Offering
Proceeds and interest of $5,102 was paid from Company operations.

F-25

<PAGE> 356

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

Purchase of Nantucket Square Shopping Center, Schaumburg, Illinois

On September 20, 1995, the Company acquired this property from an unaffiliated
third party for a purchase price of $4,257,918, including closing costs of
$4,913, a portion of which was evidenced by a promissory note payable to IMIC,
in the gross amount of $3,550,000. The remainder of the purchase price was
funded with proceeds of the Offering. In addition, as part of the purchase,
the Company agreed to and has paid $51,135 for tenant improvements for two
tenants expanding their space, which was added to the cost of the property.
The promissory note was paid in full in December 1995, with interest at a rate
of 10.5% per annum. The principal amount paid was $3,550,000 from Gross
Offering Proceeds and interest of $62,011 was paid from Company operations.

Purchase of Antioch Plaza, Antioch, Illinois

On December 28, 1995, the Company acquired Antioch Plaza from an unaffiliated
third party for a purchase price of $1,750,365, including closing costs of
$365, a portion of which was evidenced by a promissory note payable to Inland
Real Estate Investment Corporation, an affiliate of the Advisor ("IREIC"), in
the gross amount of $660,000. As of December 31, 1995, the unpaid balance of
this note was $360,000. The note which bore interest at a rate of 9.5% per
annum was repaid in full on January 9, 1996 and the total amount paid was
$661,163, of which $660,000 was principal paid from Gross Offering Proceeds and
$1,163 was interest paid from Company operations. The remainder of the
purchase price, net of prorations of approximately $1,100,000 was funded with
proceeds of the Offering. Its major tenant is Blockbuster Video which leases
6,500 square feet of gross leasable area and is considered creditworthy by the
Company.

Cost and accumulated depreciation of the above properties are summarized as
follows:

<TABLE>
<CAPTION>
1995
<S> <C>
Single-user retail:
Cost................................ $ 1,209,053
Less accumulated depreciation....... 34,550
-------------
1,174,503

Neighborhood Shopping Centers:
Cost................................ 16,303,379
Less accumulated depreciation....... 135,344
-------------

16,168,635

Total................................. $ 17,342,538
=============
</TABLE>

F-26

<PAGE> 357

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

(5) Operating Leases

Master Lease Agreements

The seller of Nantucket Square entered into a master lease agreement with the
Company for 4,500 square feet at $15 per square foot for 12 months or until the
space is leased. In addition, the Company received a credit at closing of
approximately $48,000 for rent abatement agreements under current leases,
$28,893 of which is included as a component of master lease payments recorded
at December 31, 1995 and the balance is recorded as prepaid rent.

At December 31, 1995, Antioch Plaza was 33% leased and tenant improvements are
being completed. Certain tenants have begun paying rent. The master lease
payments amounted to $1,717 through December 31, 1995. The master lease
agreement on this property expires June 1997.

Minimum lease payments to be received, excluding master lease payments, in the
future from the operating leases are as follows:

<TABLE>
<CAPTION>
1995
----
<S> <C>
1996.................................. $ 2,024,010
1997.................................. 2,002,852
1998.................................. 1,851,929
1999.................................. 1,692,580
2000.................................. 1,546,352
Thereafter............................ 10,837,583
-----------

Total................................. $19,955,306
===========
</TABLE>

Remaining lease terms range from one year to thirty-three years. Pursuant to
the lease agreements, tenants of the properties are required to reimburse the
Company for some or all of their pro rata share of the real estate taxes and
operating expenses of the property. Such amounts are included in additional
rent income.

F-27

<PAGE> 358

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

Certain tenant leases contain provisions providing for stepped rent increases.
Generally Accepted Accounting Principles require that rental income be recorded
for the period of occupancy using the effective monthly rent, which is the
average monthly rent for the entire period of occupancy during the term of the
lease. The accompanying financial statements include an increase of $12,413 of
rental income for the period of occupancy for which stepped rent increases
apply and $12,413 in related accounts receivable as of December 31, 1995.
These amounts will be collected over the terms of the related leases as
scheduled rent payments are made.

(6) Mortgage Payable

As of December 31, 1995, the required principal payments on the Company's
mortgage payable over the next five years are as follows:

<TABLE>
<CAPTION>
1995
----
<S> <C>
1996.................................. $ 11,185
1997.................................. 12,072
1998.................................. 13,029
1999.................................. 14,062
2000.................................. 15,177
Thereafter............................ 685,202
</TABLE>

(7) Subsequent Events

As of March 28, 1996, subscriptions for a total of 2,869,084 Shares were
received, bringing total Gross Offering Proceeds to $28,679,020.

The Company, through the Advisor, is currently completing its due diligence on
Regency Point and anticipates purchasing the property in March 1996 from a
third party unaffiliated with the Company for a purchase price of $5,700,000.
As part of the acquisition, it is anticipated the Company will assume the
existing first mortgage loan of approximately $4,473,200, along with a related
interest rate swap agreement. The remainder of the purchase price of
approximately $1,226,800 will be funded, after prorations, with proceeds of the
Offering.

The first mortgage loan has a floating interest rate of 180 basis points over
the 30-day LIBOR rate, which rate is adjusted monthly and amortizes over 25
years. The interest rate swap agreement, in conjunction with the first
mortgage, provides for Bank One, Chicago, to receive from or pay to the Company
the difference between 6.11% and the 30-day LIBOR rate, so that the first
mortgage loan has an effective fixed rate of 7.91% per annum. The first
mortgage loan matures in August 2000. The interest rate swap agreement expires
concurrently therewith.

F-28

<PAGE> 359

INLAND MONTHLY INCOME FUND III, INC.
(a Maryland corporation)

Notes to Financial Statements
(continued)

In January 1996, the Company paid a distribution of $129,532 to the
Stockholders of which approximately $7,460 was a return of capital.

In January 1996, the balance of $360,000 on the note payable to Affiliates of
relating to the purchase of Antioch Plaza, was paid in full along with interest
of $1,163.

Regency Point, built in 1993 and 1994, consists of a one-story, multi-tenant
brick and block strip center aggregating 54,875 of rentable square feet. Its
anchor tenants include nationally recognized tenants such as Walgreens with
13,000 square feet, Ace Hardware with 15,505 square feet and the United States
Postal Service with 2,503 square feet and are considered creditworthy by the
Company.

The Company, through the Advisor, is currently completing its due diligence on
Mundelein Plaza, located in Mundelein, Illinois and anticipates purchasing the
property in March 1996 from a third party unaffiliated with the Company for a
purchase price of $5,650,000, on an all cash basis. Mundelein Plaza, built in
1990, consists of two one-story, multi-tenant brick and block strip centers
aggregating approximately 68,000 rentable square feet. Mundelein Plaza is
currently 100% leased and is anchored by Sears Home Life with 47,000 square
feet and is considered creditworthy by the Company.

The Directors, including the Independent Directors approved the acquisitions of
Regency Point and Mundelein Plaza on February 8, 1996 and March 28, 1996,
respectively, as being fair and reasonable to the Company, subject to the
satisfactory completion of the due diligence process.

F-29

<PAGE> 360

Walgreens/Decatur Property
Historical Summary of Gross Income and Direct Operating Expenses
Six Month Period Ended December 31, 1994

Unaudited

<TABLE>
<S> <C>
Gross Income:
Base Rental Income............................... $ 63,910
Real Estate Tax Recovery......................... 12,080
---------
75,990
---------

Direct Operating Expenses:
Real Estate Taxes................................ 12,080
Management Fees.................................. 1,917
Operating Expenses............................... 295
Insurance Expense................................ 810
---------

15,102
---------

Excess of Gross Income over
Direct Operating Expenses........................ $ 60,888
=========
</TABLE>

F-30

<PAGE> 361

Independent Auditor's Report

The Board of Directors
Inland Property Sales, Inc.:

We have audited the accompanying Historical Summaries of Gross Income and
Direct Operating Expenses (Historical Summaries) of the Walgreens/Decatur
Property for each of the years in the three-year period ended June 30, 1994.
These Historical Summaries are the responsibility of the management of the
Company. Our responsibility is to express an opinion on the Historical
Summaries 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 Historical Summaries are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summaries. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Historical Summaries. We believe that our audits provide a reasonable
basis for our opinion.

The accompanying Historical Summaries were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission and for inclusion in the Registration Statement of Form S-11 of
Inland Monthly Income Fund III, Inc. as described in Note 2. The presentation
is not intended to be a complete presentation of the Walgreens/Decatur Property
revenues and expenses.

In our opinion, the Historical Summaries referred to above present fairly, in
all material respects, the gross income and direct operating expenses described
in Note 2 for each of the years in the three-year period ended June 30, 1994 in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
July 29, 1994

F-31

<PAGE> 362

Walgreens/Decatur Property
Historical Summaries of Gross Income and Direct Operating Expense
Years ended June 30, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross Income:
Base rental income.................. $ 127,820 127,820 127,820
Real estate tax recovery............ 24,733 23,732 23,479
---------- ------- -------
152,533 151,552 151,299
---------- ------- -------

Direct Operating Expenses:
Real estate taxes................... 24,733 23,732 23,479
Management fees..................... 3,811 3,820 3,809
Operating expenses.................. 933 338 496
Insurance expense................... 1,537 1,636 1,577
---------- ------- -------

31,014 29,526 29,361
---------- ------- -------

Excess of gross income over direct
operating expenses $ 121,539 122,026 121,938
========== ======= =======
</TABLE>

See accompanying notes to Historical Summaries

F-32

<PAGE> 363

Walgreens/Decatur Property
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
Years ended June 30, 1994, 1993 and 1992

1. Business

The Walgreens/Decatur Property (the Property) is a free-standing, single-
tenant retail property located in Decatur, Illinois. The Property consists
of 13,500 square feet of gross leasable area, and is leased to the
Walgreens Company (Walgreens). The Property is owned by Inland Property
Sales, Inc. (IPS).

2. Basis of Presentation

The Historical Summaries have been prepared for the purpose of complying
with Rule 3-14 of the Securities and Exchange Commission Regulations S-X
and for inclusion in the Registration Statement on Form S-11 of Inland
Monthly Income Fund III, Inc. and are not intended to be a complete
presentation of the Walgreens/Decatur Property revenues and expenses. The
Historical Summaries have been prepared on the accrual basis of accounting.

3. Gross Income

Walgreens leases the property under an operating lease agreement whereby
Walgreens is responsible for all operating expenses of the property except
for expenses related to the exterior and structural portions of the
building, roof and entryways. In addition, Walgreens reimburses the
Property for real estate taxes and is responsible for insurance on the
Property. The lease provides for payment of contingent rent based on a
percentage applied to the amount by which Walgreens' sales, as defined,
exceed predetermined levels. No such contingent rent was due for the years
ended June 30, 1994, 1993 and 1992. The lease expires on April 30, 2028,
and Walgreens has the option to exercise up to five, five-year extensions.

Minimum rents to be received from Walgreens under the operating lease in
effect at June 30, 1994 are approximately as follows:

<TABLE>
<CAPTION>
Year Amount
<S> <C>
1995 $ 128,000
1996 128,000
1997 128,000
1998 128,000
1999 128,000
Thereafter 3,691,000
----------

$4,331,000
==========
</TABLE>

F-33

<PAGE> 364

Walgreens/Decatur Property
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
Years ended June 30, 1994, 1993 and 1992

4. Direct Operating Expenses

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

The Property was managed by Mid-America Corp., an affiliate of Inland
Monthly Income Fund III, Inc., under an agreement in principle through
December 31, 1993, for a fee of 2.5% of gross revenues, as defined.
Effective January 1, 1994, Mid-America Corp. assigned the agreement to
Inland Commercial Property Management, Inc., also an affiliate of Inland
Monthly Income Fund III, Inc.

5. Commitments and Contingencies

It is anticipated that Inland Monthly Income Fund III, Inc. will purchase
the Property from IPS at a price expected to be no greater than its
historical cost. In no event will the purchase price exceed the current
appraised value of the Property. There can be no assurance that the
purchase price will not exceed that which would be paid by an unaffiliated
buyer.

F-34

<PAGE> 365

Eagle Crest Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Six Month Period Ended December 31, 1994

Unaudited

<TABLE>
<S> <C>
Gross Income:
Base Rental Income............................... $283,338
Real Estate Tax Recovery......................... 50,870
Other tenant income.............................. 1,785
--------
335,993
--------

Direct Operating Expenses:
Real Estate Taxes................................ 37,343
Management Fees.................................. 15,792
Operating Expenses............................... 26,024
Utilities........................................ 6,717
Insurance Expense................................ 2,109
--------

87,985
--------

Excess of Gross Income over
Direct Operating Expenses........................ $248,008
========
</TABLE>

F-35

<PAGE> 366

Independent Auditor's Report

The Board of Directors
Inland Property Sales, Inc.

We have audited the accompanying Historical Summaries of Gross Income and
Direct Operating Expenses (Historical Summaries) of the Eaglecrest/Naperville
Property for each of the years in the three-year period ended June 30, 1994.
These Historical Summaries are the responsibility of the management of the
Company. Our responsibility is to express an opinion on the Historical
Summaries 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 Historical Summaries are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summaries. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Historical Summaries. We believe that our audits provide a reasonable
basis for our opinion.

The accompanying Historical Summaries were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission and for inclusion in the Registration Statement on Form S-11 of
Inland Monthly Income Fund III, Inc. as described in Note 2. The presentation
is not intended to be a complete presentation of the Eaglecrest/Naperville
Property revenues and expenses.

KPMG Peat Marwick LLP

Chicago, Illinois
July 29, 1994

F-36

<PAGE> 367

Eagle Crest Shopping Center
Historical Summaries of Gross Income and Direct Operating Expenses
Years ended June 30, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross income:
Base rental income.................. $ 442,077 367,367 373,609
Operating expense and real estate
tax recoveries.................... 112,031 106,865 100,683
Other tenant income................. 15,881 1,361 839
---------- ------- -------
569,989 475,593 475,131
---------- ------- -------

Direct operating expenses:
Real estate taxes................... 72,908 71,119 71,640
Management fees..................... 25,226 21,769 21,976
Operating expenses.................. 90,263 79,843 50,532
Utilities........................... 15,586 15,235 13,554
Insurance expense................... 3,220 3,283 6,944
---------- ------- -------

207,203 191,249 164,646
---------- ------- -------

Excess of gross income over direct
operating expenses.................. $ 362,786 284,344 310,485
========== ======= =======
</TABLE>

See accompanying notes to Historical Summaries

F-37

<PAGE> 368

Eagle Crest Shopping Center
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
Years ended June 30, 1994, 1993 and 1992

1. Business

Eagle Crest Shopping Center (Eagle Crest) is a shopping center located in
Naperville, Illinois. It consists of approximately 68,000 square feet of
gross leasable area and was 100% occupied at June 30, 1994. Its major
tenant is Eagle Foods, Inc. (Eagle) which leases 46,096 square feet of the
shopping center. Eagle Crest is owned by Inland Property Sales, Inc.
(IPS).

2. Basis of Presentation

The Historical Summaries have been prepared for the purpose of complying
with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and
for inclusion in the Registration Statement on Form S-11 of Inland Monthly
Income Fund III, Inc. and are not intended to be a complete presentation of
Eagle Crest's revenues and expenses. The Historical Summaries have been
prepared on the accrual basis of accounting.

3. Gross Income

Eagle Crest leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which Eagle Crest is reimbursed for certain
common area, real estate tax, and insurance costs. In addition, certain
leases provides for payment of contingent rentals based on a percentage
applied to the amount by which the tenant's sales, as defined, exceed
predetermined levels. No such contingent rent was due for the years ended
June 30, 1994, 1993 and 1992. Certain leases contain renewal options for
various periods at various rental rates.

Base rentals are reported as income over the lease term as they become
receivable under the provision of the leases. However, when rental vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. Related adjustments increased base rental income by $123,394
and $67,079 for the years ended June 30, 1994 and 1992, respectively, and
decreased base rental income by $5,100 for the year ended June 30, 1993.

Minimum rents to be received from tenants under operating leases in effect
at June 30, 1994 are approximately as follows:

<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1995 $ 582,000
1996 568,000
1997 560,000
1998 476,000
1999 374,000
Thereafter 4,518,000
-----------
$ 7,078,000
===========
</TABLE>

F-38

<PAGE> 369

Eagle Crest Shopping Center
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
Years ended June 30, 1994, 1993 and 1992

4. Direct Operating Expenses

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

Eagle Crest was managed by Mid-America Corp., an affiliate of Inland
Monthly Income Fund III, Inc., through December 31, 1993 for a fee of 4.5%
of gross revenues,, as defined. The management agreement, which expires on
March 31, 1995, is renewable annually. Effective January 1, 1994, Mid-
America Corp. assigned the management contract to Inland Commercial
Property Management, Inc., also an affiliate of Inland Monthly Income Fund
III, Inc.

5. Commitments and Contingencies

It is anticipated that Inland Monthly Income Fund III, Inc. will purchase
Eagle Crest from IPS at a price expected to be no greater than its
historical cost. In no event will the purchase price exceed the current
appraised value of the Property. There can be no assurance that the
purchase price will not exceed that which would be paid by an unaffiliated
buyer.

F-39

<PAGE> 370

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE GENERAL PARTNERS OF
SCHAUMBEACH ASSOCIATES, INC.

We have audited the accompanying Statement of Gross Income and Direct Operating
Expenses of the NANTUCKET SQUARE SHOPPING CENTER for the year ended December
31, 1994. This Statement is the responsibility of the management of the
Company. Our responsibility is to express an opinion on this Statement based
on our audit.

The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission and for
inclusion in the Registration Statement on Form S-11 of Inland Monthly Income
Fund III, Inc. as described in Note 2. The presentation is not intended to be
a complete presentation of the Nantucket Square Shopping Center revenues and
expenses.

