INLAND REAL ESTATE CORP, POS AM, 1998-07-07

INLAND REAL ESTATE CORP
POS AM, 1998-07-07
REAL ESTATE INVESTMENT TRUSTS

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As filed with the Securities and Exchange Commission on July 7, 1998
Registration No. 333-45233

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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

2901 Butterfield Road
Oak Brook, Illinois 60523
(Address of principal executive offices)

Robert H. Baum, Esq.
Inland Real Estate Corporation
2901 Butterfield Road
Oak Brook, Illinois 60523
(Name and address of agent for service)

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

Inland Real Estate Corporation
Sticker Supplement

Supplement No. 8 to the Company's Prospectus supersedes each of the previous
supplements filed by the Company, discloses information regarding recently
completed acquisitions by the Company and updates certain information in
sections of the Prospectus headed "Investment Objectives and Policies", "Real
Property Investments", "Management's Discussion and Analysis of Financial
Condition and Results of Operations", and "Plan of Distribution." In addition,
this Supplement No. 8 also supplements the financial statements included in the
Prospectus. Unless otherwise defined, capitalized terms used herein shall have
the same meaning as in the Prospectus.

Plan of Distribution

The Company commenced the Offering on April 7, 1998. As of June 30, 1998, the
Company had accepted subscriptions for 5,751,948 shares ($59,763,913 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 fees, as referenced in the Prospectus. As of
June 30, 1998, these commissions and fees totaled $6,010,785. An Affiliate
of the Advisor is also entitled to receive Property Management Fees for
management and leasing services, as described more fully in the Prospectus.

SUPPLEMENT NO. 8
DATED JULY 7, 1998
TO THE PROSPECTUS DATED APRIL 7, 1998
OF INLAND REAL ESTATE CORPORATION

This Supplement No. 8 is provided for the purpose of supplementing the
Prospectus dated April 7, 1998 of Inland Real Estate Corporation (the
"Company"), as previously supplemented by Supplement No. 7 dated June 25, 1998,
Supplement No. 6 dated June 16, 1998, Supplement No. 5 dated May 26, 1998,
Supplement No. 4 dated May 5, 1998, Supplement No. 3 dated April 27, 1998,
Supplement No. 2 dated April 21, 1998 and Supplement No. 1 dated April 9, 1998.
This Supplement No. 8 supersedes each of these supplements and discloses
information regarding recently completed acquisitions by the Company and updates
certain information in sections of the Prospectus headed "Investment Objectives
and Policies," "Real Property Investments," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Plan of
Distribution," and "Experts." This Supplement No. 8 also supplements the
financial statements included in the Prospectus. Unless otherwise defined,
capitalized terms used herein shall have the same meaning as in the Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

The Company's Board approved an increase in Distributions from $.87 per Share
per annum, paid monthly, to $.88 per Share per annum, paid monthly, for
Distributions declared and payable beginning after June 1, 1998.

REAL PROPERTY INVESTMENTS

Bergen Plaza, Oakdale, Minnesota

On April 16, 1998, the Company acquired the entire fee simple interest in a
Community Center located at 7101 10th Street North in Oakdale, Minnesota known
as "Bergen Plaza" from Bergen Investments L.L.C., an unaffiliated third party,
for approximately $17,247,680 less a credit of $225,000 for anticipated roof
and parking lot repairs (approximately $63.74 per square foot). The purchase
price was funded using cash and cash equivalents. The Company believes that
the purchase price was fair and reasonable based on, among other things, an
appraisal received by the Company and presented to the Company's board of
directors.

Bergen Plaza, built in 1978 and expanded in 1988 through 1990, is a multi-tenant
retail center complex consisting of five buildings aggregating 270,283 leasable
square feet. As of June 30, 1998, Bergen Plaza was 98% leased (100% leased if
the master lease, which lasts for 24 months, is considered). In evaluating
Bergen Plaza as a potential acquisition, the Company considered a variety of
factors including location, demographics, tenant mix, price per square foot,
occupancy and the fact that overall rental rates at the center are comparable
to market rates. The Company believes that the center is located within a
vibrant economic area and that the grocery anchor tenant, Rainbow Foods,
enhances its first acquisition in the Minnesota market. The Company did not
consider any other factors materially relevant to the decision to acquire the
property.

The Company anticipates spending approximately $225,000 for roof and parking lot
repairs to Bergen Plaza over the next few years. The Company received a credit
at closing of approximately $225,000 toward these costs.

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

Occupancy Rate
as of Effective
December 31, Annual Rent
Year Ending of Each Year Per Leasable Square Ft
December 31, (%) ($)
------------ ------------ -----------------

1997 98 6.47
1996 93 6.46
1995 97 6.09
1994 96 6.20
1993 94 6.30

Two tenants lease more than 10% of the total gross leasable area of the
property: Rainbow Foods, a grocery store, and Kmart, a discount department
store. The leases with these tenants require each of them to pay base annual
rent on a monthly basis as follows:

Base Rent
Per Square
Approx. Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------

Rainbow Foods 64,189 24 6.20 Currently 07/31/09
Option 1 6.20 08/01/09 07/31/24

Kmart 87,680 32 3.14 Currently 10/31/04

For federal income tax purposes, the Company's depreciable basis in Bergen Plaza
is approximately $13,000,000. Depreciation expense, for tax purposes, is
computed using the straight-line method. Buildings and improvements are
depreciated based upon estimated useful lives of 40 years. Real estate taxes
paid in 1997 for the 1997 tax year (the most recent tax year for which
information is available) were $751,354. The real estate taxes were calculated
by multiplying the taxable market value by a tax rate of 5.892%.