In our opinion, the Statement referred to above presents fairly, in all
material respects, the gross income and direct operating expenses of Nantucket
Square Shopping Center as described in Note 2 for the year ended December 31,
1994, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois
September 7, 1995

F-40

<PAGE> 371

NANTUCKET SQUARE SHOPPING CENTER
STATEMENT OF GROSS INCOME AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<S> <C>
Gross Income:
Base Rental Income...................................... $ 480,770
Operating Expense and Real Estate Tax Recoveries........ 193,753
Other Tenant Income..................................... 4,533
---------
Total Gross Income................................... $ 679,056
---------

Direct Operating Expenses:
Real Estate Taxes....................................... 156,122
Management Fees......................................... 35,002
Operating Expenses...................................... 74,954
Utilities............................................... 10,355
Insurance............................................... 14,254
---------

Total Direct Operating Expenses...................... $ 290,687
---------

Excess of Gross Income over Direct Operating Expenses..... $ 388,369
=========
</TABLE>

F-41

<PAGE> 372

Nantucket Square Shopping Center
Notes to the Statement of Gross Income and Direct Operating Expenses
December 31, 1994

1. Business

Nantucket Square Shopping Center (Nantucket Square) is located in
Schaumburg, Illinois. It consists of approximately 57,263 square feet of
gross leasable area and was 82.9 percent occupied at December 31, 1994.
Nantucket Square is owned by Schaumbeach Associates, LTD. Schaumbeach
Associates, LTD. has signed a sale and purchase agreement for the sale of
Nantucket Square to Inland Monthly Income Fund III, Inc.

2. Basis of Presentation

The Statement has been prepared for the purpose of complying with Rule 3-14
of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Monthly Income Fund
III, Inc. and is not intended to be a complete presentation of Nantucket
Square's revenues and expenses. The statement has been prepared on the
accrual basis of accounting.

3. Gross Income

Nantucket Square leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. Certain of
the leases include provisions under which Nantucket Square is reimbursed
for certain common area, real estate and insurance costs. Operating
Expense and Real Estate Tax Recoveries reflected on the Statement of Gross
Income and Direct Operating Expenses includes amounts due for 1994 expenses
for which the tenants have not yet been billed. In addition, certain
leases provide for payment of contingent rentals based on a percentage
applied to the amount by which the tenant's sales, as defined, exceeds
predetermined levels. Contingent rent for the year ended December 31, 1994
was not material to base rental income. Certain leases contain renewal
options for various periods at various rental rates.

Base rentals are reported as income over the lease term as they become
receivable under the provision of the leases. However, rentals from
tenants with rent abatements or escalating rents during the lease term
should be recognized as revenue on a straight-line basis over the
respective lease term. An adjustment to recognize rents on a straight-line
basis increased base rental income by $22,337 for the year ended December
31, 1994.

F-42

<PAGE> 373

Nantucket Square Shopping Center
Notes to the Statement of Gross Income and Direct Operating Expenses
December 31, 1994

3. Gross Income (continued)

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1994, are approximately as follows:

<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1995 $ 495,242
1996 487,846
1997 493,751
1998 405,826
1999 383,787
Thereafter 909,056
-----------
$ 3,175,508
===========
</TABLE>

4. Direct Operating Expenses

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

Nantucket Square has not received its final real estate tax bill for 1994.
Real Estate tax expense is estimated upon bills for 1993. The difference
between this estimate and the final bill is not expected to have a material
impact on the Statement of Gross Income and Direct Operating Expenses.
Subsequent to the sale of Nantucket Square (see Note 1), property value may
be reassessed. Such reassessment may cause future real estate tax expense
to be incomparable to that reflected in 1994.

Nantucket Square is managed by Mid-America Asset Management Company.
Subsequent to the sale of Nantucket Square (see Note 1), the current
management agreement ceases. Any new management agreement may cause future
management fees to be incomparable to that reflected in 1994.

F-43

<PAGE> 374

The following unaudited Statement of Gross Income and Direct Operating Expenses
for Nantucket Square is for the seven months ended July 31, 1995 and is
included as additional information subsequent to the audited financial
statements for the period ended December 31, 1994.

Nantucket Square Shopping Center
Statement of Gross Income and Direct Operating Expenses
For the Seven Month Period Ended July 31, 1995
(unaudited)

<TABLE>
<S> <C>
Gross Income:
Base Rental Income................................ $ 274,572
Operating Expense and
Real Estate Tax Recoveries...................... 121,123
Other Tenant Income............................... 4,878
---------

Total Gross Income.............................. 400,573
---------

Direct Operating Expenses:
Real Estate Taxes................................. 100,061
Management Fees................................... 20,417
Operating Expenses................................ 34,456
Utilities......................................... 4,927
Insurance......................................... 11,910
---------

Total Direct Operating Expenses................. 171,771
---------
Excess of Gross Income over
Direct Operating Expenses......................... $ 228,802
=========
</TABLE>

F-44

<PAGE> 375

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF
NATIONAL SHOPPING PLAZAS, INC.

We have audited the accompanying Statement of Gross Income and Direct Operating
Expenses of the Mundelein Plaza for the year ended December 31, 1995. This
Statement is the responsibility of the management of the Company. Our
responsibility is to express an opinion on this Statement based on our audit.

In our opinion, the Statement referred to above presents fairly, in all
material respects, the gross income and direct operating expenses of Mundelein
Plaza as described in Note 2 for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

BRUCE GORLICK, C.P.A., LTD.
A PROFESSIONAL CORPORATION

BUFFALO GROVE, ILLINOIS
MARCH 14, 1996

F-45

<PAGE> 376

Mundelein Plaza
Statement of Gross Income and Direct Operating Expenses
For the year ended December 31, 1995

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 639,124
Operating expense and real estate
tax recoveries................................ 66,518
Other tenant income............................. 151
----------

Total Gross Income.............................. 705,793
----------

Direct operating expenses:
Real estate taxes............................... 84,768
Management fees................................. 26,300
Operating expenses.............................. 15,277
Utilities....................................... 4,966
Insurance expense............................... 10,171
----------

Total Direct Operating Expenses................. 141,482
----------
Excess of Gross over Direct Operating............. $ 564,311
==========
</TABLE>

F-46

<PAGE> 377

Mundelein Plaza
Notes to the Statement of Income and Direct Operating Expenses
December 31, 1995

1. Business

Mundelein Plaza is located in Mundelein, Illinois. It consists of
approximately 67,896 square feet of gross leasable area and was 100%
occupied at December 31, 1995. Mundelein Plaza is owned by Amalgamated
Bank of Chicago, Trust No. 5457. Amalgamated Bank of Chicago, Trust No.
5457 has signed a sale and purchase agreement for the sale of Mundelein
Plaza to Inland Monthly Income Fund III, Inc.

2. Basis of Presentation

The Statement has been prepared for the purpose of complying with Rule 3-14
of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Monthly Income Fund
III, Inc. and is not intended to be a complete presentation of revenues and
expenses. The Statement has been prepared on the accrual basis of
accounting.

3. Gross Income

National Shopping Plazas, Inc. leases retail space under various lease
agreements with its tenants. All leases are accounted for as operating
leases. Certain of the leases include provisions under which Mundelein
Plaza is reimbursed for certain common area, real estate, and insurance
costs. Operating Expense and Real Estate Tax Recoveries reflected on the
Statement of Gross Income and Direct Operating Expenses includes amounts
due for 1995 expenses for which the tenants have not yet been billed.
Certain leases have rent due for the year ended December 31, 1995. Certain
leases contain renewal options for various periods at various rental rates.

Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. The adjusted increase in base rental income is $1,944 for
the year ended December 31, 1995, which we consider immaterial.

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1995 are approximately as follows:

<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $ 684,649
1997 570,844
1998 552,623
1999 565,086
2000 554,840
Thereafter 937,770
-----------
$ 3,865,812
===========
</TABLE>

F-47
<PAGE> 378

Mundelein Plaza
Notes to the Statement of Gross Income and Direct Operating Expenses
December 31, 1995

4. Direct Operating Expenses

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

Mundelein Plaza has not received its final real estate bill for 1995. The
difference between this estimate and the final bill is not expected to
have a material impact on the Statement of Gross Income and Direct
Operating Expenses.

Mundelein Plaza is managed by National Shopping Plazas, Inc. For the year
ended December 31, 1995, Mundelein Plaza paid approximately $26,000 for
management fees, as per the management agreement.

F-48

<PAGE> 379
[KMPG PEAT MARWICK LLP LOGO]

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Inland Monthly Income Fund III, Inc.:

We have audited the accompanying Historical Summary of Gross Income and
Direct Operating Expenses (Historical Summary) of the Regency Point
Shopping Center for the year ended December 31, 1995. This Historical
Summary is the responsibility of the management of the Company. Our
responsibility is to express an opinion on the Historical Summary based
on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the Historical Summary is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
Historical Summary. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose
of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in the Registration Statement on
Form S-11 of Inland Monthly Income Fund III, Inc., as described in note
2. It is not intended to be a complete presentation of the Regency
Point Shopping Center's revenues and expenses.

In our opinion, the Historical Summary referred to above presents
fairly, in all material respects, the gross income and direct operating
expenses described in note 2 for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
March 8, 1996

F-49

<PAGE> 380

REGENCY POINT SHOPPING CENTER

Historical Summary of Gross Income and Direct Operating Expenses

Year ended December 31, 1995

<TABLE>
<S> <C>
- -----------------------------------------------------------------------
Gross income:
Base rental income $541,085
Operating expense and real estate tax recoveries 63,294
- -----------------------------------------------------------------------

Total gross income $604,379
- -----------------------------------------------------------------------
Direct operating expenses:
Real estate taxes 16,867
Management fees 23,660
Operating expenses 17,645
Utilities 4,013
Insurance 9,430
- -----------------------------------------------------------------------
Total direct operating expenses $71,615
- -----------------------------------------------------------------------
Excess of gross income over direct operating expenses $532,764
- -----------------------------------------------------------------------
</TABLE>

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

F-50
<PAGE> 381

REGENCY POINT SHOPPING CENTER

Historical Summary of Gross Income and Direct Operating Expenses

Year ended December 31, 1995

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

(1) BUSINESS

Regency Point Shopping Center (Regency Point) is located in Lockport,
Illinois. It consists of approximately 53,480 square feet of gross
leasable area and was 93 percent occupied at December 31, 1995. Regency
Point is owned by Metropolitan Real Estate Co. (Metropolitan).
Metropolitan has signed a sale and purchase agreement for the sale of
Regency Point to Inland Monthly Income Fund III, Inc., an unaffiliated
third party.

(2) BASIS OF PRESENTATION

The Historical Summary has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Registration Statement on Form S-11 of Inland Monthly
Income Fund III, Inc. and is not intended to be a complete presentation of
Regency Point's revenues and expenses. The Historical Summary has been
prepared on the accrual basis of accounting.

(3) GROSS INCOME

Regency Point leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which Regency Point is reimbursed for
certain common area, real estate, and insurance costs. Operating expense
and real estate tax recoveries reflected on the Historical Summary include
amounts due for 1995 expenses for which the tenants have not yet been
billed. In addition, certain leases provide for payment of contingent
rentals based on a percentage applied to the amount by which the tenant's
sales, as defined, exceed predetermined levels. No such contingent rent
was due for the year ended December 31, 1995. Certain leases contain
renewal options for various periods at various rental rates.

F-51
<PAGE> 382

REGENCY POINT SHOPPING CENTER

Historical Summary of Gross Income and Direct Operating Expenses

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

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1995, are approximately as follows:

<TABLE>
<CAPTION>
Year Amount
- ---------------------------------------------------
<S> <C>
1996 $584,000
1997 568,000
1998 552,000
1999 399,000
2000 352,000
Thereafter 3,203,000
- ---------------------------------------------------
$5,658,000
- ---------------------------------------------------
</TABLE>

(4) DIRECT OPERATING EXPENSES

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

Regency Point has not received its final real estate tax bill for 1995.
Real estate tax expense is estimated based upon bills for 1994. The
difference between this estimate and the final bill is not expected to have
a material impact on the Historical Summary. Regency Point is located in a
tax enterprise zone and, as such, the assessed value of the property is
anticipated to remain constant through 2003.

Regency Point is managed by Philip's Management, Inc., for a fee of 4.5% of
gross revenues, as defined. Subsequent to the sale of Regency Point (note
1), the current management agreement ceases. Any new management agreement
may cause future management fees to differ from the amounts reflected in
1995.

F-52
<PAGE> 383

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF
NATIONAL SHOPPING PLAZAS, INC.

We have audited the accompanying Statement of Gross Income and Direct Operating
Expenses of the Prospect Heights Plaza for the year ended December 31, 1995.
This Statement is the responsibility of the management of the Company. Our
responsibility is to express an opinion on this Statement based on our audit.

In our opinion, the Statement referred to above presents fairly, in all
material respects, the gross income and direct operating expenses of Prospect
Heights Plaza as described in Note 2 for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

BRUCE GORLICK, C.P.A., LTD.
A PROFESSIONAL CORPORATION

BUFFALO GROVE, ILLINOIS
MAY 24, 1996

F-53

<PAGE> 384

Prospect Heights Plaza
Statement of Gross Income and Direct Operating Expenses
For the year ended December 31, 1995

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 164,152
Operating expense and real estate
tax recoveries................................ 116,075
Other tenant income............................. 100
----------
Total Gross Income.............................. 280,327
----------
Direct operating expenses:
Real estate taxes............................... 127,033
Management fees................................. 16,600
Operating expenses.............................. 29,678
Utilities....................................... 3,339
Insurance expense............................... 4,169
----------

Total Direct Operating Expenses................. 180,819
----------

Excess of Gross over Direct Operating............. $ 99,508
==========
</TABLE>

F-54

<PAGE> 385

Prospect Heights Plaza
Notes to the Statement of Income and Direct Operating Expenses
December 31, 1995

1. Business

Prospect Heights Plaza is located in Prospect Heights, Illinois. It
consists of approximately 27,830 square feet of gross leasable area and was
78% occupied at December 31, 1995. Prospect Heights Plaza is owned by
Amalgamated Bank of Chicago, Trust No. 5073. Amalgamated Bank of Chicago,
Trust No. 5073 has signed a sale and purchase agreement for the sale of
Prospect Heights Plaza to Inland Monthly Income Fund III, Inc.

2. Basis of Presentation

The Statement has been prepared for the purpose of complying with Rule 3-14
of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Monthly Income Fund
III, Inc. and is not intended to be a complete presentation of revenues and
expenses. The Statement has been prepared on the accrual basis of
accounting.

3. Gross Income

National Shopping Plazas, Inc. leases retail space under various lease
agreements with its tenants. All leases are accounted for as operating
leases. Certain of the leases include provisions under which Prospect
Heights Plaza is reimbursed for certain common area, real estate, and
insurance costs. Operating Expense and Real Estate Tax Recoveries
reflected on the Statement of Gross Income and Direct Operating Expenses
includes amounts due for 1995 expenses for which the tenants have not yet
been billed. Certain leases have rent due for the year ended December 31,
1995. Certain leases contain renewal options for various periods at
various rental rates.

Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. The adjusted increase in base rental income is $11 for the
year ended December 31, 1995, which we consider immaterial.

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1995 are approximately as follows:

<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $178,710
1997 179,910
1998 116,630
1999 94,450
2000 94,450
Thereafter 332,062
--------
$996,212
========
</TABLE>

F-55

<PAGE> 386

Prospect Heights Plaza
Notes to the Statement of Gross Income and Direct Operating Expenses
December 31, 1995

4. Direct Operating Expenses

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

Prospect Heights Plaza has not received its final real estate bill for
1995. The difference between this estimate and the final bill is not
expected to have a material impact on the Statement of Gross Income and
Direct Operating Expenses.

Prospect Heights Plaza is managed by National Shopping Plazas, Inc. For
the year ended December 31, 1995, Prospect Heights Plaza paid approximately
$17,000 for management fees, as per the management agreement.

F-56

<PAGE> 387

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF
NATIONAL SHOPPING PLAZAS, INC.

We have audited the accompanying Statement of Gross Income and Direct Operating
Expenses of the Montgomery-Sears Shopping Center ("Montgomery-Sears") for the
year ended December 31, 1995. This Statement is the responsibility of the
management of the Company. Our responsibility is to express an opinion on this
Statement based on our audit.

In our opinion, the Statement referred to above presents fairly, in all
material respects, the gross income and direct operating expenses of
Montgomery-Sears as described in Note 2 for the year ended December 31, 1995,
in conformity with generally accepted accounting principles.

BRUCE GORLICK, C.P.A., LTD.
A PROFESSIONAL CORPORATION

BUFFALO GROVE, ILLINOIS
MAY 29, 1996

F-57

<PAGE> 388

Montgomery-Sears Shopping Center
Statement of Gross Income and Direct Operating Expenses
For the year ended December 31, 1995

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 327,610
Operating expense and real estate
tax recoveries................................ 75,642
----------
Other tenant income............................. 540
----------

Total Gross Income.............................. 403,792
----------

Direct operating expenses:
Real estate taxes............................... 60,996
Management fees................................. 14,800
Operating expenses.............................. 12,596
Utilities....................................... 5,311
Insurance expense............................... 8,364
----------

Total Direct Operating Expenses................. 102,067
----------

Excess of Gross over Direct Operating............. $ 301,725
==========
</TABLE>

F-58

<PAGE> 389
]

Montgomery-Sears Shopping Center
Notes to the Statement of Income and Direct Operating Expenses
December 31, 1995

1. Business

Montgomery-Sears is located in Montgomery, Illinois. It consists of
approximately 34,600 square feet of gross leasable area and was 85%
occupied at December 31, 1995. Montgomery-Sears is owned by Amalgamated
Bank of Chicago, Trust No. 5435. Amalgamated Bank of Chicago, Trust No.
5435 has signed a sale and purchase agreement for the sale of Montgomery-
Sears to Inland Monthly Income Fund III, Inc.

2. Basis of Presentation

The Statement has been prepared for the purpose of complying with Rule 3-14
of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Monthly Income Fund
III, Inc. and is not intended to be a complete presentation of revenues and
expenses. The Statement has been prepared on the accrual basis of
accounting.

3. Gross Income

National Shopping Plazas, Inc. leases retail space under various lease
agreements with its tenants. All leases are accounted for as operating
leases. Certain of the leases include provisions under which Montgomery-
Sears is reimbursed for certain common area, real estate, and insurance
costs. Operating Expense and Real Estate Tax Recoveries reflected on the
Statement of Gross Income and Direct Operating Expenses includes amounts
due for 1995 expenses for which the tenants have not yet been billed.
Certain leases contain renewal options for various periods at various
rental rates.

Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. The adjusted increase in base rental income is $56 for the
year ended December 31, 1995, which we consider immaterial.

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1995 are approximately as follows:

<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $ 335,180
1997 355,440
1998 321,560
1999 258,950
2000 205,800
Thereafter -
-----------
$ 1,476,930
===========
</TABLE>

F-59

<PAGE> 390

Montgomery-Sears Shopping Center
Notes to the Statement of Gross Income and Direct Operating Expenses
December 31, 1995

4. Direct Operating Expenses

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

Montgomery-Sears has not received its final real estate bill for 1995. The
difference between this estimate and the final bill is not expected to
have a material impact on the Statement of Gross Income and Direct
Operating Expenses.

Montgomery-Sears is managed by National Shopping Plazas, Inc. For the year
ended December 31, 1995, Montgomery-Sears paid approximately $15,000 for
management fees, as per the management agreement.

F-60

<PAGE> 391

Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
December 31, 1995
(unaudited)

The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect (1) the acquisitions of Mundelein Plaza, the Regency Point Shopping
Center, Prospect Heights Plaza, Montgomery-Sears Shopping Center and the Zany
Brainy store and (2) the completion of the Company's Offering of 6,000,000
Shares that commenced on October 14, 1994 and the completion of the Company's
Offering of an additional 11,000,000 Shares, as though these transactions
occurred on December 31,1995. This unaudited Pro Forma Balance Sheet should be
read in conjunction with the December 31, 1995 Financial Statements and the
notes thereto as filed on Form 10-K.

This unaudited Pro Forma Balance Sheet is not necessarily indicative of what
the actual financial position would have been at December 31, 1995, nor does it
purport to represent the future financial position of the Company. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.

F-61

<PAGE> 392

Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
December 31, 1995
(unaudited)

<TABLE>
<CAPTION>
December 31,
December 31, Pro Forma Pro Forma 1995
1995 Adjustments Adjustments Pro Forma
Historical(A) (B) (C) Balance Sheet
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Assets
Net investment in
properties.................. $ 17,342,538 19,397,230 - 36,739,768
Cash and cash equivalents..... 738,931 - 117,121,706 117,860,637
Restricted cash............... 150,000 - - 150,000
Accounts and rents
receivable.................. 333,823 167,855 - 501,678
Other assets.................. 185,585 - - 185,585
------------- ---------- ----------- -----------
Total assets.................. $ 18,750,877 19,565,085 117,121,706 155,437,668
============ ========== =========== ===========

Liabilities and Stockholders' Equity

Accounts payable and accrued
expenses.................... $ 288,037 7,500 - 295,537
Accrued real estate taxes..... 374,180 202,049 - 576,229
Distributions payable (D)..... 129,532 - - 129,532
Security deposits............. 54,483 52,221 - 106,704
Mortgage payable.............. 750,727 4,473,200 - 5,223,927
Notes payable to Affiliate.... 360,000 - - 360,000
Other liabilities............. 178,852 - - 178,852
------------- ---------- ----------- -----------

Total liabilities............. 2,135,811 4,734,970 - 6,870,781
------------- ---------- ----------- -----------

Common Stock.................. 19,996 17,245 132,759 170,000
Additional paid in capital
(net of Offering costs)..... 16,835,183 14,812,870 116,988,947 148,637,000
Accumulated distributions in
excess of net income........ (240,113) - - (240,113)
------------- ---------- ----------- -----------

Total Stockholders' equity.... 16,615,066 14,830,115 117,121,706 148,566,887
------------- ---------- ----------- -----------

Total liabilities and
Stockholders' equity........ $ 18,750,877 19,565,085 117,121,706 155,437,668
============ ========== =========== ===========
</TABLE>

See accompanying notes to pro forma balance sheet.

F-62

<PAGE> 393

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
December 31, 1995
(unaudited)

(A) The December 31, 1995 Historical column represents the historical balance
sheet as presented in the December 31, 1995 10-K as filed with the SEC and
includes the following properties acquired by the Company as of December
31, 1995.

Walgreens, Decatur, Illinois

On January 31, 1995, the Company acquired this property from Inland
Property Sales, Inc. ("IPS"), an Affiliate of the Advisor, for the total
purchase price of $1,209,053, including acquisition costs of $482, and the
assumption of the first mortgage loan with a balance of $750,727 at
December 31, 1995, which is secured by the property. This mortgage has an
interest rate of 7.655% and amortizes over a 25-year period. The Company
is responsible for monthly payments of principal and interest of $5,689.

Eagle Crest Shopping Center, Naperville, Illinois

On March 1, 1995, the Company acquired this property from IPS for the
purchase price of $4,816,970, including acquisition costs of $11,059, and
the assumption of the first mortgage loan of approximately $3,534,000,
which was secured by the property. The balance of the purchase price was
funded through a loan from IPS, totaling $1,212,427, with interest accruing
at 10.5%. On April 20, 1995, the Company paid off the first mortgage
secured by this property. The deferred portion of the purchase price,
totaling $1,212,427, was paid to IPS in May 1995 from Gross Offering
Proceeds. In addition, accrued interest of $22,009 was paid from Company
operations.

Montgomery-Goodyear Shopping Center, Montgomery, Illinois

On September 14, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $1,145,992, including
closing costs of $5,992, a portion of which was evidenced by a promissory
note payable to Inland Mortgage Investment Corporation ("IMIC"), an
Affiliate of the Advisor, in the gross amount of $600,000. The remainder
of the purchase price net of prorations, of approximately $535,000 was
funded with proceeds of the Offering. The promissory note was paid in full
in October 1995, with interest at a rate of 10.9% per annum. The total
amount paid was $604,260, of which $600,000 was principal paid from Gross
Offering Proceeds and $4,260 was interest paid from Company operations.

F-63

<PAGE> 394

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1995
(unaudited)

Hartford Plaza, Naperville, Illinois

On September 14, 1995, the Company acquired this newly constructed property
from an unaffiliated third party for a purchase price of $4,414,015
including closing costs of $14,015, and deposited $150,000 in an escrow
account for leasehold improvements to the Blockbuster, Inc. space. A
portion of the purchase price was evidenced by a promissory note payable to
IMIC, in the gross amount of $600,000. The remainder of the purchase price
was funded with proceeds of the Offering. The promissory note was paid in
full in October 1995 with interest at a rate of 10.9% per annum. The total
amount paid was $605,102, of which $600,000 was principal paid from Gross
Offering Proceeds and $5,102 was interest paid from Company operations.

Nantucket Square Shopping Center, Schaumburg, Illinois

On September 20, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $4,257,918, including
closing costs of $4,913, a portion of which was evidenced by a promissory
note payable to IMIC, in the gross amount of $3,550,000. The remainder of
the purchase price was funded with proceeds of the Offering. In addition,
as part of the purchase, the Company agreed to pay $51,135 for tenant
improvements for two tenants expanding their space, which was added to the
cost of the property. The promissory note was paid in full in December
1995 with interest at a rate of 10.5% per annum. The principal amount paid
was $3,550,000 from Gross Offering Proceeds and interest of $62,011 was
paid from Company operations.

Antioch Plaza, Antioch, Illinois

On December 28, 1995, the Company acquired Antioch Plaza from an
unaffiliated third party for a purchase price of $1,750,365, including
closing costs of $365, a portion of which was evidenced by a promissory
note payable to Inland Real Estate Investment Corporation, an affiliate of
the Advisor ("IREIC"), in the gross amount of $660,000. As of December 31,
1995, the unpaid balance of this note was $360,000. The note which bore
interest at a rate of 9.5% per annum was repaid in full on January 9, 1996
and the total amount paid was $661,163, of which $660,000 was principal
paid from Gross Offering Proceeds and $1,163 was interest paid from Company
operations. The remainder of the purchase price, net of prorations of
approximately $1,100,000 was funded with proceeds of the Offering.

F-64

<PAGE> 395

Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
December 31, 1995
(unaudited)

(B) The following pro forma adjustment relates to the acquisition or probable
acquisition of the subject properties as though they were acquired on
December 31, 1995. The terms are described in the notes that follow.

<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------------------------------- Total
Mundelein Regency Prospect Montgomery- Zany Pro Forma
Plaza Point Heights Sears Brainy Adjustment
----------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets

Net investment in
properties.................. $ 5,658,230 5,700,000 2,165,000 3,419,000 2,455,000 19,397,230
Cash and cash equivalents..... - - - - - -
Restricted cash............... - - - - - -
Accounts and rent
receivable.................. 84,375 16,867 38,771 27,842 - 167,855
Other assets.................. - - - - - -
----------- --------- --------- --------- --------- ----------
Total assets.................. $ 5,742,605 5,716,867 2,203,771 3,446,842 2,455,000 19,565,085
=========== ========= ========= ========= ========= ==========

<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C> <C> <C> <C> <C>

Accounts payable and accrued
expenses.................... $ 7,500 - - - - 7,500
Accrued real estate taxes..... 89,010 16,867 63,517 32,655 - 202,049
Distributions payable (D)..... - - - - - -
Security deposits............. 15,000 28,621 8,600 - - 52,221
Mortgage payable.............. - 4,473,200 - - - 4,473,200
Notes payable to Affiliate.... - - - - - -
Other liabilities............. - - - - - -
----------- --------- --------- --------- --------- ----------
Total liabilities............. 111,510 4,518,688 72,117 32,655 - 4,734,970
----------- --------- --------- --------- --------- ----------

Common Stock.................. 6,548 1,393 2,479 3,970 2,855 17,245
Additional paid in capital
(net of Offering costs)..... 5,624,547 1,196,786 2,129,175 3,410,217 2,452,145 14,812,870
Accumulated distributions in
excess of net income........ - - - - - -
----------- --------- --------- --------- --------- ----------
Total Stockholders' equity.... 5,631,095 1,198,179 2,131,654 3,414,187 2,455,000 14,830,115
----------- --------- --------- --------- --------- ----------
Total liabilities and
Stockholders' equity........ $ 5,742,605 5,716,867 2,203,771 3,446,842 2,455,000 19,565,085
=========== ========= ========= ========= ========= ==========
</TABLE>

F-65

<PAGE> 396

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1995
(unaudited)

Acquisition of Mundelein Plaza, Mundelein, Illinois

On March 29, 1996, the Company acquired the Mundelein Plaza property
located in Mundelein, Illinois ("Mundelein Plaza") from an unaffiliated
third party for a purchase price of $5,658,230, including closing costs of
$8,230, on an all cash basis, funded from offering proceeds.

Acquisition of Regency Point Shopping Center, Lockport, Illinois

On April 5, 1996, the Company completed the acquisition of the Regency
Point Shopping Center located in Lockport, Illinois ("Regency Point"), from
an unaffiliated third party for a purchase price of $5,700,000. As part of
the acquisition, the Company will assume the existing first mortgage loan
of $4,473,200 along with a related interest rate swap agreement, with the
balance funded with Offering proceeds.

The first mortgage loan has a floating interest rate of 180 basis points
over the 30-day LIBOR rate, which rate is adjusted monthly. The interest
rate swap agreement, in conjunction with the first mortgage, provides for
Bank One, Chicago, to receive from or pay to the Company the difference
between 6.11% and the 30-day LIBOR rate, so that the first mortgage loan
has an effective rate of 7.91% per annum. The first mortgage loan matures
in August 2000. The related interest rate swap agreement was terminated on
April 18, 1996 resulting in $48,419 proceeds to the Company. No pro forma
adjustment has been made as a result of this termination.

Acquisition of Prospect Heights Plaza, Prospect Heights, Illinois

On June 17, 1996, the Company acquired Prospect Heights Plaza located in
Prospect Heights, Illinois ("Prospect Heights") from an unaffiliated third
party for the purchase price of $2,165,000 on an all cash basis, funded from
Offering proceeds.

Acquisition of Montgomery-Sears, Montgomery, Illinois

On June 17, 1996, the Company, through the Advisor, acquired
Montgomery-Sears Shopping Center located in Montgomery, Illinois
("Montgomery-Sears") from an unaffiliated third party for the purchase price
of $3,419,000 on an all cash basis, funded from Offering proceeds.

Acquisition of Zany Brainy, Wheaton, Illinois

On July 1, 1996, the Company acquired this property from an unaffiliated
third party for the purchase price of $2,455,000 on an all cash basis,
funded from Offering proceeds.

F-66

<PAGE> 397

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1995
(unaudited)

Additional Offering Proceeds

Additional Offering Proceeds of $17,244,320, net of additional Offering
costs of $2,414,205, are reflected as received as of December 31, 1995,
prior to the purchase of the properties. Offering costs consist
principally of registration costs, printing and selling costs, including
commissions.

(C) This pro forma adjustment reflects the completion of the Company's Offering
of 6,000,000 Shares that commenced on October 14, 1994, net of additional
Offering costs of $986,120, as though this occurred on December 31, 1995.
In addition, this pro forma adjustment reflects the completion of the
Company's Offering of an additional 11,000,000 Shares, net of Offering
costs of $12,771,500, as though this also occurred on December 31, 1995.

(D) No pro forma assumptions have been made for the additional payment of
distributions resulting from the additional proceeds raised.

F-67

<PAGE> 398

Inland Monthly Income Fund III, Inc.
Pro Forma Statement of Operations
For the year ended December 31, 1995
(unaudited)

The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of the Walgreens/Decatur property, Eagle
Crest Shopping Center, Montgomery-Goodyear property, Nantucket Square Shopping
Center, Mundelein Plaza, Regency Point Shopping Center, Prospect Heights Plaza
and Montgomery-Sears Shopping Center as of January 1, 1995. The remaining
three properties acquired or proposed to be acquired by the Company were
constructed in 1995 and acquired shortly after construction was completed.
Therefore, the unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisition of Hartford/Naperville Plaza, Antioch Plaza
and the Zany Brainy store, as of August 17, 1995, September 1, 1995 and
November 22, 1995, respectively, the date occupancy commenced at these
properties. This unaudited Pro Forma Statement of Operations should be read in
conjunction with the December 31, 1995 Financial Statements and the notes
thereto as filed on Form 10-K.

This unaudited Pro Forma Statement of Operations is not necessarily indicative
of what the actual results of operations would have been for the year ended
December 31, 1995, nor does it purport to represent the future results of
operations of the Company. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.

F-68

<PAGE> 399

Inland Monthly Income Fund III, Inc.
Pro Forma Statement of Operations
for the year ended December 31, 1995
(unaudited)

<TABLE>
<CAPTION>
Pro Forma Adjustments

1995 1995 1996
Historical Acquisitions Acquisitions 1995
(A) (B) (C) Pro Forma
---------- ------- --------- ---------
<S> <C> <C> <C> <C>
Rental
income.......... $ 869,485 585,614 1,700,614 3,155,713
Additional
Rental income... 228,024 162,536 327,350 717,910
Interest
income (D)...... 82,913 - - 82,913
---------- ------- --------- ---------
Total income.... 1,180,422 748,150 2,027,964 3,956,536
---------- ------- --------- ---------

Professional
services and
general and
administrative 23,132 - - 23,132
Property operating
expenses........ 326,721 275,218 501,485 1,103,424
Interest expense.. 164,161 429,997 351,900 946,058
Depreciation (E).. 169,894 111,767 425,255 706,916
---------- ------- --------- ---------
Total expenses.... 683,908 816,982 1,278,640 2,779,530
---------- ------- --------- ---------

Net income(loss) $ 496,514 (68,832) 749,324 1,177,006
========== ======= ========= =========

Weighted average
common stock shares
outstanding (F). 943,156 15,755,521
========== ==========

Net income per weighted
average common stock
outstanding (F). $ .53 .07
========== ==========
</TABLE>

See accompanying notes to pro forma statement of operations.

F-69

<PAGE> 400

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1995
(unaudited)

(A) The December 31, 1995 Historical column represents the historical statement
of operations of the Company for the year ended December 31, 1995, as filed
with the SEC on Form 10-K.

(B) Total pro forma adjustments for 1995 acquisitions as though they were
acquired the earlier of January 1, 1995 or date that operations commenced.

<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------------------------------------------------
Hartford Total
Montgomery- Naperville Nantucket Antioch 1995
Walgreens Eagle Crest Goodyear Plaza Square Plaza Pro Forma
--------- ----------- ---------- ---------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental
income.......... 10,651 95,232 101,359 15,077 340,545 22,750 585,614
Additional
Rental income... - 2,218 19,203 662 140,453 - 162,536
Interest
income (D)...... - - - - - - -
------ ------- ------- ------ ------- ------ -------
Total income.... 10,651 97,450 120,562 15,739 480,998 22,750 748,150
------ ------- ------- ------ ------- ------ -------
Professional
services and
general and
administrative - - - - - - -
Property operating
expenses........ 533 17,376 47,758 3,436 205,903 212 275,218
Interest expense.. 4,840 77,170 46,325 13,625 267,137 20,900 429,997
Depreciation (E).. 3,141 16,324 20,682 8,867 57,357 5,396 111,767
------ ------- ------- ------ ------- ------ -------
Total expenses.... 8,514 110,870 114,765 25,928 530,397 26,508 816,982
------ ------- ------- ------ ------- ------ -------

Net income(loss) 2,137 (13,420) 5,797 (10,189) (49,399) (3,758) (68,832)
====== ======= ======= ====== ======= ====== =======
</TABLE>

F-70

<PAGE> 401

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)

Acquisition of Walgreens/Decatur, Decatur, Illinois

In conjunction with the acquisition, the Company assumed a portion of the
first mortgage loan with a balance of $775,000. This mortgage has an
interest rate of 7.655%, amortizes over a 25-year period and matures May
31, 2004. The Company is responsible for monthly payments of principal
and interest of $5,689. The pro forma adjustment for interest expense for
the period prior to acquisition was estimated using the described loan
terms.