On June 30, 1998, a total of 265,084 square feet was leased to thirty-eight
tenants at Bergen Plaza. The following tables set forth certain information
with respect to the amount of and expiration of the leases at this Community
Center:

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Rainbow Foods 64,189 07/09 1/15 yr. 397,968 6.20
Kmart 87,680 10/04 - 275,315 3.14
Burger King 3,100 06/09 - 73,067 23.57
Big Top Liquors 7,200 10/99 - 58,968 8.19
Hunan Garden
Restaurant 4,050 09/99 1/5 yr. 36,450 9.00
Carpet Mart 4,800 11/02 - 24,000 5.00
True Value Hardware 3,777 01/07 1/10 yr. 12,000 3.18
Petco 19,513 04/06 1/10 yr. 107,321 5.50
Classroom
Connections 4,200 07/99 - 37,800 9.00

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Grand Tan 2,437 01/99 - 24,370 10.00
Bubbles Ultra
Cleaning 1,600 09/00 - 17,600 11.00
Pack 'N Mail 1,600 09/99 - 12,960 8.10
Outlaw's R.C. World 1,600 07/01 - 17,600 11.00
One Hour
Martinizing 1,600 07/99 - 20,000 12.50
Streg Hair Design 1,600 12/99 - 19,200 12.00
P.J. Sportsbar 3,002 08/01 - 31,521 10.50
Bon Jons Flowers 2,000 02/00 1/5 yr. 18,000 9.00
Pioneer Credit
Union 5,881 01/06 1/10 yr. 41,994 7.14
Rack 'em Up
Billiards 5,592 02/99 - 44,736 8.00
Jo Bridal & Tuxedo 3,118 05/02 - 32,739 10.50
First Nail 528 07/99 1/3 yr. 6,336 12.00
Fan Man 1,400 11/98 - 11,200 8.00
Ideas for Framing 1,400 09/99 - 14,420 10.30
Gourmet Coffee 1,400 09/98 - 15,400 11.00
Little Caesar's
Pizza 1,392 12/99 1/10 yr. 13,920 10.00
Groe One-hour Photo 1,500 04/03 - 18,756 12.50
Great Clips 1,200 10/99 - 16,800 14.00
Bartlett
Chiropratic 900 01/00 - 13,500 15.00
Western State Bank 3,200 07/03 1/9 yr. 36,800 11.50
Dr. Coyle Pet
Clinic 1,384 06/99 - 16,608 12.00
Smokers Haven 1,045 03/00 1/3 yr. 16,719 16.00
Cousins Submarine
Sandwich 2,052 04/02 1/7 yr. 20,520 10.00
Cost Cutters 1,200 09/02 - 18,000 15.00

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Oakdale Optical 1,200 05/02 - 15,120 12.60
Blockbuster Video 6,615 05/02 1/10 yr. 85,983 13.00
Dr. Timm, D.D.S. 1,000 08/99 - 17,000 17.00
Miniapple
Montessori 4,824 05/02 - 64,786 13.43
Erik's Bike Shop 4,305 05/03 - 34,440 8.00
Vacant 5,199

Average Percent of Percent of
Base Rent Total Annual Base
Approx. Base Total Per Square Building GLA Rent
GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

1998 3 6,000 63,400 1,780,215 10.57 2.22 3.56

1999 14 35,183 339,568 1,722,415 9.65 13.02 19.71

2000 4 5,545 65,820 1,392,462 11.87 2.05 4.73

2001 2 4,602 51,521 1,336,245 11.20 1.70 3.86

2002 7 23,809 320,650 1,296,096 13.47 8.81 24.74

2003 2 5,805 53,190 975,446 9.16 2.15 5.45

2004 1 87,680 275,312 922,256 3.14 32.40 29.85

2005 - - - 646,941 - - -

2006 2 25,394 149,312 646,941 5.88 9.38 23.08

(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 existing at the time of releasing.

</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
which reported a fair market value for the Bergen Plaza property, as of February
20, 1998, of $17,770,000. Appraisals are estimates of value and should not be
relied on as a measure of true worth or realizable value.

High Point Centre, Madison, Wisconsin

On April 24, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at 7475 Mineral Point Road in Madison,
Wisconsin known as "High Point Centre" from The Gialamas Company, an
unaffiliated third party, for approximately $10,354,000 (approximately $119.73
per square foot). The purchase price was funded using cash and cash
equivalents. The Company believes that the purchase price was fair and
reasonable based on, among other things, an appraisal received by the Company
and presented to the Company's board of directors.

High Point Centre, built in 1984, is a one-story, multi-tenant retail facility
containing 86,204 leasable square feet. As of June 30, 1998, High Point Centre
was 97% leased (100% leased if the master lease, which lasts for one year, is
considered). In evaluating High Point Centre as a potential acquisition, the
Company considered a variety of factors including location, demographics, tenant
mix, price per square foot, occupancy and the fact that overall rental rates at
the center are comparable to market rates. The Company believes High Point
Centre, which is adjacent to a regional mall, is strategically located in the
newest and fastest growing sector of the metro Madison area. This mall area,
along with High Point Centre, has long enjoyed high occupancy rates. 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 High Point Centre over the next few years. A substantial portion of any
monies spent on repairs and improvements would be paid for by the tenants
pursuant to the terms of the existing leases.