Acquisition of Eagle Crest Shopping Center, Naperville, Illinois

As part of the acquisition, the Company assumed a portion of the first
mortgage loan with a balance of $3,534,000, as well as entering into a
loan agreement with Inland Property Sales, Inc. ("IPS"), an Affiliate of
the Advisor, for the balance of the purchase price for $1,212,427. The
first mortgage bears interest at 9.5% per annum and the loan to IPS bears
interest at 10.5%. The pro forma adjustment for interest expense for the
period prior to acquisition was estimated using the described loan terms.

Acquisition of Montgomery-Goodyear, Montgomery, Illinois

As part of the acquisition, the Company entered into a loan agreement with
Inland Mortgage Investment Corporation ("IMIC"), an affiliate of the
Advisor, for $600,000 which bears interest of 10.9% per annum. The pro
forma adjustment for interest expense for the period prior to acquisition
was estimated using the described loan terms.

Acquisition of Hartford/Naperville Plaza, Naperville, Illinois

In conjunction with the acquisition, the Company entered into a loan
agreement with IMIC for $600,000 which bears interest of 10.9% per annum.
The pro forma adjustment for interest expense was estimated using the
described loan terms.

Acquisition of Nantucket Square Shopping Center, Schaumburg, Illinois

As part of the acquisition, the Company entered into a loan agreement with
IMIC for $3,550,000 which bears interest of 10.5% per annum. The pro
forma adjustment for interest expense for the period prior to acquisition
was estimated using the described loan terms.

F-71

<PAGE> 402

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)

Acquisition of Antioch Plaza, Antioch, Illinois

This pro forma adjustment reflects the purchase of the Antioch Plaza
property as if the Company had purchased the property as of September 1,
1995, the date the first tenant occupied this newly constructed property.
The pro forma adjustment for operations for the period September 1, 1995
to December 28, 1995 (date of acquisition) was estimated using applicable
lease information. Blockbuster Video was the only tenant occupying the
property during that period. No pro forma adjustment was made for real
estate tax expense and the related recovery income since the property was
vacant land for most of 1995 and the amount would be difficult to estimate
and have an immaterial effect.

As part of the acquisition, the Company entered into a loan agreement with
Inland Real Estate Investment Corporation, an affiliate of the Advisor,
for $660,000 which bears interest of 9.5% per annum. The pro forma
adjustment for interest expense was estimated using the described loan
terms.

F-72

<PAGE> 403

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
for the year ended December 31, 1995
(unaudited)

(C) Total pro forma adjustments for 1996 Acquisitions as though they were
acquired the earlier of January 1, 1995 or date that operations commenced.

<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------------------------
Total
Mundelein Regency Prospect Montgomery- Zany 1995
Plaza Point Heights Sears Brainy Pro Forma
--------- ------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Rental
income.......... 639,124 541,085 164,152 327,610 28,643 1,700,614
Additional
Rental income... 66,669 63,294 116,175 76,182 5,030 327,350
Interest
income (D)...... - - - - - -
------- ------- ------- ------- ------ ---------
Total income.... 705,793 604,379 280,327 403,792 33,673 2,027,964
------- ------- ------- ------- ------ ---------
Professional
services and
general and
administrative - - - - - -
Property operating
expenses........ 141,482 71,615 180,819 102,067 5,502 501,485
Interest expense.. - 351,900 - - - 351,900
Depreciation (E).. 128,233 162,500 46,900 83,200 4,422 425,255
------- ------- ------- ------- ------ ---------
Total expenses.... 269,715 586,015 227,719 185,267 9,924 1,278,640
------- ------- ------- ------- ------ ---------
Net income...... 436,078 18,364 52,608 218,525 23,749 749,324
======= ======= ======= ======= ====== =========
</TABLE>

F-73

<PAGE> 404

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)

Acquisition of Mundelein Plaza, Mundelein, Illinois

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:

<TABLE>
<CAPTION>
Mundelein Plaza
----------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- -------
<S> <C> <C> <C>
Rental income....... $ 639,124 - 639,124
Additional rental
income............ 66,669 - 66,669
Interest income..... - - -
---------- ------- -------
Total income........ 705,793 - 705,793
---------- ------- -------

Professional services
and general and
administrative.... - - -
Property operating
expenses.......... 141,482 - 141,482
Interest expense.... - - -
Depreciation (E).... - 128,233 128,233
---------- ------- -------

Total expenses...... 141,482 128,233 269,715
---------- ------- -------

Net income.......... $ 564,311 (128,233) 436,078
========== ======= =======
</TABLE>

F-74

<PAGE> 405

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)

Acquisition of Regency Point, Lockport, Illinois

As part of the acquisition, the Company will assume the existing first
mortgage loan of $4,473,200, along with a related interest rate swap
agreement.

The first mortgage loan has a floating interest rate of 180 basis points
over the 30-day LIBOR rate, which rate is adjusted monthly. The interest
rate swap agreement, in conjunction with the first mortgage, provides for
Bank One, Chicago, to receive from or pay to the Company the difference
between 6.11% and the 30-day LIBOR rate, so that the first mortgage loan
has an effective rate of 7.91% per annum. The pro forma adjustment for
interest expense for 1995 was estimated using the described loan terms.

The related interest rate swap agreement was terminated on April 18, 1996
resulting in $48,419 proceeds to the Company. The pro forma adjustment
does not give effect to the termination of this agreement.

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:

<TABLE>
<CAPTION>
Regency Point
----------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ------- -------
<S> <C> <C> <C>
Rental income....... $ 541,085 - 541,085
Additional rental
income............ 63,294 - 63,294
Interest income..... - - -
---------- ------- -------

Total income........ 604,379 - 604,379
---------- ------- -------
Professional services
and general and
administrative.... - - -
Property operating
expenses.......... 71,615 - 71,615
Interest expense.... - 351,900 351,900
Depreciation (E).... - 162,500 162,500
---------- ------- -------

Total expenses...... 71,615 514,400 586,015
---------- ------- -------

Net income.......... $ 532,764 (514,400) 18,364
========== ======= =======
</TABLE>

F-75

<PAGE> 406

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)

Acquisition of Prospect Heights Plaza, Prospect Heights, Illinois

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:

<TABLE>
<CAPTION>
Prospect Heights
--------------------------------
*As Pro Forma
Reported Adjustments Total
-------- ----------- -------
<S> <C> <C> <C>
Rental income....... $ 164,152 - 164,152
Additional rental
income............ 116,175 - 116,175
Interest income..... - - -
---------- ------ -------
Total income........ 280,327 - 280,327
---------- ------ -------

Professional services
and general and
administrative.... - - -
Property operating
expenses.......... 180,819 - 180,819
Interest expense.... - - -
Depreciation (E).... - 46,900 46,900
---------- ------ -------
Total expenses...... 180,819 46,900 227,719
---------- ------ -------

Net income.......... $ 99,508 (46,900) 52,608
========== ====== ========
</TABLE>

F-76

<PAGE> 407

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)

Acquisition of Montgomery-Sears, Montgomery, Illinois

Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:

<TABLE>
<CAPTION>
Montgomery-Sears
----------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- -------
<S> <C> <C> <C>
Rental income....... $ 327,610 - 327,610
Additional rental
income............ 76,182 - 76,182
Interest income..... - - -
---------- ------ -------
Total income........ 403,792 - 403,792
---------- ------ -------

Professional services
and general and
administrative.... - - -
Property operating
expenses.......... 102,067 - 102,067
Interest expense.... - - -
Depreciation (E).... - 83,200 83,200
---------- ------ -------

Total expenses...... 102,067 83,200 185,267
---------- ------ -------

Net income.......... $ 301,725 (83,200) 218,525
========== ====== =======
</TABLE>

Acquisition of Zany Brainy, Wheaton, Illinois

This pro forma adjustment reflects the purchase of Zany Brainy as if the
Company had purchased the property as of January 1, 1995. Operations for
this property for the period from November 22, 1995 (date of occupancy) to
December 31, 1995 were estimated using the lease and operating expense
information supplied by the seller. This property was purchased on an
all cash basis.

(D) No pro forma adjustment has been made relating to interest income which
would have been earned on the additional Offering Proceeds raised.

(E) Depreciation expense is computed using the straight-line method, based
upon an estimated useful life of thirty years.

(F) The pro forma weighted average common stock shares for the year ended
December 31, 1995 was calculated by adding to the historical weighted
average number of shares at December 31, 1995, the number of shares to
complete the Company's Offerings of 17,000,000 Shares.

F-77

<PAGE> 408

Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
March 31, 1996
(unaudited)

The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect (1) the acquisition of the Regency Point Shopping Center, Prospect
Heights Plaza, Montgomery-Sears Shopping Center and the Zany Brainy store and
(2) the completion of the Company's Offering of 6,000,000 shares that commenced
on October 14, 1994 and the completion of the Company's Offering of an
additional 11,000,000 Shares, as though these transactions occurred on March
31, 1996. This unaudited Pro Forma Balance Sheet should be read in conjunction
with the March 31, 1996 Financial Statements and the notes thereto as filed on
Form 10-Q.

This unaudited Pro Forma Balance Sheet is not necessarily indicative of what
the actual financial position would have been at March 31, 1996, nor does it
purport to represent the future financial position of the Company. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.

F-78

<PAGE> 409

Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
March 31, 1996
(unaudited)

<TABLE>
<CAPTION>
March 31,
March 31, Pro Forma Pro Forma 1996
1996 Adjustments Adjustments Pro Forma
Historical(A) (B) (C) Balance Sheet
------------ ---------- ----------- --------------
<S> <C> <C> <C> <C>
Assets

Net investment in
properties.................. $ 22,950,129 13,739,000 - 36,689,129
Cash and cash equivalents..... 2,937,473 - 114,647,690 117,585,163
Accounts and rents
receivable.................. 492,081 155,731 - 647,812
Other assets.................. 48,398 - - 48,398
------------ ---------- ----------- -----------
Total assets.................. $ 26,428,081 13,894,731 114,647,690 154,970,502
============ ========== =========== ===========

Liabilities and Stockholders' Equity

Accounts payable and accrued
expenses.................... $ 418,393 - - 418,393
Accrued real estate taxes..... 463,751 207,738 - 671,489
Distributions payable (D).... 183,457 - - 183,457
Security deposits............. 71,133 37,221 - 108,354
Mortgage payable.............. 748,011 4,473,200 - 5,221,211
Other liabilities............. 42,120 - - 42,120
------------ ---------- ----------- -----------

Total liabilities............. 1,926,865 4,718,159 - 6,645,024
------------ ---------- ----------- -----------

Common Stock ................. 29,103 10,671 130,226 170,000
Additional paid in capital
(net of Offering costs)..... 24,953,635 9,165,901 114,517,464 148,637,000
Accumulated distributions in
excess of net income........ (481,522) - - (481,522)
------------ ---------- ----------- -----------

Total Stockholders' equity.... 24,501,216 9,176,572 114,647,690 148,325,478
------------ ---------- ----------- -----------
Total liabilities and
Stockholders' equity........ $ 26,428,081 13,894,731 114,647,690 154,970,502
============ ========== =========== ===========
</TABLE>

See accompanying notes to pro forma balance sheet.

F-79

<PAGE> 410

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
March 31, 1996
(unaudited)

(A) The March 31, 1996 Historical column represents the historical balance
sheet as presented in the March 31, 1996 10-Q as filed with the SEC and
includes the following properties acquired by the Company as of March 31,
1996.

Walgreens, Decatur, Illinois

On January 31, 1995, the Company acquired this property from Inland
Property Sales, Inc. ("IPS"), an Affiliate of the Advisor, for the total
purchase price of $1,209,053, including acquisition costs of $482, and the
assumption of the first mortgage loan with a balance of $748,011 at March
31, 1996, which is secured by the property. This mortgage has an interest
rate of 7.655% and amortizes over a 25-year period. The Company is
responsible for monthly payments of principal and interest of $5,689.

Eagle Crest Shopping Center, Naperville, Illinois

On March 1, 1995, the Company acquired this property from IPS for the
purchase price of $4,816,970, including acquisition costs of $11,059, and
the assumption of the first mortgage loan of approximately $3,534,000,
which was secured by the property. The balance of the purchase price was
funded through a loan from IPS, totaling $1,212,427, with interest accruing
at 10.5%. On April 20, 1995, the Company paid off the first mortgage
secured by this property. The deferred portion of the purchase price,
totaling $1,212,427, was paid to IPS in May 1995 from Gross Offering
Proceeds. In addition, accrued interest of $22,009 was paid from Company
operations.

Montgomery-Goodyear Shopping Center, Montgomery, Illinois

On September 14, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $1,145,992, including
closing costs of $5,992, a portion of which was evidenced by a promissory
note payable to Inland Mortgage Investment Corporation ("IMIC"), an
Affiliate of the Advisor, in the gross amount of $600,000. The remainder
of the purchase price net of prorations, of approximately $535,000 was
funded with proceeds of the Offering. The promissory note was paid in full
in October 1995, with interest at a rate of 10.9% per annum. The total
amount paid was $604,260, of which $600,000 was principal paid from Gross
Offering Proceeds and $4,260 was interest paid from Company operations.

F-80

<PAGE> 411

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1996
(unaudited)

Hartford Plaza, Naperville, Illinois

On September 14, 1995, the Company acquired this newly constructed property
from an unaffiliated third party for a purchase price of $4,414,015
including closing costs of $14,015, and deposited $150,000 in an escrow
account for leasehold improvements to the Blockbuster, Inc. space. The
leasehold improvements were completed in January, 1996 and were added to
the cost of the property. A portion of the purchase price was evidenced by
a promissory note payable to IMIC, in the gross amount of $600,000. The
remainder of the purchase price was funded with proceeds of the Offering.
The promissory note was paid in full in October 1995 with interest at a
rate of 10.9% per annum. The total amount paid was $605,102, of which
$600,000 was principal paid from Gross Offering Proceeds and $5,102 was
interest paid from Company operations.

Nantucket Square Shopping Center, Schaumburg, Illinois

On September 20, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $4,257,918, including
closing costs of $4,913, a portion of which was evidenced by a promissory
note payable to IMIC, in the gross amount of $3,550,000. The remainder of
the purchase price was funded with proceeds of the Offering. In addition,
as part of the purchase, the Company agreed to pay $51,135 for tenant
improvements for two tenants expanding their space, which was added to the
cost of the property. The promissory note was paid in full in December
1995 with interest at a rate of 10.5% per annum. The principal amount paid
was $3,550,000 from Gross Offering Proceeds and interest of $62,011 was
paid from Company operations.

Antioch Plaza, Antioch, Illinois

On December 28, 1995, the Company acquired Antioch Plaza from an
unaffiliated third party for a purchase price of $1,750,365, including
closing costs of $365, a portion of which was evidenced by a promissory
note payable to Inland Real Estate Investment Corporation, an affiliate of
the Advisor ("IREIC"), in the gross amount of $660,000. The note which
bore interest at a rate of 9.5% per annum was repaid in full on January 9,
1996 and the total amount paid was $661,163, of which $660,000 was
principal paid from Gross Offering Proceeds and $1,163 was interest paid
from Company operations. The remainder of the purchase price, net of
prorations of approximately $1,100,000 was funded with proceeds of the
Offering.

Mundelein Plaza, Mundelein, Illinois

On March 29, 1996, the Company acquired the Mundelein Plaza property
("Mundelein Plaza") from an unaffiliated third party for a purchase price
of $5,658,230, including closing costs of $8,230, on an all cash basis,
funded from offering proceeds.

F-81

<PAGE> 412

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1996
(unaudited)

(B) The following pro forma adjustment relates to the acquisition or probable
acquisition of the subject properties as though they were acquired on March
31, 1996. The terms are described in the notes that follow.

<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------------- Total
Regency Prospect Montgomery- Zany Pro Forma
Point Heights Sears Brainy Adjustments
---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Net investment in
properties...... $5,700,000 2,165,000 3,419,000 2,455,000 13,739,000
Cash and cash
equivalents..... - - - - -
Accounts and rents
receivable...... 21,072 80,632 54,027 - 155,731
Other assets...... - - - - -
---------- --------- --------- --------- ----------
Total assets...... $5,721,072 2,245,632 3,473,027 2,455,000 13,894,731
========== ========= ========= ========= ==========

<Captio>
Liabilities and Stockholders' Equity
<S> <C> <C> <C> <C> <C>
Accounts payable
and accrued
expenses........ $ - - - - -
Accrued real estate
taxes........... 21,072 123,284 63,382 - 207,738
Distributions
payable(D)...... - - - - -
Security Deposits. 28,621 8,600 - - 37,221
Mortgage payable.. 4,473,200 4,473,200
Other liabilities. - - - - -
---------- --------- --------- --------- ----------

Total liabilities. 4,522,893 131,884 63,382 - 4,718,159
---------- --------- --------- --------- ----------

Common Stock...... $ 1,393 2,458 3,965 2,855 10,671
Additional paid in
capital (net of
Offering
Costs).......... 1,196,786 2,111,290 3,405,680 2,452,145 9,165,901
Accumulated
distributions in
excess of net
income.......... - - - - -
---------- --------- --------- --------- ----------
Total Stockholders'
equity.......... 1,198,179 2,113,748 3,409,645 2,455,000 9,176,572
---------- --------- --------- --------- ----------

Total liabilities
and Stockholders'
equity.......... $5,721,072 2,245,632 3,473,027 2,455,000 13,894,731
========== ========= ========= ========= ==========
</TABLE>

F-82

<PAGE> 413

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1996
(unaudited)

Acquisition of Regency Point, Lockport, Illinois

On April 5, 1996, the Company completed the acquisition of the Regency
Point from an unaffiliated third party for a purchase price of $5,700,000.
As part of the acquisition, the Company assumed the existing first mortgage
loan of $4,473,200 along with a related interest rate swap agreement, with
the balance funded with Offering Proceeds.

The first mortgage loan has a floating interest rate of 180 basis points
over the 30-day LIBOR rate, which rate is adjusted monthly. The interest
rate swap agreement, in conjunction with the first mortgage, provides for
Bank One, Chicago, to receive from or pay to the Company the difference
between 6.11% and the 30-day LIBOR rate, so that the first mortgage loan
has an effective rate of 7.91% per annum. The first mortgage loan matures
in August 2000. The interest rate swap agreement was terminated on April
18, 1996 resulting in $48,419 proceeds to the Company. No pro forma
adjustment has been made as a result of this termination.

Acquisition of Prospect Heights Plaza, Prospect Heights, Illinois

On June 17, 1996, the Company acquired Prospect Heights located in Prospect
Heights, Illinois ("Prospect Heights") from an unaffiliated third party for
the purchase price of $2,165,000 on an all cash basis, funded from Offering
proceeds.

Acquisition of Montgomery-Sears, Montgomery, Illinois

On June 17, 1996, the Company acquired Montgomery-Sears Shopping Center
located in Montgomery, Illinois ("Montgomery-Sears") from an unaffiliated
third party for the purchase price of $3,419,000 on an all cash basis,
funded from Offering proceeds.

Acquisition of the Zany Brainy Store, Wheaton, Illinois

On July 1, 1996, the Company acquired this property from an unaffiliated
third party for the purchase price of $2,455,000 on an all cash basis, from
Offering proceeds.

Additional Offering Proceeds

Additional Offering Proceeds of $10,670,432, net of additional Offering
costs of $1,493,860 are reflected as received as of March 31, 1996, prior
to the purchase of the properties. Offering costs consist principally of
registration costs, printing and selling costs, including commissions.

(C) This pro forma adjustment reflects the completion of the Company's Offering
of 6,000,000 Shares that commenced on October 14, 1994, net of additional
Offering costs of $949,432, as though this occurred on of March 31, 1996.
In addition, this pro forma adjustment reflects the completion of the
Company's Offering and sale of an additional 11,000,000 Shares, net of
Offering costs of $12,771,500, as though this also occurred on March 31,
1996.

(D) No pro forma assumptions have been made for the additional payment of
distributions resulting from the additional proceeds raised.

F-83

<PAGE> 414

Inland Monthly Income Fund III, Inc.
Pro Forma Statement of Operations
For the three months ended March 31, 1996
(unaudited)

The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of Mundelein Plaza, Regency Point Shopping
Center, Prospect Heights Plaza, Montgomery-Sears Shopping Center and the Zany
Brainy store as of January 1, 1996. This unaudited Pro Forma Statement of
Operations should be read in conjunction with the March 31, 1996 Financial
Statements and the notes thereto as filed on Form 10-Q.

This unaudited Pro Forma Statement of Operations is not necessarily indicative
of what the actual results of operations would have been for the three months
ended March 31, 1996, nor does it purport to represent the future financial
position of the Company. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.

F-84

<PAGE> 415

Inland Monthly Income Fund III, Inc.
Pro Forma Statement of Operations
for the three months ended March 31, 1996
(unaudited)

<TABLE>
<CAPTION>
1996 Total
Historical Pro Forma 1996
(A) Adjustments(B) Pro Forma
---------- ------------- ---------
<S> <C> <C> <C>
Rental income............... $ 475,038 505,299 980,337
Additional rental income.... 242,290 120,227 362,517
Interest income (C)......... 43,751 - 43,751
---------- ------- -------

Total income.............. 761,079 625,526 1,386,605
---------- ------- -------

Professional services and
general and
administrative fees....... 38,168 - 38,168
Advisor asset management
fee....................... 48,540 34,348 82,888
Property operating expenses. 310,613 166,660 477,273
Interest expense............ 15,043 88,455 103,498
Depreciation (D)............ 103,091 117,108 220,199
Amortization................ 1,373 - 1,373
Acquisition costs expensed.. 8,985 - 8,985
---------- ------- -------

Total expenses.............. 525,813 406,571 932,384
---------- ------- -------

Net income................ $ 235,266 218,955 454,221
========== ======= =======

Weighted average
common stock shares
outstanding (E)........... 2,394,092 16,297,997
========== ==========

Net income per weighted
average common stock
outstanding (E)........... $ .12 .03
========== ==========
</TABLE>

See accompanying notes to pro forma statement of operations.

F-85

<PAGE> 416

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 1996
(unaudited)

(A) The March 31, 1996 Historical column represents the historical statement of
operations of the Company for the three months ended March 31, 1996, as
filed with the SEC on Form 10-Q.

(B) Total pro forma adjustments as though the acquisitions of the following
properties occurred on January 1, 1996 on an all cash basis except for
Regency Point where the Company assumed the existing first mortgage loan of
$4,473,200, along with a related interest rate swap agreement.

The first mortgage loan has a floating interest rate of 180 basis points
over the 30-day LIBOR rate, which rate is adjusted monthly. The interest
rate swap agreement, in conjunction with the first mortgage, provides for
Bank One, Chicago, to receive from or pay to the Company the difference
between 6.11% and the 30-day LIBOR rate, so that the first mortgage loan
has an effective rate of 7.91% per annum. The pro forma adjustment for
interest expense for 1996 was estimated using the described loan terms.
The related interest rate swap agreement was terminated on April 18, 1996
resulting in $48,419 proceeds to the Company. The pro forma adjustment
does not give effect to the termination of this agreement.

<TABLE>
<CAPTION>
Mundelein Regency Prospect Montgomery- Zany Pro Forma
Plaza Point Heights Sears Brainy Adjustments Total
---------- ------- ------- ------- ------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income..... $ 163,381 139,271 44,552 89,350 68,745 - 505,299
Additional rental
income.......... 32,975 16,034 33,410 25,736 12,072 - 120,227
Interest income... - - - - - - -
---------- ------- ------ ------- ------ ------- -------
Total income...... 196,356 155,305 77,962 115,086 80,817 - 625,526
---------- ------- ------ ------- ------ ------- -------
Professional services
and general and
administrative.. - - - - - - -
Advisor asset
management fee.. - - - - - 34,348 34,348
Property operating
expenses........ 53,986 19,046 44,325 33,348 15,955 - 166,660
Interest expense.. - - - - - 88,455 88,455
Depreciation (D).. - - - - - 117,108 117,108
---------- ------- ------ ------- ------ ------- -------

Total expenses.... 53,986 19,046 44,325 33,348 15,955 239,911 406,571
---------- ------- ------ ------- ------ ------- -------

Net income........ $ 142,370 136,259 33,637 81,738 64,862 (239,911) 218,955
========== ======= ====== ====== ====== ======= =======
</TABLE>

F-86

<PAGE> 417

Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 1996
(unaudited)

(C) No pro forma adjustment has been made relating to interest income which
would have been earned on the additional Offering Proceeds raised.

(D) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years.

(E) The pro forma weighted average common stock shares for the three months
ended March 31, 1996 was calculated by adding to the historical weighted
average number of shares at March 31, 1996, the number of shares to
complete the Company's Offerings of 17,000,000 Shares.

F-87
<PAGE> 418

EXHIBIT A
PRIOR PERFORMANCE TABLES

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

Table I Experience in Raising and Investing Funds
Table II Compensation to IREIC and Affiliates
Table III Operating Results of Prior Programs
Table IV Results of Completed Programs
Table V Sales or Disposals of Properties
Table VI Acquisition of Properties by Programs*

* Prospective investors in the Company may obtain copies of Table VI by
contacting the Advisor.

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

(1) Capital appreciation; and

(2) Cash distributions for limited partners.

In addition, with respect to private limited partnerships, an objective
was the generation of tax loss deductions which generally will be used to
offset taxable income from other sources.

A-1
<PAGE> 419

TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS

Table I presents information on a dollar and percentage basis showing the
experience of Inland Real Estate Investment Corporation (IREIC), of which the
Advisor is a wholly owned subsidiary, in raising and investing funds in prior
partnerships where the offering closed in the three years prior to December 31,
1995. The Table particularly focuses upon the dollar amount available for
investment in properties expressed as a percentage of total dollars raised.

Since 1986, Inland Real Estate Investment Corporation has organized and
completed the offerings of four public partnerships which have primarily
invested in existing residential real property and three public partnerships
which have invested in undeveloped land.

A-2
<PAGE> 420

TABLE I(CONTINUED)
EXPERIENCE IN RAISING AND INVESTING FUNDS (A)
(000'S OMITTED)

<TABLE>
<CAPTION>
Inland Capital
Fund, L.P.
-------------------
<S> <C> <C>
Dollar amount offered .................................... $60,000
Dollar amount raised ..................................... 32,399 100.00%
Less offering expenses:
Selling Commissions:
Affiliated parties ...................................... 3,239 10.00
Unaffiliated parties .................................... 0 0.00
Organizational expenses .................................. 15 0.05
Other offering expenses (B) .............................. 1,227 3.79
Reserves (C) ............................................. 1,972 6.08
------- --------
Available for investment ................................. $25,946 80.08%
------- --------

Acquisition costs:
Cash down payments (D) ................................... $24,286 74.96%
Acquisition fees ......................................... 1,444 4.46
Other cash expenditures capitalized (E) .................. 821 2.53
------- --------

Acquisition costs related to the purchase of properties .. $26,551 81.95%
------- --------

Percent leverage ......................................... 0.00%
Date offering began ...................................... 12-13-91
Length of offering (in months) ........................... 20
Months to invest 90% of amount available for
investment (measured from beginning of offering) ......... 36
</TABLE>

A-3

<PAGE> 421

TABLE I-(CONTINUED)
EXPERIENCE IN RAISING AND INVESTING FUNDS
(000'S OMITTED)
NOTES TO TABLE I

(A) The figures in this table are cumulative and are as of December 31,
1995. The dollar amount raised represents the cash proceeds collected by the
partnerships. The Table reflects payments made from investor capital
contributions upon receipt.

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

(C) Includes 1% of the offering proceeds committed to the Unit Repurchase
Program of each partnership. Partnership expenses, including operating expenses
during the offering period or thereafter not related to the offering, may be
paid from these reserves.

(D) Cash down payments include amounts paid and mortgage financing at
closing.

(E) Consists of acquisition expenses and improvements to the property
subsequent to acquisition which are capitalized and paid or to be paid from the
proceeds of the offering.

A-4

<PAGE> 422

TABLE II
COMPENSATION TO IREIC AND AFFILIATES(A)

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

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

A-5

<PAGE> 423

TABLE II
COMPENSATION TO IREIC AND AFFILIATES(A)
(000'S OMITTED)

<TABLE>
<CAPTION>
Other
Public
Inland Programs
Capital ----------
Fund, L.P. 6 Programs
---------- ----------
<S> <C> <C>
Date offering commenced ....................................... 12-13-91 -
Dollar amount raised .......................................... $32,399 $149,306
======= ========
Amounts paid or payable to general partner or affiliates
from proceeds of offerings:
Selling commissions and underwriting fees (B) ................ $ 3,239 $ 2,819
Other offering expenses (C) .................................. 249 2,225
Acquisition cost and expense (D) ............................. 1,444 9,591

Dollar amount of cash available (deficiency) from operations
before deducting (adding) payments to (from) general partner
or affiliates (E) ............................................. $ 1,559 $ 13,615
======= ========
Amounts paid to (received from) general partner or affiliates
related to operations:
Property management fees (F) ................................. $ 94 $ 952
Partnership subsidies received (G) ........................... 0 (582)
Accounting services .......................................... 60 285
Data processing service ...................................... 39 228
Legal services ............................................... 48 121
Other administrative services ................................ 96 652
Property upgrades ............................................ 19 186
Property operating expenses .................................. 1 6

Dollar amount of property sales and refinancings before
payments to general partner and affiliates (H):
Cash ......................................................... $ 647 $ 19,534
Equity in notes and undistributed sales proceeds ............. 0 9,686

Dollar amounts paid or payable to general partner or affiliates
from sales and refinancings (I):
Sales commissions ............................................ $ 0 $ 467
Property upgrade ............................................. 0 172
Mortgage brokerage fee ....................................... 0 15
Participation in cash distributions .......................... 0 93
</TABLE>

A-6

<PAGE> 424

TABLE II(CONTINUED)
COMPENSATION TO IREIC AND AFFILIATES
(000'S OMITTED)
NOTES TO TABLE II

(A) The figures in this Table II relating to proceeds of the offerings are
cumulative and are as of December 31, 1995 and the figures relating to cash
available from operations are for the three years ending December 31, 1995. The
dollar amount raised represents the cash proceeds collected by the
partnerships. Amounts paid or payable to IREIC or affiliates from proceeds of
the offerings represent payments made or to be made to IREIC and affiliates
from investor capital contributions.

(B) Inland Capital Fund paid all commissions to an affiliate of the
general partner, who in turn paid $2,711,791 to third party soliciting dealers.

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

<TABLE>
<CAPTION>
Inland Public
Capital Programs
Fund, L.P. 6 Programs
---------- ----------
<S> <C> <C>

Acquisition fees ....................... $ 1,444 $ 9,478
Reimbursement (at cost) for upgrades and
acquisition due diligence .............. 0 113
Partnership down payments .............. 0 44,585
Inland down payments ................... 0 (44,585)
-------- --------
Acquisition cost and expense ........... $ 1,444 $ 9,591
</TABLE> ======== ========

(E) See Note (G) to Table III.

(F) An Affiliate of the Advisor provides property management services for
all properties acquired by the partnerships. Management fees have not exceeded
6% of the gross receipts from the properties managed. With respect to Inland
Capital Fund, L.P., Inland Land Appreciation Fund II, L.P. and Inland Land
Appreciation Fund, L.P. (included in "Other Public Programs"), IREIC receives
an asset management fee equal to 1/4% of total partnership capital limited to a
cumulative total over the life of the partnership of 2% of the land's original
cost to the partnership.

(G) The amounts shown in the table for Other Public Programs represent
supplemental capital contributions from IREIC in accordance with the terms of
the partnership agreements.

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

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

A-7

<PAGE> 425

TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS

Table III presents operating results for limited partnerships the
offerings of which closed during each of the five years ended prior to December
31, 1995. The operating results consist of:

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

A-8

<PAGE> 426
TABLE III- (CONTINUED)
OPERATING RESULTS OF PRIOR PROGRAMS
(000'S OMITTED, EXCEPT FOR AMOUNTS PRESENTED PER $1,000 INVESTED)

<TABLE>
<CAPTION>
Inland Capital
Fund, L.P.
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Gross revenues ........................................... $457 $744 $564 $104 $0
Profit on sale of properties ............................. 229 0 0 0 0
Less:
Operating expenses ....................................... 146 64 4 1 0
Interest expense ......................................... 0 0 0 0 0
Partnership expenses ..................................... 167 175 86 1 0
Depreciation and amortization ............................ 5 4 3 3 1
---- ----- ----- ----- ----
Net income (loss)-GAAP basis ............................. $368 $501 $471 $99 $ (1)
Taxable income (loss) (A):
Allocated to investors from operations ................... 137 495 466 100 (1)
Allocated to general partner from operations ............. 1 5 5 1 0
---- ----- ----- ----- ----
Total from operations .................................... 138 500 471 101 (1)
From gain on sale:
Capital (allocated to investors) ........................ 231 0 0 0 0
Capital (allocated to general partner) .................. 0 0 0 0 0
Ordinary (recapture) .................................... 0 0 0 0 0
---- ----- ----- ----- ----
$369 $500 $471 $101 $ (1)

Cash available (deficiency) from operations (G) .......... 172 633 397 94 0
Cash available from sales (B) ............................ 646 0 0 0 0
Cash (deficiency) from refinancings ...................... 0 0 0 0 0
---- ----- ----- ----- ----
Total cash available (deficiency) before
distributions and special items .......................... 818 633 397 94 0
Less distributions to investors:
From operations .......................................... 0 0 0 0 0
From sales and refinancings .............................. 645 0 0 0 0
From return of capital ................................... 0 0 0 0 0
From supplemental capital
contribution (return on capital) (E) (H) ................. 0 0 0 0 0
Less distributions to general partner:
From operations .......................................... 0 0 0 0 0
From sales and refinancings .............................. 0 0 0 0 0
---- ----- ----- ----- ----
Cash available after distributions before special items .. 173 633 397 94 0

Inland Land
Appreciation Fund II, L.P.
1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues ........................................... $508 $494 $545 $841 $1,386 $896 $0
Profit on sale of properties ............................. 2,858 219 485 0 0 0 0
Less:
Operating expenses ....................................... 248 263 266 132 67 13 0
Interest expense ......................................... 0 0 0 0 0 0 0
Partnership expenses ..................................... 230 191 180 254 181 80 0
Depreciation and amortization ............................ 3 4 5 2 2 2 1
------ ---- --------- --------- --------- ---- ----
Net income (loss)-GAAP basis ............................. $2,885 $255 $579 $453 $1,136 $801 $ (1)
Taxable income (loss) (A):
Allocated to investors from operations ................... 315 227 144 477 1,141 800 (1)
Allocated to general partner from operations ............. 3 2 1 5 12 8 0
------ ---- --------- --------- --------- ---- ----
Total from operations .................................... 318 229 145 482 1,153 808 (1)
From gain on sale:
Capital (allocated to investors) ........................ 2,333 219 351 0 0 0 0
Capital (allocated to general partner) .................. 329 0 93 0 0 0 0
Ordinary (recapture) .................................... 0 0 0 0 0 0 0
------ ---- --------- --------- --------- ---- ----
$2,980 $448 $589 $482 $1,153 $808 $ (1)

Cash available (deficiency) from operations (G) .......... 5 9 164 511 1,253 694 0
Cash available from sales (B) ............................ 7,488 450 1,176 0 0 0 0
Cash (deficiency) from refinancings ...................... 0 0 0 0 0 0 0
------ ---- --------- --------- --------- ---- ----
Total cash available (deficiency) before
distributions and special items .......................... 7,493 459 1,340 511 1,253 694 0
Less distributions to investors:
From operations .......................................... 0 0 0 454 267 0 0
From sales and refinancings .............................. 1,000 0 1,116 0 0 0 0
From return of capital ................................... 0 0 0 00 0 0 0
From supplemental capital
contribution (return on capital) (E) (H) ................. 0 0 0 0 0 0 0
Less distributions to general partner:
From operations .......................................... 0 0 0 0 0 0 0
From sales and refinancings .............................. 0 0 0 0 93 0 0
------ ---- --------- --------- --------- ---- ----
Cash available after distributions before special items .. 6,493 459 131 57 986 694 0
</TABLE>