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

Effective Annual
Occupancy Rate as of Rental Rate Per
December 31, Leasable Square
Year Ending of Each Year Ft
December 31, (%) ($)
------------ ------------ -----------------

1997 99 11.46
1996 97 11.42
1995 97 11.07
1994 100 10.75
1993 100 10.43

One tenant leases more than 10% of the total gross leasable area of the
property: Pier 1 Imports, a home furnishing store. The lease with this tenant
requires the tenant to pay base annual rent on a monthly basis as follows:

Base Rent
Per Square
Approx. GLA % of Total Foot Per Lease Term
Lessee Leased GLA Annum Beginning To
($)
- ----------- ----------- ------------ ---------- ----------- ----------

Pier 1 Imports 8,976 10 15.25 Current 02/28/00
17.25 03/01/00 02/28/05

For federal income tax purposes, the Company's depreciable basis in High Point
Centre is approximately $7,800,000. Depreciation expense, for tax purposes, is
computed using the straight-line method. Buildings and improvements are
depreciated based upon estimated useful lives of 40 years. Real estate taxes
payable in 1998 for the tax year ended 1997 (the most recent tax year for which
information is available) will be $147,561. The real estate taxes were
calculated by multiplying the assessed value by a tax rate of 2.7415%.

On June 30, 1998, a total of 83,661 square feet was leased to twenty-seven
tenants at High Point Centre. The following tables set forth certain
information with respect to the amount of and expiration of the leases at this
Neighborhood Retail Center:

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Pier 1 Imports 8,976 02/05 - 136,884 15.25
Paper Heaven 3,760 06/99 - 47,000 12.50
Catura's Gallery 1,754 06/00 1/3 yr. 21,925 12.50
Hong Kong Cafe 2,862 08/04 3/5 yr. 40,068 14.00
Suiters Ltd. 2,608 03/01 3/5 yr. 28,688 11.00
TQ Diamonds 1,512 04/00 - 21,213 14.03
Easycuts 1,800 04/01 - 27,450 15.25
Pilgrim Cleaners 2,800 09/04 - 42,700 15.25
Inches A Weigh 1,668 04/01 1/5 yr. 20,850 12.50
Cottonwood Futons 2,000 06/99 2/5 yr. 27,000 13.50
Total Awards 4,650 06/01 2/5 yr. 46,500 10.00
Dimaggio Design 6,360 03/00 2/5 yr. 61,756 9.71
American Paging 3,336 01/00 2/5 yr. 53,042 15.90
Frugal Muse Books 6,100 09/04 - 73,200 12.00
Salon 2000 7,525 10/06 3/5 yr. 86,538 11.50
Rundell's Mens Wear 2,682 11/98 - 34,866 13.00
Computer Renaissance 2,308 12/99 1/5 yr. 31,158 13.50
A A Tailors 600 06/00 - 7,416 12.36

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Madison Outfitters 1,450 08/00 2/3 yr. 17,400 12.00
Cobbler Shop 1,512 09/99 2/5 yr. 20,412 13.50
Garden Market 2,350 05/02 - 26,438 11.25
Nevada Bobs 4,758 02/07 1/5 yr. 64,870 13.00
A & W Gold Foods 2,850 12/00 3/5 yr. 23,997 8.42
Angels for all
Reasons 1,150 08/99 - 11,500 10.00
Avco Financial
Services 1,710 10/02 1/5 yr. 22,230 13.00
California Closets 1,300 10/99 - 16,900 13.00
Exclusive Co. 3,280 06/01 1/5 yr. 43,985 13.41
Vacant 2,543

1998 1 2,682 34,866 1,500,680 13.00 3.11 3.32

1999 6 12,030 157,455 1,041,888 13.09 13.96 15.11

2000 7 17,862 223,438 916,239 12.51 20.72 24.39

2001 5 14,006 188,345 731,269 13.45 16.25 25.76

2002 2 4,060 50,430 555,651 12.42 4.71 9.08

2003 - - - 517,359 - - -

2004 3 11,762 188,204 529,498 16.00 13.64 35.54

2005 1 8,796 154,836 347,551 17.25 10.41 44.55

2006 1 7,525 116,638 198,973 15.50 8.73 58.62

2007 1 4,990 84,830 84,830 17.00 5.52 100.00

</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
which reported a fair market value for High Point Centre, as of April 15, 1998,
of $10,400,000. Appraisals are estimates of value and should not be relied on as
A measure of true worth or realizable value.

Western & Howard, Chicago, Illinois

On April 29, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at 2357 West Howard in Chicago, Illinois
known as "Western & Howard" from Michael Tansey, an unaffiliated third party,
for approximately $1,913,000 (approximately $149.64 per square foot). The
purchase price was funded using cash and cash equivalents. The Company believes
that the purchase price was fair and reasonable based on, among other things, an
appraisal received by the Company and presented to the Company's board of
directors.

Western & Howard, built in 1985, is a one-story, multi-tenant retail facility
containing 12,784 leasable square feet. As of June 30, 1998, Western & Howard
was 100% leased. In evaluating Western & Howard as a potential acquisition, the
Company considered a variety of factors including location, demographics, tenant
mix, price per square foot, the fact that overall rental rates at the center are
comparable to market rates and occupancy including the fact that all three of
the entities leasing space at the center are "national tenants" and have leased
space at the center since the center's opening. The remaining lease terms range
from three to seven years. The Company's management believes that the center is
located within a highly populated and vibrant economic area. 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 Western & Howard over the next few years. A substantial portion of any monies
spent on repairs and improvements would be paid for by the tenants pursuant to
the terms of the existing leases.