A-9
<PAGE> 427

TABLE III(CONTINUED)
OPERATING RESULTS OF PRIOR PROGRAMS
(000'S OMITTED, EXCEPT FOR AMOUNTS PRESENTED PER $1,000 INVESTED)

<TABLE>
<CAPTION>
Inland Capital
Fund, L.P.
------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Special items:
Fixed asset additions (C) ......................... $ 0 $ 0 $ 0 $ 0 $ 0
Advances (repayments) from (to)
general partner or affiliates ..................... 23 2 1 (85) 85
Repurchase of units (I) ........................... 0 (2) 0 0 0
Use of partnership reserves ....................... 0 2 0 0 0
Use of cash available for offering purposes ....... 0 0 0 0 0
---- ---- ---- ---- ----
Cash available (deficiency) after distributions and
special items (J) ................................. $196 $635 $398 $ 9 $ 85
==== ==== ==== ==== ====

Tax and distribution data per $1,000 invested (D):
Federal income tax results:
Ordinary income (loss):
From operations (E) ............................... $ 4 $ 15 $ 14 $ 3 $ 0
==== ==== ==== ==== ====
From recapture .................................... 0 0 0 0 0
Capital gain ...................................... 7 0 0 0 0
Cash distributions to investors:
Source (on GAAP basis):
Investment income ................................. 0 0 0 0 0
Return of capital ................................. 20 0 0 0 0
Supplemental capital contributions (return on
capital) (E) (H) .................................. 0 0 0 0 0
Source (on cash basis):
Sales ............................................. 20 0 0 0 0
Refinancings ...................................... 0 0 0 0 0
Operations ........................................ 0 0 0 0 0
Return of capital ................................. 0 0 0 0 0
Supplemental capital contributions (return on
capital) (E) (H) .................................. 0 0 0 0 0
Percent of properties remaining unsold (F) ........ 98.43%
=======

<CAPTION>
Inland Land
Appreciation Fund II, L.P.
------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Special items:
Fixed asset additions (C) ......................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Advances (repayments) from (to)
general partner or affiliates ..................... 31 (19) 10 (5) (272) 287
Repurchase of units (I) ........................... (36) (52) (143) (47) 0 0 0
Use of partnership reserves ....................... 36 52 143 47 0 0 0
Use of cash available for offering purposes ....... 0 0 0 (50) 0 0 0
---- ---- ---- ---- ---- ---- ----
Cash available (deficiency) after distributions and
special items (J) ................................. $6,496 $460 $112 $ 17 $981 $422 $287
======= ==== ==== ==== ==== ==== ====
Tax and distribution data per $1,000 invested (D):
Federal income tax results:
Ordinary income (loss):
From operations (E) ............................... $ 6 $ 5 $ 3 $ 9 $ 23 $ 16 $ 0
From recapture .................................... 0 0 0 0 0 0 0
Capital gain ...................................... 46 4 7 0 0 0 0
Cash distributions to investors:
Source (on GAAP basis):
Investment income ................................. 0 0 0 9 5 0 0
Return of capital ................................. 20 0 22 0 0 0 0
Supplemental capital contributions (return on
capital) (E) (H) .................................. 0 0 0 0 0 0 0
Source (on cash basis):
Sales ............................................. 20 0 22 0 0 0 0
Refinancings ...................................... 0 0 0 0 0 0 0
Operations ........................................ 0 0 0 9 5 0 0
Return of capital ................................. 0 0 0 0 0 0 0
Supplemental capital contributions (return on
capital) (E) (H) .................................. 0 0 0 0 0 0 0
Percent of properties remaining unsold (F) ........ 89.13%
======
</TABLE>

A-10

<PAGE> 428

TABLE III(CONTINUED)
OPERATING RESULTS OF PRIOR PROGRAMS
(000'S INCLUDED)
NOTES TO TABLE III

(A) "Taxable income (loss)" represents the aggregate amounts shown on the
partnerships' tax returns for such years. One of the principal differences
between the tax basis of reporting and generally accepted accounting principles
(GAAP) is that depreciation is based upon the rates established by the
Accelerated Cost Recovery System (ACRS) for property placed in service after
January 1, 1981. Use of ACRS usually results in a higher charge against
operations than would be the result if the depreciation rate was based upon the
economic useful life as required by GAAP. Further, under GAAP, to the extent
that interest rates on notes received in connection with the sale of a property
are deemed to be below market interest rates at the date of sale, such notes
would be required to be discounted based upon market interest rates.

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

(C) Fixed asset additions represent betterments and improvements to
properties which have been paid for from the operations of the respective
properties.

(D) Tax data per $1,000 is based on the income (loss) allocated to
investors for federal income tax purposes. Tax and distribution data per $1,000
invested is based on total capital raised.

(E) Taxable ordinary income from operations relating to Inland Monthly
Income Fund II, L.P. include taxable income at the limited partner level due to
taxable guaranteed payments relating to the IREIC's supplemental capital
contributions. A limited partner's basis in his partnership interest will be
increased by the amount of supplemental capital contributions allocated to him
and reduced by distributions from supplemental capital contributions. The
amount of supplemental capital contributions per $1,000 invested are $0 for
1989 through 1995 and $1 for 1988 for Inland Monthly Income Fund, II, L.P.

(F) Percent of properties remaining unsold represents original total
acquisition cost of properties retained divided by original total acquisition
cost of all properties in the program, plus the total of uninvested offering
proceeds (if any).

A-11

<PAGE> 429

TABLE III(CONTINUED)
OPERATING RESULTS OF PRIOR PROGRAMS
(000'S INCLUDED)
NOTES TO TABLE III

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

Inland Capital
Fund, L.P.
--------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities
per the Form 10-K annual report or 10-Q
quarterly report ........................ 195 635 398 9 85

Payments to (from) general partner and
affiliates .............................. (23) (2) (1) 85 (85)

Principal payments on long-term debt .... 0 0 0 0 0

Payments for deferred loan fees 0 0 0 0 0
--- --- --- -- ---

172 633 397 94 0
=== === === == ===

<CAPTION>
Inland Land
Appreciation
Fund II, L.P.
-------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by operating activities
per the Form 10-K annual report or 10-Q
quarterly report ........................ 8 10 145 521 1,248 422

Payments to (from) general partner and
affiliates .............................. (3) (1) 19 (10) 5 272

Principal payments on long-term debt .... 0 0 0 0 0 0

Payments for deferred loan fees 0 0 0 0 0 0
--- --- --- --- ----- ---

5 9 164 511 1,253 694
=== === === === ===== ===
</TABLE>

(H) IREIC was required to make supplemental capital contributions if
necessary, in sufficient amounts to allow the partnerships to make
distributions to limited partners equal to an 8% per annum non-compounded
return on their invested capital through August 4, 1993. The cumulative amounts
of such supplemental capital contributions for Monthly Income Fund II was
$30,155, which was repaid in 1993.

(I) Each entity established a unit repurchase program which provides
limited liquidity to eligible investors who have suffered severe adverse
financial conditions or who have died or become legally incapacitated. These
funds were utilized by the partnerships to repurchase units, on a limited
basis, for pre-determined amounts pursuant to the terms of the prospectus.

(J) Cash deficiencies for certain years are the result of (1) current year
distributions from operations that include a portion of accumulated cash flows
from operations of prior years or; (2) current year distributions from sales
which include proceeds relating to prior year property sales.

A-12
<PAGE> 430

TABLE IV
RESULTS OF COMPLETED PROGRAMS

Table IV is a summary of operating and disposition results of prior public
partnerships sponsored by Affiliates of the Advisor, which during the five
years ended prior to December 31, 1995 have sold their properties and either
hold notes with respect to such sales or have liquidated. No public partnership
has disposed of all its properties.

A-13
<PAGE> 431

TABLE V
SALES OR DISPOSALS OF PROPERTIES

Table V presents information on the results of the sale or disposals of
public partnership properties during the three years ended prior to December
31, 1995. Since 1993, partnerships sponsored by Affiliates of the Advisor have
sold 14 properties in whole or in part. The table provides certain information
to evaluate property performance over the holding period such as:

- Sale proceeds received by the partnerships in the form of cash down
payments at the time of sale after expenses of sale and secured notes
received at sale;

-Cash invested in properties;

-Cash flow (deficiency) generated by the property;

-Taxable gain (ordinary and total); and

-Terms of notes received at sale.
A-14

<PAGE> 432

TABLE V(CONTINUED)
SALES OR DISPOSALS OF PROPERTIES(A)
(000'S OMITTED)

<TABLE>
<CAPTION>
Selling Price, net of closing costs
-----------------------------------------------------------------
Cash Selling
Received, commissions Secured
net of paid or Notes Net
Date Date of Closing payable to Mortgage at Received at Selling
Property Acquired Sale Costs(B) Inland Time of Sale Sale(C) Price
- ------------------------------------------ -------- ------- ------- ---------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
LAND I .52 ACRE OF PARCEL #18 ............. 1/29/90 3/11/93 33 0 0 0 33
LAND I 4.41 ACRES OF PARCEL #23 ........... 5/8/90 Var 93 170 0 0 0 170
LAND II PARCEL #23A ....................... 10/30/92 3/16/93 183 0 0 0 183
LAND II PARCELS #11 & #13 ................. 8/20/91 5/3/93 70 0 0 828(F) 898
&
9/23/92
LAND II 5 ACRES OF PARCEL #15 ............. 9/4/91 9/1/93 95 0 0 0 95
GROWTH FUND I - COUNTRY CLUB, 55 UNITS .... 12/30/85 Var 93 5,673 0 1,650 0 4,023
LAND II 10 ACRES OF PARCEL #22 ............ 10/30/92 1/6/94 166 0 0 0 166
LAND II .258 ACRES OF PARCEL #6 ........... 4/16/91 10/1/94 10 0 0 0 10
LAND II 11 ACRES OF PARCEL #15 ............ 9/4/91 12/1/94 274 0 0 0 274
GROWTH FUND I - COUNTRY CLUB, 31 UNITS .... 12/30/85 Var 94 2,432 0 0 0 2,432
LAND I 35.88 ACRES OF PARCEL #23 .......... 5/8/90 Var 94 1,149 0 0 156 1,305
MONTHLY INCOME FUND I -
SCHAUMBURG TERRACE, 22 BUILDINGS ......... 6/24/88 Var 94 701 0 0 4,912(G) 5,613
LAND I 3.44 ACRES OF PARCEL #23 ........... 5/8/90 Var 95 139 0 0 0 139
MONTHLY INCOME FUND I -
SCHAUMBURG TERRACE, 16 BUILDINGS ......... 6/24/88 Var 95 409 0 0 3,790(G) 4,199
LAND II 60 ACRES OF PARCEL #23 ............ 10/30/92 Var 95 4,196 0 0 0 4,196
LAND II PARCEL #25 ........................ 1/28/93 10/31/95 3,292 0 0 0 3,292
CAPITAL FUND PARCEL #10A .................. 9/16/94 4/21/95 286 0 0 0 286
CAPITAL FUND 17.742 ACRES OF PARCEL #2 .... 11/9/93 8/2/95 361 0 0 0 361
LAND I 27.575 ACRES OF PARCEL #4 .......... 4/18/89 8/25/95 542 0 0 0 542

Cost of Properties including closing
costs and other cash expenditures
-------------------------------------
Original Partnership
Mortgage Capital
Property Financing Invested(D) Total
- ------------------------------------------ --------- ----------- -----
<S> <C> <C> <C>
LAND I .52 ACRE OF PARCEL #18 ............. 0 4 4
LAND I 4.41 ACRES OF PARCEL #23 ........... 0 128 128
LAND II PARCEL #23A ....................... 0 183 183
LAND II PARCELS #11 & #13 ................. 0 453 453

LAND II 5 ACRES OF PARCEL #15 ............. 0 55 55
GROWTH FUND I - COUNTRY CLUB, 55 UNITS .... 1,168 1,495 2,663
LAND II 10 ACRES OF PARCEL #22 ............ 0 105 105
LAND II .258 ACRES OF PARCEL #6 ........... 0 4 4
LAND II 11 ACRES OF PARCEL #15 ............ 0 122 122
GROWTH FUND I - COUNTRY CLUB, 31 UNITS .... 658 843 1,501
LAND I 35.88 ACRES OF PARCEL #23 .......... 0 971 971
MONTHLY INCOME FUND I -
SCHAUMBURG TERRACE, 22 BUILDINGS ......... 0 5,019 5,019
LAND I 3.44 ACRES OF PARCEL #23 ........... 0 98 98
MONTHLY INCOME FUND I -
SCHAUMBURG TERRACE, 16 BUILDINGS ......... 0 3,683 3,683
LAND II 60 ACRES OF PARCEL #23 ............ 0 2,900 2,900
LAND II PARCEL #25 ........................ 0 1,730 1,730
CAPITAL FUND PARCEL #10A .................. 0 221 221
CAPITAL FUND 17.742 ACRES OF PARCEL #2 .... 0 196 196
LAND I 27.575 ACRES OF PARCEL #4 .......... 0 231 231
</TABLE>

A-15
<PAGE> 433

TABLE V(CONTINUED)
SALES OR DISPOSALS OF PROPERTIES(A)
(000'S OMITTED)

<TABLE>
<CAPTION>
Excess
(deficiency)
of property Amount of
operating subsidies Total
cash receipts included in Taxable Ordinary
over cash operating Gain Income Capital
Property expenditures(E) cash receipts from Sale from Sale Gain
<S> <C> <C> <C> <C> <C>
LAND I .52 ACRE OF PARCEL #18 ............ 0 0 29 0 29
LAND I 4.41 ACRES OF PARCEL #23 .......... 0 0 42 0 42
LAND II PARCEL #23A ...................... (6) 0 0 0 0
LAND II PARCELS #11 & #13 ................ 9 0 445 0 445
LAND II 5 ACRES OF PARCEL #15 ............ 1 0 40 0 40
GROWTH FUND I - COUNTRY CLUB, 55 UNITS ... 1,375 0 1,592 0 1,592
LAND II 10 ACRES OF PARCEL #22 ........... 0 0 61 0 61
LAND II .258 ACRES OF PARCEL #6 .......... 0 0 6 0 6
LAND II 11 ACRES OF PARCEL #15 ........... 1 0 152 0 152
GROWTH FUND I - COUNTRY CLUB, 31 UNITS ... 775 0 1,223 0 1,223
LAND I 35.88 ACRES OF PARCEL #23 ......... 4 0 360 360 0
MONTHLY INCOME FUND I -
SCHAUMBURG TERRACE, 22 BUILDINGS ........ 1,556 0 1,609 0 1,609
LAND I 3.44 ACRES OF PARCEL #23 .......... 0 0 33 33 0
MONTHLY INCOME FUND I -
SCHAUMBURG TERRACE, 16 BUILDINGS ........ 1,152 0 1,398 0 1,398
LAND II 60 ACRES OF PARCEL #23 ........... (80) 0 1,100 1,100 0
LAND II PARCEL #25 ....................... 60 0 1,562 0 1,562
CAPITAL FUND PARCEL #10A ................. (9) 0 67 67 0
CAPITAL FUND 17.742 ACRES OF PARCEL #2 ... 1 0 164 0 164
LAND I 27.575 ACRESOF PARCEL #4 .......... 14 0 311 0 311
</TABLE>

A-16

<PAGE> 434

TABLE V(CONTINUED)
SALES OR DISPOSALS OF PROPERTIES
(000'S OMITTED)
NOTES TO TABLE V

(A) The table includes all sales of properties by the partnerships during
the three years ended December 31, 1995. All sales have been made to parties
unaffiliated with the partnership.

(B) Consists of cash payments received from the buyers and the assumption
of certain liabilities by the buyers at the date of sale, less expenses of
sale.

(C) The stated principal amount of the notes is shown in the table under
"Secured Notes Received at Sale." All sales with notes received at sale are
being reported for tax purposes on the installment basis.

(D) Amounts represent the dollar amount raised from the offerings of
limited partnership units, less sales commissions and other offering expenses.

(E) Represents "Cash Available (Deficiency) from Operations (including
subsidies)" as adjusted for appli-cable "Fixed Asset Additions" through the
year of sale.

(F) The partnership provided financing in the amount of $828,000. The
amount financed earned interest at 8% annually, paid monthly, until maturity
and was paid off on October 27, 1993.

(G) As of December 31, 1995, the Partnership has sold all of the
thirty-eight six-unit condominium buildings comprising the Schaumburg Terrace
condominium complex to unaffiliated third parties. The Partnership received
$249,596 from one all cash sale in 1994. In addition, the Partnership received
$823,518 in down payment proceeds, and provided mortgage loans totaling
$8,701,439 to the purchasers for the thirty-seven additional sales. The
principal balances of these loans range from approximately $211,000 to
$256,000. These loans require monthly principal and interest payments totaling
$67,763 with an interest rate of 8.625% per annum for ten years (based on a
thirty year amortization) and payment of all remaining principal at the end of
that period.

A-17
<PAGE> 435

INLAND REAL ESTATE CORPORATION
DISTRIBUTION REINVESTMENT PROGRAM

Inland Real Estate Corporation, a Maryland corporation (the
"Company"), pursuant to its Articles of Incorporation, as amended and restated
to date (the "Articles") has adopted a Distribution Reinvestment Program (the
"DRP"), the terms and conditions of which are set forth below. Capitalized
terms shall have the same meaning as set forth in the Articles unless otherwise
defined herein.

1. As agent for the Stockholders who purchased Shares pursuant to
the Company's prior public offering which commenced October 14, 1994 and was
completed July 22, 1996 (the "Prior Offering") and the current offering of
Shares by the Company pursuant to the prospectus dated July 24, 1996 (the
"Offering") and elect to participate in the DRP (the "Participants"), the
Company will apply all distributions, paid with respect to the Shares held by
each Participant (the "Distributions"), including Distributions paid with
respect to any full or fractional Shares acquired under the DRP, to the
purchase of the Shares for said Participants directly, if permitted under state
securities laws and, if not, through the Dealer-Manager or Participating
Dealers registered in the Participant's state of residence. Neither the
Company nor its Affiliates will receive a fee for selling Shares under the DRP.

2. Procedure for Participation. Any Stockholder who purchased
Shares pursuant to the Company's Prior Offering or this Offering may elect to
become a Participant by completing and executing the Subscription Agreement or
other appropriate authorization form as may be available from the Company, the
Dealer-Manager or Soliciting Dealer. Participation in the DRP will begin with
the next Distribution payable after receipt of a Participant's subscription or
authorization. Shares will be purchased under the DRP on the record date for
the Distribution used to purchase the Shares. Distributions for Shares
acquired under the DRP are currently paid monthly and are calculated with a
daily record and Distribution declaration date. Each Participant agrees that
if, at any time prior to listing of the Shares on a national stock exchange or
inclusion of the Shares for quotation on a national market system, he fails to
meet the suitability requirements for making an investment in the Company or
cannot make the other representations or warranties set forth in the
Subscription Agreement, he will promptly so notify the Company in writing.

3. Purchase of Shares. Participants will acquire Shares from the
Company at a fixed price of $9.05 per Share until the termination of the
Offering. Participants in the DRP may also purchase fractional Shares so that
100% of the Distributions will be used to acquire Shares. However, a
Participant will not be able to acquire Shares under the DRP to the extent such
purchase would cause it to exceed the Ownership Limit.

It is possible that a secondary market will develop for the Shares,
and that the Shares may be bought and sold on the secondary market at prices
lower or higher than the $9.05 per Share price which will be paid under the
DRP.

The Company shall endeavor to acquire Shares on behalf of Participants
at the lowest price then available. However, the Company does not guarantee or
warrant that the Participant will be acquiring Shares at the lowest
possible price.

B-1
<PAGE> 436

the status of authorized but unissued Shares. These Shares will not be issued
unless they are first registered with the Securities and Exchange Commission
(the "Commission") under the Act and under appropriate state securities laws or
are otherwise issued in compliance with such laws.

It is understood that reinvestment of Distributions does not relieve a
Participant of any income tax liability which may be payable on the
Distributions.

4. Share Certificates. Within 90 days after the end of the
Company's fiscal year, the Company will issue certificates evidencing ownership
of Shares purchased through the DRP during the prior fiscal year. The
ownership of the Shares will be in book-entry form prior to the issuance of
such certificates.

5. Reports. Within 90 days after the end of the Company's fiscal
year, the Company will provide each Participant with an individualized report
on his or her investment, including the purchase date(s), purchase price and
number of Shares owned, as well as the dates of distribution and amounts of
Distributions received during the prior fiscal year. The individualized
statement to Stockholders will include receipts and purchases relating to each
Participant's participation in the DRP including the tax consequences relative
thereto.

6. Termination by Participant. A Participant may terminate
participation in the DRP at any time, without penalty, by delivering to the
Company a written notice. Prior to listing of the Shares on a national stock
exchange or inclusion of the Shares for quotation on a national market system,
any transfer of Shares by a Participant to a non-Participant will terminate
participation in the DRP with respect to the transferred Shares. IF a
Participant terminates DRP participation, the Company will provide the
terminating Participant with a certificate evidencing the whole shares in his
or her account and a check for the cash value of any fractional share in such
account. Upon termination of DRP participation, Distributions will be
distributed to the Stockholder in cash.

7. Amendment or Termination of DRP by the Company. The Directors
of the Company may by majority vote (including a majority of the Independent
Directors) amend or terminate the DRP for any reason upon 30 days' written
notice to the Participants.

8. Liability of the Company. The Company shall not be liable for
any act done in good faith, or for any good faith omission to act, including,
without limitation, any claims or liability: (a) arising out of failure to
terminate a Participant's account upon such Participant's death prior to
receipt of notice in writing of such death; and (b) with respect to the time
and the prices at which Shares are purchased or sold for a Participant's
account. To the extent that indemnification may apply to liabilities arising
under the Act or the securities act of a state, the Company has been advised
that, in the opinion of the Commission and certain state securities
commissioners, such indemnification is contrary to public policy and,
therefore, unenforceable.

9. Governing Law. This DRP shall be governed by the laws of the
State of Maryland.

B-2
<PAGE> 437
EXHIBIT I

INLAND REAL ESTATE CORPORATION

SUBSCRIPTION AGREEMENT

[INLAND LOGO]

PLEASE MAIL THE WHITE COPY, THE YELLOW COPY, AND YOUR
CHECK MADE PAYABLE TO "LNB/ESCROW AGENT FOR IREC" TO: Inland
Securities Corporation, 2901 Butterfield Road, Oak Brook,
Illinois 60521, Attn: Investor Services. Please use ballpoint
pen or type the information.

INLAND REAL ESTATE CORPORATION INSTRUCTIONS TO PURCHASERS

INSTRUCTIONS Any Person desiring to subscribe for Shares should carefully
read and review the Prospectus and, if he/she desires to
subscribe for Shares, complete the Subscription
Agreement/Signature Page which follows these instructions.
Follow the appropriate instruction listed below for the items
indicated. Please print in ink or type the information.

INVESTMENT Item 1--Enter the number of Shares to be purchased and the
A dollars and cents amount of the purchase. Minimum purchase 300
Shares ($3,000). Qualified Plans 100 Shares ($1,000).
(Iowa requires 300 Shares ($3,000) for IRA accounts.) Item
2--Check if you desire to participate in Distribution
Reinvestment Program.

REGISTRATION Item 3--Enter the exact name in which the Shares are to be
INFORMATION held. For co-owners enter the names of all owners. For
B investments by qualified plans, include the exact name of the
plan. If this is an additional purchase by a qualified
plan, please use the same exact plan name as previously used.
Item 4--Enter mailing address, state of residence and
telephone number of owner.
Item 5--Check the appropriate box. If the owner is a
non-resident alien, he must apply to the United States
Internal Revenue Service for an identification number via Form
SS-4 for an individual or SS-5 for a corporation, and supply
the number to the Company as soon as it is available.
Item 6-- Check this box if the owner is an employee of
Inland or an individual who has been continuously affiliated
with Inland as an independent contractor. Item 7--Enter birth
date(s) or date of incorporation. Item 8--Enter the Social
Security number or Taxpayer I.D. number. The owner is
certifying that this number is correct.

C Item 9--The residence address if different.

D Item 10--Check the appropriate box to indicate the type of
entity which is subscribing. If additional purchase,
this should be exactly the same as previous investment.

SIGNATURE Item 11--The Subscription Agreement/Signature Page must be
E executed and initialed by the owner(s), or if applicable, the
trustee or custodian.

ALTERNATE ADDRESS Item 12--If owners desire direct deposit of his/her/their cash
FOR DISTRIBUTIONS distributions to an account or address other than as
(OPTIONAL) set forth in the Subscription Agreement/Signature Page,
F please complete. Please make sure account has been opened and
account number is provided, as well as informing recipient
that distribution will be forthcoming and is an asset
transfer.

BROKER/DEALER Item 13--Enter the name of the Broker/Dealer and the
REGISTERED name of the Registered Representative, along with the street
REPRESENTATIVE address, city, state, zip code and telephone number of the
G Registered Representative. By executing the Subscription
Agreement/Signature Page, the Registered Representative
substantiates compliance with the Conduct Rules of the NASD
by certifying that the Registered Representative has
reasonable grounds to believe, based on information obtained
from the investor concerning his, her or its investment
objectives, other investments, financial situation and needs
and any other information known by such Registered
Representative, that investment in the Company is suitable for
such investor in light of his, her or its financial position,
net worth and other suitability characteristics and that the
Registered Representative has informed the investor of all
pertinent facts relating to the liability, liquidity and
marketability of an investment in the Company during its term.
The Registered Representative (authorized signature) should
sign and date.

SUBMISSION OF The properly completed and executed White and Yellow
SUBSCRIPTION copies of the Subscription Agreement/ Signature Page together
with a CHECK MADE PAYABLE TO "LNB/ESCROW AGENT FOR IREC"
should be returned to the owner's Registered Representative or
the offices of Inland Securities Corporation, 2901 Butterfield
Road, Oak Brook, Illinois 60521.

NOTE: If a Person other than the Person in whose name the Shares will be held
is reporting the income received from the Company, you must notify the Company
in writing of that Person's name, address and Social Security number.

This Specimen Copy of the Subscription Agreement/Signature Page (Exhibit I
of the Prospectus) should not be executed.

ALL INVESTORS AND THEIR REGISTERED REPRESENTATIVES MUST SIGN THE SUBSCRIPTION
AGREEMENT/ SIGNATURE PAGE PRIOR TO TENDERING ANY FUNDS FOR INVESTMENT IN
SHARES.

CALIFORNIA INVESTORS
All Certificates representing Shares which are sold in the State of California
will bear the following legend conditions: IT IS UNLAWFUL TO CONSUMMATE A SALE
OR TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFORE, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.

01-94-100-2

I-1
<PAGE> 438
[INLAND LOGO]

INLAND REAL ESTATE CORPORATION
SUBSCRIPTION AGREEMENT/SIGNATURE PAGE

PLEASE READ THIS SUBSCRIPTION AGREEMENT/SIGNATURE PAGE AND THE TERMS AND
CONDITIONS BEFORE SIGNING.
SUBSCRIBER MUST READ THE SUBSCRIPTION INSTRUCTIONS.

A
(1) INVESTMENT MAKE CHECK PAYABLE TO LNB/ESCROW AGENT FOR IREC
This subscription is in the amount of $_________________ for the purchase
of ______________ Shares of Inland Real Estate Corporation at $10 per
Share. Minimum initial investment: 300 Shares (100 Shares for IRA, Keogh
and qualified plan accounts-Iowa requires 300 Shares for IRA accounts)
This is an: / / INITIAL INVESTMENT / / ADDITIONAL INVESTMENT
(2) DISTRIBUTION REINVESTMENT PROGRAM: / / YES Subscriber elects to
participate in the Distribution Reinvestment Program described in the
Prospectus.
Distributions will be made by check unless box is marked.

B
<TABLE>
<S><C>
(3) REGISTERED OWNER

/ / Mr. / / Mrs. / / Ms. - -
- ----
CO-OWNER ---------------------------------------------------------- --------------------------
/ / Mr. / / Mrs. / / Ms. (AREA CODE) HOME TELEPHONE
- ---- ----------------------------------------------------------

(4) MAILING ADDRESS ----------------------------------------------------------
- ---- - -
-----------------------------
CITY, STATE & ZIP CODE ---------------------------------------------------------- (AREA CODE) BUSINESS TELEPHONE
- ----
STATE OF RESIDENCE (7) BIRTH DATE
- ---- ------------------ ----- ---- ---- ----- --- ----
MONTH DAY YEAR MONTH DAY YEAR
- ----
(5) PLEASE INDICATE
CITIZENSHIP STATUS
/ / U.S. CITIZEN
/ / RESIDENT ALIEN
/ / NON-RESIDENT ALIEN

(6) / / EMPLOYEE OR AFFILIATE

(8) SOCIAL SECURITY #

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

CO-OWNER
- ---- SOCIAL SECURITY #

CORPORATE OR CUSTODIAL
TAX IDENTIFICATION NUMBER

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

(9)
RESIDENCE ADDRESS IF DIFFERENT FROM ABOVE

- ------------------------------------------------------------------------------------------------------------------------------------
STREET CITY STATE ZIP CODE

(10) CHECK ONE--IMPORTANT--REFER TO REGISTRATION REQUIREMENTS ON BACK
A / / INDIVIDUAL OWNERSHIP H/ / IRA L/ / PENSION OR PROFIT SHARING PLAN
B / / JOINT TENANTS WITH RIGHT M/ / TRUST/DATE TRUST ESTABLISHED
OF SURVIVORSHIP I/ / QUALIFIED PLAN (KEOGH) ------------
C / / COMMUNITY PROPERTY NAME OF TRUSTEE OR OTHER ADMINISTRATOR
D / / TENANTS IN COMMON J/ /SIMPLIFIED EMPLOYEE PENSION/TRUST (S.E.P.)
E / / TENANTS BY THE ENTIRETY K/ / UNIFORM GIFTS TO MINORS ACT ----------------------------------------
F / / CORPORATE OWNERSHIP STATE OF A CUSTODIAN / / TAXABLE / / GRANTOR A OR B
G/ / PARTNERSHIP OWNERSHIP --------------- N/ / ESTATE
FOR O/ / OTHER (SPECIFY)
----------------------------- ------------------------
/ / TAXABLE / / NON-TAXABLE

</TABLE>

E
(11) The undersigned certifies, under penalties of perjury (i) that the
taxpayer identification number shown on the Subscription Agreement/Signature
Page is true, correct and complete, and (ii) is not subject to backup
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 or
distributions, or the Internal Revenue Service has notified him that he is no
longer subject to backup withholding.
The undersigned futher acknowledges and/or represents (or in the case of
fiduciary accounts, the person authorized to sign on such Investor's behalf)
the following:

(a) acknowledges receipt of the Prospectus of the Company relating to the
Shares, wherein the terms and conditions of the offering of the Shares
are described.
(b) represents that I (we) either: (i) have a net worth (excluding home,
home furnishings and automobiles) of at least $45,000 and estimate that
(without regard to investment in the Company) I (we) have gross income
due in the current year of at least $45,000; or (ii) have a net worth
(excluding home, home furnishings and automobiles) of at least $150,000
or such higher suitability as may be required by certain states and set
forth on page I-3 herein; In the case of sales to fiduciary accounts,
the suitability standards must be met by the beneficiary, the fiduciary
account or by the donor or grantor who directly or indirectly supplies
the funds for the purchase of the Shares.
(c) represents that the investors purchasing the Shares for his or her
own account and if I am (we are) purchasing Shares on behalf of a trust
or other entity of which I am (we are) trustee(s) or authorized
agent(s) I (we) have due authority to execute the Subscription
Agreement/Signature Page and do hereby legally bind the trust or other
entity of which I am (we are) trustee(s) or authorized agent(s).
(d) acknowledges that the Shares are not liquid; (not required for
Minnesota residents)
(e) if an Affiliate of the Company, represents that the Shares are being
purchased for investment purposes only and not with a view toward
immediate resale.

<TABLE>
<S><C>
AGREEMENT DATED 19
-------------------------- -----

X X
- ----------------------------------------------------------- ----------------------------
SIGNATURE--REGISTERED OWNER SIGNATURE--CO-OWNER

- -----------------------------------------------------------
(PRINT NAME OF CUSTODIAN OF TRUSTEE)

- -----------------------------------------------------------
AUTHORIZED SIGNATURE (CUSTODIAN OR TRUSTEE)

</TABLE>

A sale of the Shares may not be completed by the Soliciting Dealers until
at least five business days after receipt of the Prospectus.

<TABLE>
<S><C>
(12) (OPTIONAL) DIRECTLY DEPOSIT CASH DISTRIBUTIONS TO:
--------------------------------
ACCOUNT NUMBER MUST BE FILLED IN

NAME OF BANK,
BROKERAGE FIRM
OR INDIVIDUAL X
------------------------------------------------------------------- ---------------------------------------
SIGNATURE--REGISTERED OWNER
MAILING ADDRESS
-------------------------------------------------------------------
CITY, STATE &
ZIP CODE X
------------------------------------------------------------------- ---------------------------------------
SIGNATURE--CO-OWNER
</TABLE>

(13) BROKER/DEALER DATA--COMPLETED BY SELLING REGISTERED REPRESENTATIVE (PLEASE
USE REP'S ADDRESS--NOT HEADQUARTERS)

NAME OF
SALESPERSON - -
------------------------------------ ---------------------
/ / Mr. / / Mrs. / / Ms. SALESPERSON'S TELEPHONE

IS THIS A NEW BROKER/DEALER?
MAILING ADDRESS
-------------------------------- / / YES / / NO
CITY, STATE &
ZIP CODE
--------------------------------
BROKER/DEALER
NAME X
MAILING ADDRESS -------------------------------- ----------------------------
SIGNATURE--REGISTERED
CITY, STATE & REPRESENTATIVE
ZIP CODE
---------------------------------

INLAND REAL ESTATE CORPORATION

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<PAGE> 439

SUBSCRIPTION AGREEMENT/SIGNATURE PAGE

CERTAIN STATES HAVE IMPOSED SPECIAL FINANCIAL SUITABILITY STANDARDS FOR
INVESTORS WHO PURCHASE SHARES.
IF THE INVESTOR IS A RESIDENT OF CALIFORNIA, THE INVESTOR MUST HAVE
EITHER: (I) A NET WORTH (EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES) OF
$225,000; OR (II) A MINIMUM ANNUAL GROSS INCOME OF $60,000 AND A NET WORTH
(EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) OF $60,000.
IF THE INVESTOR IS A RESIDENT OF MAINE, THE INVESTOR MUST HAVE EITHER: (I)
A NET WORTH (EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES) OF $200,000; OR
(II) A MINIMUM ANNUAL GROSS INCOME OF $50,000 AND A NET WORTH (EXCLUSIVE OF
HOME, HOME FURNISHINGS AND AUTOMOBILES) OF $50,000.
IF THE INVESTOR IS A RESIDENT OF MASSACHUSETTS, THE INVESTOR MUST HAVE
EITHER: (I) A NET WORTH (EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES) OF
$225,000; OR (II) A MINIMUM ANNUAL GROSS INCOME OF $60,000 AND A NET WORTH
(EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) OF $60,000.
IF THE INVESTOR IS A RESIDENT OF TENNESSEE, THE INVESTOR MUST HAVE EITHER:
(I) A NET WORTH (EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES) OF $225,000;
OR (II) A MINIMUM ANNUAL GROSS INCOME OF $60,000 AND A NET WORTH (EXCLUSIVE OF
HOME, HOME FURNISHINGS AND AUTOMOBILES) OF $60,000.
THE COMPANY INTENDS TO ASSERT THE FOREGOING REPRESENTATIONS AS A DEFENSE
IN ANY SUBSEQUENT LITIGATION WHERE SUCH ASSERTION WOULD BE RELEVANT. THE
COMPANY SHALL HAVE THE RIGHT TO ACCEPT OR REJECT THIS SUBSCRIPTION IN WHOLE OR
IN PART, SO LONG AS SUCH PARTIAL ACCEPTANCE OR REJECTION DOES NOT RESULT IN AN
INVESTMENT OF LESS THAN THE MINIMUM AMOUNT SPECIFIED IN THE PROSPECTUS. AS USED
ABOVE, THE SINGULAR INCLUDES THE PLURAL IN ALL RESPECTS IF SHARES ARE BEING
ACQUIRED BY MORE THAN ONE PERSON. AS USED IN THIS AGREEMENT, "INLAND" REFERS TO
THE INLAND COMPANIES AND ITS AFFILIATES. THIS AGREEMENT AND ALL RIGHTS
HEREUNDER SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF ILLINOIS.