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

Occupancy Rate
as of Effective
December 31, Annual Rent
Year Ending of Each Year Per Leasable Square Ft
December 31, (%) ($)
------------ ------------ -----------------

1997 100 16.45
1996 100 16.89
1995 100 17.01
1994 100 17.01
1993 100 17.01

Three tenants lease more than 10% of the total gross leasable area of the
property: Super Gap, a clothing store, Payless Shoes, a discount shoe store,
and Pearle Vision, an eyeglass center. The leases with these tenants require
each of them to pay base annual rent on a monthly basis as follows:

Base Rent
Per Square
Approx. Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
Super Gap 7,944 62 17.00 Currently 01/31/01
Option 1 20.40 02/01/01 01/31/06

Payless Shoes 2,840 22 11.00 Currently 10/31/01

Pearle Vision 2,000 16 21.99 Currently 05/31/00
26.40 06/01/00 05/31/05

For federal income tax purposes, the Company's depreciable basis in Western &
Howard is approximately $1,200,000. Depreciation expense, for tax
purposes, is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes paid in 1997 for the tax year ended 1996 (the most recent tax
year for which information is available) were $59,595. The real estate taxes
were calculated by multiplying the assessed value by an equalizer of 2.1517%
and a tax rate of 4.7265%.

On June 30, 1998, a total of 12,784 square feet was leased to three tenants at
Western & Howard. The following tables set forth certain information with
respect to the amount of and expiration of the leases at this Neighborhood
Retail Center:

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Super Gap 7,944 01/01 1/5 yr. 135,048 17.00
Payless Shoes 2,840 10/01 - 31,240 11.00
Pearle Vision 2,000 05/05 - 43,980 21.99

1998 - - - 210,268 - - -

1999 - - - 210,268 - - -

2000 - - - 210,268 - - -

2001 2 10,784 166,288 219,088 15.42 84.4 75.9

2002 - - - 52,800 - - -

2003 - - - 52,800 - - -

2004 - - - 52,800 - - -

2005 1 2,000 52,800 52,800 26.40 15.6 100.0

</TABLE>

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 Western & Howard property, as of
April 3, 1998, of $1,965,000. Appraisals are estimates of value and should not
be relied on as a measure of true worth or realizable value.

Wauconda Shopping Center, Wauconda, Illinois

On May 5, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at 620 West Liberty in Wauconda, Illinois
known as "Wauconda Shopping Center" from Michael Scott, an unaffiliated third
party, for approximately $2,525,000 (approximately $81.04 per square foot). The
purchase price was funded using cash and cash equivalents. The Company believes
that the purchase price was fair and reasonable based on, among other things, an
appraisal received by the Company and presented to the Company's board of
directors.

Wauconda Shopping Center, built in 1988, is a one-story, multi-tenant retail
facility containing 31,157 leasable square feet. As of June 30, 1998, Wauconda
Shopping Center was 100% leased. In evaluating Wauconda Shopping Center as a
potential acquisition, the Company considered a variety of factors including
location, demographics, tenant mix, price per square foot, occupancy and the
fact that overall rental rates at the center are comparable to market rates.
The Company believes that the center is located within a vibrant economic area.
The center's anchor tenant, Sears Hardware, is a national tenant. 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 Wauconda Shopping Center over the next few years. A substantial portion of
any monies spent on repairs and improvements would be paid for by the tenants
pursuant to the terms of the existing leases.

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

Occupancy Rate
as of Effective
December 31, Annual Rent
Year Ending of Each Year Per Leasable Square Ft
December 31, (%) ($)
------------ ------------ -----------------

1997 100 8.12
1996 100 7.72
1995 100 6.27
1994 92 7.08
1993 100 7.23

Two tenants lease more than 10% of the total gross leasable area at the
property: Sears Hardware, a paint and hardware store, and Spasso, Ltd., a
restaurant. The leases with these tenants require each of them to pay base
annual rent on a monthly basis as follows:

Base Rent
Per Square
Approx. Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
Sears Hardware 21,600 69 6.75 Currently 09/30/01
7.25 10/01/01 09/30/06
Option 1 7.25 10/01/06 09/30/11

Spasso, Ltd. 4,667 15 14.28 Currently 12/31/00

For federal income tax purposes, the Company's depreciable basis in Wauconda
Shopping Center is approximately $2,000,000. Depreciation expense, for tax
purposes, is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes payable in 1998 for the tax year ended 1997 (the most recent
tax year for which information is available) will be $40,120. The real estate
taxes were calculated by multiplying the assessed value by a tax rate of 7.313%.

On June 30, 1998, a total of 31,157 square feet was leased to four tenants
at Wauconda Shopping Center. The following tables set forth certain
information with respect to the amount of and expiration of the leases at this
Neighborhood Retail Center:

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------

Sears Hardware 21,600 09/06 1/5 yr. 145,800 6.75
Mr. E's Bagels 2,445 09/00 1/5 yr. 20,342 8.32
E & E Systems 2,445 12/98 - 21,149 8.65
Spasso, Ltd. 4,667 12/00 - 67,674 14.50

1998 1 2,445 21,149 253,937 8.65 7.85 8.32

1999 - - - 234,450 - - -

2000 2 7,112 88,650 234,450 12.46 22.82 37.81

2001 - - - 145,800 - - -

2002 - - - 156,600 - - -

2003 - - - 156,600 - - -

2004 - - - 156,600 - - -

2005 - - - 156,600 - - -

2006 1 21,600 156,600 156,600 7.25 69.33 100.00

</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
which reported a fair market value for Wauconda Shopping Center, as of March 1,
1998, of $2,600,000. Appraisals are estimates of value and should not be relied
on as a measure of true worth or realizable value.

Berwyn Plaza, Berwyn, Illinois

On May 15, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at 6901 West Ogden Avenue in Berwyn, Illinois
known as "Berwyn Plaza" from Berwyn Plaza Partnership, an unaffiliated third
party, for approximately $1,837,000 (approximately $100.89 per square foot). The
purchase price was funded using cash and cash equivalents. The Company
believes that the purchase price was fair and reasonable based on, among other
things, an appraisal received by the Company and presented to the Company's
board of directors.

Berwyn Plaza, built in 1983, is a one-story, multi-tenant retail facility
containing 18,138 leasable square feet. As of June 30, 1998, Berwyn Plaza was
100% leased. In evaluating Berwyn Plaza as a potential acquisition, the Company
considered a variety of factors including location, demographics, tenant mix,
price per square foot, occupancy and the fact that overall rental rates at the
center are comparable to market rates. The Company believes that the center is
located within a vibrant economic area. 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 Berwyn Plaza over the next few years. A substantial portion of any monies
spent on repairs and improvements would be paid for by the tenants pursuant to
the terms of existing leases.

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

Occupancy Rate
as of Effective
December 31, Annual Rent
Year Ending of Each Year Per Leasable Square Ft
December 31, (%) ($)
------------ ------------ -----------------

1997 100 10.23
1996 100 9.90
1995 100 10.01
1994 100 10.45
1993 100 10.48

Two tenants lease more than 10% of the total gross leasable area of the
property: Walgreens, a drug store, and Radio Shack, an electronics store. The
leases with these tenants require that each of them pay base annual rent on a
monthly basis as follows:

Base Rent
Per Square
Approx. Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------

Walgreens 13,506 74 8.51 Currently 07/31/23

Radio Shack 2,000 11 11.70 Currently 02/28/99
Option 1 03/01/99 02/28/04

For federal income tax purposes, the Company's depreciable basis in Berwyn Plaza
is approximately $1,400,000. Depreciation expense, for tax purposes, is
computed using the straight-line method. Buildings and improvements are
depreciated based upon estimated useful lives of 40 years. Real estate taxes
paid in 1997 for the tax year ended 1996 (the most recent tax year for which
information is available) were $106,167. The real estate taxes were
calculated by multiplying the assessed value by an equalizer of 2.1517% and a
tax rate of 5.667%.

On June 30, 1998, a total of 18,138 square feet was leased to five tenants at
Berwyn Plaza. The following tables set forth certain information with respect to
the amount of and expiration of the leases at this Neighborhood Retail Center:

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Walgreens 13,506 07/23 - $114,936 $ 8.51
Radio Shack 2,000 02/99 1/5 yr. 23,400 11.70
Baskin Robbins 1,000 10/99 - 14,400 14.40
Currency Exchange 736 09/98 - 13,800 18.75
Mr. Beef 896 05/00 - 18,897 21.09

1998 1 736 13,800 185,433 18.75 4.06 7.44

1999 2 3,000 37,800 172,233 12.60 16.54 21.95

2000 1 896 20,097 135,033 22.43 4.94 14.88

2001-
2007 - - - 114,936 - - -

</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
which reported a fair market value for Berwyn Plaza, as of December 10, 1997, of
$1,900,000. Appraisals are estimates of value and should not be relied on as a
measure of true worth or realizable value.

Woodland Heights Shopping Center, Streamwood, Illinois

On June 5, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at 225 Irving Park Road in Streamwood,
Illinois known as "Woodland Heights Shopping Center" from Woodland Heights
Associates, an unaffiliated third party, for approximately $9,600,000
(approximately $79.44 per square foot). The purchase price was funded using
cash and cash equivalents. The Company believes that the purchase price was
fair and reasonable based on, among other things, an appraisal received by the
Company and presented to the Company's board of directors.

Woodland Heights Shopping Center, built in 1956 and expanded in 1985 and
renovated in 1997, is a one-story, multi-tenant retail facility containing
120,436 leasable square feet. As of June 30, 1998, Woodland Heights Shopping
Center was 86% leased (100% leased if the master lease, which lasts for one
year, is considered). The Company believes the space currently being master
leased will be leased to new tenants prior to the termination of the master
lease. In evaluating Woodland Heights Shopping Center as a potential
acquisition, the Company considered a variety of factors including location,
demographics, tenant mix, price per square foot, occupancy and the fact that
overall rental rates at the center are comparable to market rates. As part of
an overall renovation project in 1997, the Jewel/Osco store was expanded to
60,626 square feet, a new facade and new signage was created for the other
tenants, new roofing was installed throughout the center, the parking lot was
resurfaced and new parking lot lighting was installed. The Company believes
that the center is located within a vibrant economic area. 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 Woodland Heights Shopping Center over the next few years. A substantial
portion of any monies spent on repairs and improvements would be paid for by the
tenants pursuant to the terms of existing leases.