OFFICE USE ONLY Investor Check Date _______________
Investor Check # ________________
Check Amount $ ________________

BROKER/DEALER
NUMBER ________________________________

OWNER ACCOUNT
NUMBER _________________

CO-OWNER _______________
ACCOUNT NUMBER

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<PAGE> 440
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

<TABLE>
<S> <C>
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Securities and Exchange Commission Registration Fee . . . . . . . . . . . . $ 39,155
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,655
Printing and Mailing Expenses . . . . . . . . . . . . . . . . . . . . . . . 383,000
Blue Sky Fees and Expenses (including counsel fees) . . . . . . . . . . . . 125,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 40,000
Advertising and Sales Literature . . . . . . . . . . . . . . . . . . . . . 400,000
Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,690

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,771,500
=========================
</TABLE>

ITEM 31. SALES TO SPECIAL PARTIES.

Employees and associates of the Company and its Affiliates will be
permitted to purchase Shares net of sales commissions. Prior to the time that
the Minimum Number of Shares is sold, such persons may be required to pay $10
per Share and will receive a return of the commission amount promptly upon the
receipt of subscriptions for the Minimum Number of Shares.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.

On May 12, 1994, Inland Real Estate Advisory Services, Inc. (the
"Advisor") acquired 100 Shares at a price of $10 per Share, paid in cash. No
sales commission or other consideration was paid in connection with such sale,
which was effective without registration under the Securities Act of 1933, as
amended (the "Act"), in reliance upon the exemption from registration in
Section 4(2) of the Act as a transaction not involving any public offering. On
May 25, 1994 the Advisor purchased an additional 19,900 Shares at a price of
$10 per Share, paid in cash. No sales commission or other consideration was
paid in connection with such sale, and the sale was made in reliance upon the
exemption from registration in Section 4(2) of the Act.

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Second Articles of Amendment and Restatement and Bylaws
authorize it, to the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted and, without limiting the generality
of the foregoing, in accordance with Section 2-418 of the Maryland General
Corporation Law, to indemnify and pay or reimburse reasonable expenses to: any
Director, Advisor or Affiliate (each an "Indemnified Party"), provided, that:
(i) the Director, Advisor or Affiliate have determined, in good faith, that
the course of conduct which caused the loss or liability was in the best
interest of the Company; (ii) the Director, the Advisor or Affiliate were
acting on behalf of or performing services on the part of the Company; (iii)
such liability or loss was not the result of negligence or misconduct on the
part of the Indemnified Party, except that in the event the Indemnified Party
is or was an Independent Director, such liability or loss shall not have been
the result of gross negligence or willful misconduct; and (iv) such
indemnification or agreement to be held harmless is recoverable only out of the
assets of the Company and not from the Stockholders. The Company shall not
indemnify a Director, the Advisor or Affiliate for 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: (i) there has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the

II-1
<PAGE> 441
particular indemnitee; (ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular
indemnitee; or (iii) a court of competent jurisdiction approves a settlement of
the claims and finds that indemnification of the settlement and related costs
should be made and the court considering the request has been advised of the
position of the Securities and Exchange Commission (the "Commission") and the
published opinions of the Tennessee Securities Division and any other state
securities regulatory authority in which securities of the Company were offered
and sold as to indemnification for securities law violations.

To the extent that the indemnification may apply to liabilities
arising under the Act, the Company has been advised that, in the opinion of the
Commission, such indemnification is contrary to public policy and, therefore,
unenforceable.

ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.

Inapplicable.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.

(See Exhibit Index)

ITEM 36. UNDERTAKINGS.

A. The Registrant undertakes:

(a) to file any prospectuses required by Section 10(a)(3)
of the Act as post-effective amendments to this
Registration Statement;

(b) that for the purpose of determining any liability
under the Act, each such post-effective amendment may
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-2
<PAGE> 442
(c) that all post-effective amendments will comply with
the applicable forms, rules and regulations of the
Commission in effect at the time such post-effective
amendments are filed; and

(d) 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.

B. The Registrant undertakes to file, during any period in which
offers or sales are being made, a post- effective amendment to the Registration
Statement to: (a) include any prospectus required by Section 10(a)(3) of the
Act; (b) 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;
and (c) 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.

C. The Registrant undertakes to send to each Stockholder at least
on an annual basis a detailed statement of any transactions with the Advisor or
its Affiliates, and of fees, commissions, compensation and other benefits paid
or accrued to the Advisor or its Affiliates for the fiscal year completed,
showing the amount paid or accrued to each recipient and the services
performed.

D. The Registrant undertakes to provide to the Stockholders the
financial statements required by Form 10-K for the first full fiscal year of
operations of the Company.

E. The Registrant hereby undertakes to send to the Stockholders,
within 60 days after the close of each quarterly fiscal period, the information
specified by Form 10-Q, if such report is required to be filed with the
Securities and Exchange Commission.

F. The Registrant undertakes to file a sticker supplement
pursuant to Rule 424(c) under the Act during the distribution period describing
each property not identified in the prospectus at such time as there arises a
reasonable probability that such property will be acquired and to consolidate
all such stickers into a post-effective amendment filed at least once every
three months, with the information contained in such amendment provided
simultaneously to the existing Stockholders. Each sticker supplement should
also disclose all compensation and fees received by the Advisor and its
Affiliates in connection with any such acquisition. The post-effective
amendment shall include audited financial statements meeting the requirements
of Rule 3-14 of Regulation S-X only for properties acquired during the
distribution period.

The Registrant also undertakes to file, after the end of the
distribution period, a current report on Form 8-K containing the financial
statements and any additional information required by Rule 3-14 of Regulation
S-X, to reflect each commitment (i.e., the signing of a binding purchase
agreement) made after the end of the distribution period involving the use of
10 % or more (on a cumulative basis) of the net proceeds of the offering and to
provide the information contained in such report to the Stockholders at least
once each quarter after the distribution period of the offering has ended.

G. Insofar as indemnification for liabilities arising under the
Act 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.

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<PAGE> 443
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies 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 Post-Effective Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Oak Brook, State of Illinois, on the 30th day of April, 1997.

INLAND REAL ESTATE CORPORATION

By: /s/ Robert D. Parks
----------------------------------------------
Title: President, Chief Executive Officer,
Chief Operating Officer and Chairman
of the Board of Directors

II-4
<PAGE> 444
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 3 to the Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated:

<TABLE>
<S> <C> <C>
/s/ Robert D. Parks President, Chief Executive Officer, April 30, 1997
- --------------------------- Chief Operating Officer and Chairman
Robert D. Parks of the Board of Directors

/s/ G. Joseph Cosenza Director April 30, 1997
- ---------------------------
G. Joseph Cosenza

/s/ Kelly Tucek Secretary, Treasurer and April 30, 1997
- --------------------------- Chief Financial Officer
Kelly Tucek (Principal Accounting Officer)

/s/ Douglas R. Finlayson Director April 30, 1997
- ---------------------------
Douglas R. Finlayson, M.D.

/s/ Heidi N. Lawton Director April 30, 1997
- ---------------------------
Heidi N. Lawton

/s/ Roland W. Burris Director April 30, 1997
- ---------------------------
Roland W. Burris
</TABLE>

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<PAGE> 445
EXHIBIT INDEX

(a)(1) FINANCIAL STATEMENTS INCLUDED IN THE PROSPECTUS:

INLAND REAL ESTATE CORPORATION

Balance Sheets at March 31, 1996 and December 31, 1995
(unaudited).

Statements of Operations for the three months ended March 31,
1996 and 1995 (unaudited).

Statements of Stockholders' Equity at March 31, 1996 and
December 31, 1995.

Statement of Cash Flows for the three months ended March 31,
1996 and 1995 (unaudited).

Notes to Financial Statements March 31, 1996 (unaudited).

Independent Auditors' Report.

Balance Sheets as of December 31, 1995 and 1994.

Statement of Operations for the year ended December 31, 1995.

Statement of Stockholders' Equity for the year ended December
31, 1995 and for the period from May 12, 1994 (formation of
the Company) to December 31, 1994.

Statement of Cash Flows for the year ended December 31, 1995
and for the period May 12, 1994 (formation of the Company) to
December 31, 1994.

Notes to Financial Statements for the year ended December 31,
1995 and for the period from May 12, 1994 (formation of the
Company) to December 31, 1994.

Walgreens/Decatur Property Historical Summary of Gross Income
and Direct Operating Expenses for the six-month period ended
December 31, 1994 (unaudited).

Independent Auditor's Report.

Walgreens/Decatur Property Historical Summaries of Gross
Income and Direct Operating Expenses. Years ended June 30,
1994, 1993 and 1992.

Walgreens/Decatur Property Notes to Historical Summaries of
Gross Income and Direct Operating Expenses. Years ended June
30, 1994, 1993 and 1992.

Eagle Crest Shopping Center Historical Summary of Gross Income
and Direct Operating Expenses for the six-month period ended
December 31, 1994 (unaudited).

Independent Auditor's Report.

Eagle Crest Shopping Center Historical Summaries of Gross
Income and Direct Operating Expenses for the years ended June
30, 1994, 1993 and 1992.

II-6
<PAGE> 446

Eagle Crest Shopping Center Notes to the Historical Summary of
Gross Income and Direct Operating Expenses for the years ended
June 30, 1994, 1993 and 1992.

Report of Independent Public Accountants.

Nantucket Square Shopping Center Statement of Gross Income and
Direct Operating Expenses for the year ended December 31,
1994.

Nantucket Square Shopping Center Notes to the Statement of
Gross Income and Direct Operating Expenses for the year ended
December 31, 1994.

Nantucket Square Shopping Center Statement of Gross Income and
Direct Operating Expenses for the seven- month period ended
July 31, 1995.

Report of Independent Public Accountants.

Mundelein Plaza Statement of Gross Income and Direct Operating
Expenses for the Year Ended December 31, 1995.

Mundelein Plaza Notes to the Statement of Income and Direct
Operating Expenses for the year ended December 31, 1995.

Independent Auditors' Report.

Regency Point Shopping Center Historical Summary of Gross
Income and Direct Operating Expenses for the year ended
December 31, 1995.

Regency Point Shopping Center Notes to Historical Summary of
Gross Income and Direct Operating Expenses for the year ended
December 31, 1995.

Report of Independent Public Accountants.

Prospect Heights Plaza Statement of Gross Income and Direct
Operating Expenses for the year ended December 31, 1995.

Prospect Heights Plaza Notes to the Statement of Income and
Direct Operating Expenses for the year ended December 31,
1995.

Report of Independent Public Accountants.

Montgomery-Sears Shopping Center Statement of Gross Income and
Direct Operating Expenses for the year ended December 31,
1995.

Montgomery-Sears Shopping Center Notes to the Statement of
Income and Direct Operating Expenses for the year ended
December 31, 1995.

Inland Monthly Income Fund III Pro Forma Balance Sheet at
December 31, 1995 (unaudited).

II-7
<PAGE> 447
Inland Monthly Income Fund III Notes to Pro Forma Balance
Sheet at December 31, 1995 (unaudited).

Inland Monthly Income Fund III Pro Forma Statement of
Operations for the year ended December 31, 1995 (unaudited).

Inland Monthly Income Fund III Notes to Pro Forma Statement of
Operations of the Company for the year ended December 31, 1995
(unaudited).

Inland Monthly Income Fund III Pro Forma Balance Sheet at
March 31, 1996 (unaudited).

Inland Monthly Income Fund III Notes to Pro Forma Balance
Sheet at March 31, 1996 (unaudited).

Inland Monthly Income Fund III Pro Forma Statement of
Operations for the three months ended March 31, 1996
(unaudited).

Inland Monthly Income Fund III Notes to Pro Forma Statement of
Operations for the three months ended March 31, 1996
(unaudited).

(a) (2) FINANCIAL STATEMENTS INCLUDED IN THE REGISTRATION STATEMENT AS
PART OF SUPPLEMENT NUMBER 11.

(See exhibit index to Supplement No. 11)

(b) EXHIBITS

1.1 Dealer Manager Agreement, dated July 16, 1996, by and
between Inland Real Estate Corporation and Inland
Securities Corporation(2)

1.1(a) Amendment No. 1 to the Dealer Manager Agreement dated
October 15, 1996(3)

1.2 Form of Soliciting Dealers Agreement between Inland
Securities Corporation and Soliciting Dealer(2)

1.2(a) Form of Amendment No. 1 to the Soliciting Dealers
Agreement(3)

1.3 Form of Warrant Purchase Agreement(2)

3.1 Inland Monthly Income Fund III, Inc. Second Articles
of Amendment and Restatement(1)

3.2 Amended and Restated Bylaws of Inland Real Estate
Corporation(2)

3.3 Articles of Amendment of Inland Monthly Income Fund
III, Inc.(2)

4.1 Specimen Stock Certificate(2)

5 Opinion of Shapiro and Olander as to the legality of
the securities being registered(2)

II-8
<PAGE> 448
8 Opinion of Shefsky Froelich & Devine Ltd. as to tax
matters(2)

10.1 Escrow Agreement between Inland Monthly Income Fund
III, Inc. and LaSalle National Bank, N.A.(2)

10.2 Advisory Agreement between Inland Monthly Income Fund
III and Inland Real Estate Advisory Services dated
October 14, 1994(1)

10.2(a) Amendment No. 1 to the Advisory Agreement dated
October 13, 1995(3)

10.2(b) Amendment No. 2 to the Advisory Agreement dated
October 13, 1996(3)

10.3 Form of Management Agreement between the Company and
Inland Commercial Property Management, Inc(2)

10.4 Amended and Restated Independent Director Stock
Option Plan(1)

10.5 Real Estate Purchase and Sale Agreement by and
between Salem Square, Ltd. and American National Bank
and Trust Company of Chicago, as trustee dated July
11, 1996(3)

10.6 Agreement of Purchase and Sale by and between LaSalle
National Trust, N.A., as trustee and Endowment and
Foundation Realty Partnership -- JMB I and Inland
Monthly Income Fund III, Inc. dated July 18, 1996(3)

10.7 Agreement to Purchase by and between JMB/Spring Hill
Associates and Inland Real Estate Corporation dated
October 14, 1996(4)

10.8 Agreement of Sale by and between Lansing Square RFPII
Limited Partnership and Inland Real Estate
Corporation dated December 19, 1996(6)

10.9 Agreement of Purchase and Sale by and between KBS
Retail Limited Partnership and Inland Real Estate
Corporation dated December 20, 1996(5)

10.10 Letter Agreement between Aurora Commons Limited
Partnership and Northpoint Two Limited Partnership,
as seller, and Inland Real Estate Corporation, dated
November 7, 1996, as amended November 15, 1996,
December 16, 1996, December 20, 1996 and January 10,
1997(6)

23.1 Consent of KPMG Peat Marwick LLP dated April 30, 1997

23.2 Consent of Warady & Davis, dated April 30, 1997

23.3 Consent of Shefsky Froelich & Devine Ltd. dated July
17, 1996(2)

23.4 Consent of Shapiro and Olander1 (filed as part of
Exhibit 5)

II-9
<PAGE> 449
24 Power of Attorney (1) (included on signature page of
Registration Statement)

27 Financial Data Schedule (1)

99.1 Consent of Douglas R. Finlayson, M.D. to be named as
an Independent Director (1)

99.2 Consent of Heidi N. Lawton to be named as an
Independent Director (1)

_______________
1) Previously filed by Registrant on June 20, 1996
2) Previously filed by Registrant on July 18, 1996
3) Previously filed by Registrant on November 1, 1996
4) Previously filed by Registrant as Exhibit 10.1 to Current Report on
Form 8-K dated November 13, 1996 as filed on November 27, 1996
5) Previously filed by Registrant as Exhibit 10.1 to Current Report on
Form 8-K dated January 9, 1997 as filed on January 24, 1997
6) Previously filed by Registrant on January 31, 1997

II-10

<PAGE> 1
[KPMG PEAT MARWICK LLP LETTERHEAD]

The Board of Directors
Inland Real Estate Corporation:

We consent to the use of our reports relating to the financial statements of
Inland Real Estate Corporation as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for the years ended December 31, 1996 and
1995 and for the period from May 12, 1994 (formation date) to December 31, 1994,
the historical summary of gross income and direct operating expenses of Maple
Park Place for the year ended December 31, 1996, the historical summary of gross
income and direct operating expenses of Niles Shopping Center for the year ended
December 31, 1996, and the historical summary of gross income and direct
operating expenses of Sequoia Shopping Center for the year ended December 31,
1996, included herein and to the reference to our firm under the heading
"Experts" in this Registration Statement (No. 333-6459) on Form S-11.

Chicago, Illinois
April 30, 1997

<PAGE> 1
[WARADY & DAVIS LLP LETTERHEAD]

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) on the (i) Historical Summary of Gross
Income and Direct Operating Expenses (Historical Summary) of Aurora Commons
Partnership (An Illinois Limited Partnership) D/B/A Aurora Commons Shopping
Center as of December 31, 1996; and (ii) Historical Summary of Gross Income and
Direct Operating Expenses (Historical Summary) of Clark & Diversey Property
Limited Partnership (An Illinois Limited Partnership) D/B/A Lincoln Park Place
as of December 31, 1996 included in or made part of this Registration Statement
on Form S-11.

Warady & Davis LLP

Deerfield, Illinois
April 30, 1997