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

Occupancy Rate
as of Effective
December 31, Annual Rent
Year Ending of Each Year Per Leasable Square Ft
December 31, (%) ($)
------------ ------------ -----------------

1997 86 6.09
1996 87 6.06
1995 86 6.07
1994 95 7.65
1993 100 7.47

Two tenants lease more than 10% of the total gross leasable area of the
property: Jewel Food Store, a grocery store, and the U.S. Postal Service. The
leases with these tenants require each of them to pay base annual rent on a
monthly basis as follows:

Base Rent
Per Square
Approx. Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
Jewel Food Store 60,626 50 5.00 Currently 11/30/12
Option 1 5.00 12/01/12 11/30/47

U.S. Postal
Service 17,750 15 8.00 Currently 11/30 99
9.00 12/01/99 11/30/04

For federal income tax purposes, the Company's depreciable basis in Woodland
Heights Shopping Center is approximately $7,000,000. Depreciation expense, for
tax purposes, is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes paid in 1997 for the tax year ended 1996 (the most recent tax
year for which information is available) were $451,843. The real estate taxes
were calculated by multiplying the assessed value by an equalizer of 2.1517%
and a tax rate of 10.584%.

On June 30, 1998, a total of 103,586 square feet was leased to twelve tenants at
Woodland Heights Shopping Center. The following tables set forth certain
information with respect to the amount of and expiration of the leases at this
Neighborhood Retail Center:

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
U.S. Postal
Service 17,750 11/04 - 142,000 8.00
Home to Home 1,600 10/98 1/3 yr. 21,618 13.23
1/2 yr.
1/3 yr.

Hollywood Video 8,000 09/07 2/5 yr. 114,000 14.25
Lifestyles 2,000 09/00 1/2 yr. 24,000 12.00
Jewel Food Store 60,626 11/12 1/35 yr. 303,130 5.00
New Horizon's
Hair Design 2,000 12/03 1/5 yr. 28,000 14.00
Streamwood Currency
Exchange 1,050 11/00 - 17,724 16.88

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Danny's Pizza 1,010 09/06 - 11,110 11.00
Bo Mei Restaurant 2,100 03/03 - 26,250 12.50
Woodland Cleaners 1,050 12/98 1/5 yr. 15,750 15.00
Subway 1,600 01/01 2/5 yr. 20,000 12.50
Video Galaxy 4,800 11/98 - 67,200 14.00
Vacant 16,850

1998 3 7,450 104,118 789,018 13.98 6.19 13.20

1999 - - - 687,224 - - -

2000 2 3,050 42,260 706,310 13.86 2.53 5.98

2001 1 1,600 21,600 665,860 13.50 1.33 3.24

2002 - - - 645,310 - - -

2003 2 4,100 55,300 660,000 13.49 3.40 8.38

2004 1 17,750 159,750 604,700 9.00 14.74 26.42

2005 - - - 445,960 - - -

2006 1 1,010 15,150 445,960 15.00 .84 3.40

2007 1 8,000 127,680 430,810 15.96 6.64 29.64

</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
which reported a fair market value for the Woodland Heights Shopping Center
property, as of May 28, 1998, of $9,650,000. Appraisals are estimates of value
and should not be relied on as a measure of true worth or realizable value.

Walgreens Property, Woodstock, Illinois

On June 23, 1998, the Company acquired the entire fee simple interest in a
single-user retail property located at 331 N. Irving Avenue in Woodstock,
Illinois known as "the Walgreens property" from Woodstock Walgreen Venture, an
unaffiliated third party, for approximately $1,162,000 (approximately $73.82 per
square foot). The purchase price was funded using cash and cash equivalents.
The Company believes that the purchase price was fair and reasonable based on,
among other things, an appraisal received by the Company and presented to the
Company's board of directors.

The Walgreens property, built in 1973, is a one-story, single-user retail
facility containing 15,856 leasable square feet. As of June 30, 1998, the
Walgreens property was 100% leased. In evaluating the Walgreens property as a
potential acquisition, the Company considered a variety of factors including
location, demographics, price per square foot, occupancy and the fact that
overall rental rates at the center are comparable to market rates. The Company
believes that the center is located within a vibrant economic area. This
property has been recently renovated to include a drive-up 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 Walgreens property over the next few years. A substantial portion of any
monies spent on repairs and improvements would be paid for by the tenant
pursuant to the terms of the existing lease.

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

Occupancy Rate
as of Effective
December 31, Annual Rent
Year Ending of Each Year Per Leasable Square Ft
December 31, (%) ($)
------------ ------------ -----------------
1997 100 6.99
1996 100 6.99
1995 100 6.99
1994 100 6.99
1993 100 6.99

One tenant leases the total gross leasable area of the property: Walgreens,
a drug store. The lease with this tenant requires it to pay base annual
rent on a monthly basis as follows:

For federal income tax purposes, the Company's depreciable basis in the
Walgreens property is approximately $760,000. Depreciation expense, for tax
purposes, is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years. Real
estate taxes for this property are paid by the tenant and are not available from
the seller.

On June 30, 1998, a total of 15,856 square feet was leased to one tenant at the
Walgreens property. The following tables set forth certain information with
respect to the amount of and expiration of the leases at this single-user
retail property:

Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Walgreens 15,856 03/30 - 110,800 6.99

1998-
2007 - - - 110,800 - - -

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

</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
which reported a fair market value for the Walgreens property, as of May
26,1998, of $1,200,000. Appraisals are estimates of value and should not be
relied on as a measure of true worth or realizable value.

Schaumburg Plaza Shopping Center, Schaumburg, Illinois

On June 30, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at Barrington Road and Weathersfield Road in
Schaumburg, Illinois known as "Schaumburg Plaza" from George Hanus, an
unaffiliated third party for approximately $6,987,300 (approximately $113.64
per square foot). As part of the acquistion of Schaumburg Plaza, the Company
assumed the existing debt of $3,924,183. This debt requires monthly payments
of interest only at a rate of 9.25% per annum through September 2004, and then
requires monthly payments of principal and interest at a rate of 9.25% per
annum, based on a 30 year amortization schedule through December 2009. The
balance of the purchase price was funded using cash and cash equivalents. The
Company believes the purchase price was fair and reasonable based on, among
other things, an appraisal received by the Company and presented to the
Company's board of directors.

Schaumburg Plaza, built in 1994, is a one-story, multi-tenant retail
facility aggregating 61,485 leasable square feet. As of June 30, 1998,
Schaumburg Plaza was 93% leased. (100% leased if the master lease, which lasts
for one year, is considered). In evaluating Schaumburg Plaza as a potential
acquisition, the Company considered a variety of factors including location,
demographics, tenant mix, price per square foot, occupancy and the fact that
overall rental rates at the center are comparable to market rates. The center is
newly built with several strong anchor tenants: Sears, Trak Auto and Ulta III.
The Company believes that the center is located at a prime location within a
vibrant economic area. 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 Schaumburg Plaza over the next few years. A substantial
portion of any monies spent on repairs and improvements would be for paid by the
tenants, pursuant to the terms of the existing leases.

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

Occupancy Rate Effective
as of Annual Rental
December 31, Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------

1997 100 12.14
1996 100 11.92
1995 100 11.92
1994 95 *
1993 * *

* Construction was completed on Schaumburg Plaza in the fourth quarter of
1994.

Three tenants lease more than 10% of the total gross leasable area of the
property: Sears, a hardware store, Trak Auto, an auto parts store and Ulta III,
a cosmetic store. The leases with these tenants require each of them to pay
base annual rent on a monthly basis as follows:

Base Rent
Per Square
Foot Per
Approx. % of Total Annum Lease Term
Lessee GLA Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
Sears 20,076 32.54 12.00 Currently 09/30/04
Option 1 13.00 10/01/04 09/30/09
14.00 10/01/09 09/30/14

Trak Auto 20,000 32.53 8.50 Currently 12/31/99
Option 1 9.00 01/01/00 12/31/04
9.50 01/01/05 12/31/10
10.00 01/31/10 12/31/14

Ulta III 8,500 13.82 11.00 Currently 01/31/00
Option 1 12.00 02/01/00 01/31/05

For federal income tax purposes, the Company's depreciable basis in
Schaumburg Plaza is approximately $5,200,000. Depreciation expense, for tax
purposes, is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes paid in 1997 for the tax year ended 1996 (the most recent tax
year for which information is generally available) were $414,144. The real
estate taxes were calculated by multiplying the assessed value by an equalizer
of 2.1517% and a tax rate of 9.094%.

On June 30, 1998, a total of 61,485 square feet was leased to eight tenants
at Schaumburg Plaza. The following tables set forth certain information with
respect to the amount of and expiration of the leases at this Neighborhood
Retail Center:

Approx. Current Rent per Square
GLA Lease Renewal Annual Rent Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Sears 20,076 10/04 1/10 yr. 240,912 12.00
Trak Auto 20,000 06/04 1/10 yr. 170,000 8.50
Ulta III 8,500 01/00 1/5 yr. 93,500 11.00
Fuddruckers 5,520 06/09 1/15 yr. 131,000 23.73
Nationwide 1,500 10/00 - 21,000 14.00
Acceptance
Hair Cuttery 1,450 12/99 1/5 yr. 23,180 15.99
Vacant 4,439

<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Approx. Base Total Per Square Building GLA Rent
GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring by Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

1998 - - - 672,348 - - -

1999 1 1,450 23,186 672,348 15.99 2.36 3.45

2000 2 10,000 107,500 676,384 10.75 16.26 15.89

2001 - - - 568,884 - - -

2002 - - - 568,884 - - -

2003 - - - 568,884 - - -

2004 2 40,076 420,672 568,884 10.50 65.18 73.95

2005 - - - 167,697 - - -

2006 - - - 167,697 - - -

2007 - - - 167,697 - - -

(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 existing at the time of
releasing.

</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 which reported a fair market value for the Schaumburg Plaza
property, as of October 11, 1997, of $7,000,000. Appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

Winnetka Commons Shopping Center, New Hope, Minnesota

On July 1, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at 3520-3566 Winnetka Avenue North in New
Hope, Minnesota known as "Winnetka Commons" from WCSC Associates Limited
Partnership, an unaffiliated third party, for approximately $4,435,000
(approximately $104.65 per square foot). The purchase price was funded using
cash and cash equivalents. The Company believes that the purchase price was
fair and reasonable based on, among other things, an appraisal received by the
Company and presented to the Company's board of directors.

Winnetka Commons, built in 1990, is a one-story, multi-tenant retail
facility aggregating 42,415 leasable square feet. As of July 1, 1998, Winnetka
Commons was 100% leased. In evaluating Winnetka Commons as a potential
acquisition, the Company considered a variety of factors including location,
demographics, tenant mix, price per square foot, occupancy and the fact that
overall rental rates at the center are comparable to market rates. The Company
believes that the center is located within a steady growth economic area and is
well maintained. 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 Winnetka Commons over the next few years. A substantial
portion of any monies spent on repairs and improvements would be paid for by the
tenants pursuant to the terms of the existing leases.

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

Occupancy Rate Effective
as of Annual Rental
December 31, Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------

1997 100 10.50
1996 96 10.44
1995 90 9.89
1994 94 8.69
1993 94 8.91

Two tenants lease more than 10% of the total gross leasable area of the
property: Walgreen's, a national drug store and Big Wheel/Rossi, a foreign car
parts store. The leases with these tenants require each of them to pay base
annual rent on a monthly basis as follows:

Base Rent
Per Square
Foot Per
Approx. % of Total Annum Lease Term
Lessee GLA Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
Walgreens Drug 11,890 28.03 10.60 Currently 05/31/10
11.60 06/01/10 05/31/20
12.60 06/01/20 05/31/30

Big Wheel/Rossi 6,227 14.68 6.50 Currently 03/31/02
Option 1 7.50 05/01/02 03/31/07

For federal income tax purposes, the Company's depreciable basis in
Winnetka Commons is approximately $2,800,000. Depreciation expense, for tax
purposes, is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes payable in 1998 for the tax year 1998 (the most recent tax
year for which information is generally available) are $175,660. The real
estate taxes were calculated by multiplying the taxable market value by a tax
rate of 5.6911%.

On July 1, 1998, a total of 42,415 square feet was leased to sixteen
tenants at Winnetka Commons. The following tables set forth certain
information with respect to the amount of and expiration of the leases at this
Neighborhood Retail Center:
Approx. Current Rent per Square
GLA Lease Renewal Annual Rent Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Tires Plus 4,200 09/00 2/5 yr. 56,700 13.50
Back in Shape 1,542 09/01 - 16,962 11.00
McGlynn's Bakery 1,702 11/99 1/5 yr. 14,467 8.50
Hot Comics 1,400 05/01 - 10,500 7.50
Big Wheel/Rossi 6,227 03/02 1/5 yr. 40,476 6.50
A.J. Floral 1,200 09/02 - 13,200 11.00
Jade Cafe' 1,812 03/05 - 19,932 11.00
Winnetka Liquors 2,388 02/07 - 20,298 8.50
Travel Masters 900 10/01 - 7,650 8.50
Tobacco Outlet 900 06/00 1/3 yr. 11,250 12.50
New Hope For Hair 900 11/00 - 13,950 15.50
H & R Block 900 4/02 - 11,250 12.50
Frankie's Pizza 1,670 05/04 - 20,875 12.50
Brueggers Bagels 2,764 08/05 - 41,626 15.06
Dunn Bros. Coffee 2,020 01/06 - 28,280 14.00
Walgreens Drug 11,890 11/30 - 126,034 10.60

<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Approx. Base Total Per Square Building GLA Rent
GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring by Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- -------- --------- ----------- ----------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>

1998 - - - 645,356 - - -

1999 1 1,702 15,318 461,058 9.00 4.01 3.32

2000 3 6,000 82,350 456,717 13.73 14.15 18.03

2001 4 5,512 67,461 386,925 12.24 13.00 17.44

2002 3 8,327 66,576 323,395 8.00 19.63 20.59

2003 - - - 260,033 - - -

2004 - - - 263,936 - - -

2005 2 4,576 76,100 266,324 16.63 10.79 28.57

2006 1 2,020 34,340 191,418 17.00 4.76 17.94

2007 1 2,388 32,238 158,272 13.50 5.63 20.37

(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 existing at the time of
releasing.

</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 which reported a fair market value for the Winnetka Commons
property, as of June 15, 1998, of $4,700,000. Appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

Eastgate Shopping Center, Lombard, Illinois

On July 7, 1998, the Company acquired the entire fee simple interest in a
Neighborhood Retail Center located at 837 South Westmore in Lombard, Illinois
known as "Eastgate Shopping Center" from Shidler Group, an unaffiliated third
party, for approximately $7,731,000 less a credit for $931,000 for anticipated
roof and parking lot repairs (approximately $58.33 per square foot). The
purchase price was funded using cash and cash equivalents. The Company
believes that the purchase price 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.

Eastgate Shopping Center, built in 1959 and renovated in 1987, consists of
three one-story, multi-tenant retail facilities and a single tenant outlot
aggregating 132,208 leasable square feet. As of July 7, 1998, Eastgate
Shopping Center was 89% leased (100% leased if the master lease, which lasts
for two years, is considered). In evaluating Eastgate Shopping Center as a
potential acquisition, the Company considered a variety of factors including
location, demographics, tenant mix, price per square foot, occupancy and the
fact that overall rental rates at the center are comparable to market rates.
Eastgate Shopping Center is an older, well established neighborhood center with
strong, long-term local tenants. The Company believes that the center was
purchased well below replacement cost. The Company did not consider any other
factors materially relevant to the decision to acquire the property.

The Company anticipates spending approximately $931,000 for roof and parking
lot repairs to Eastgate Shopping Center over the next few years. The Company
received a credit at closing of approximately $931,000 toward these costs.

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

Occupancy Rate Effective
as of Annual Rental
December 31, Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------

1997 87 9.77
1996 85 9.61
1995 85 9.91
1994 84 9.73
1993 83 9.77

Two tenants lease more than 10% of the total gross leasable area of the
property: the Illinois Department of Employment and Ace Hardware. The leases
with these tenants require each of them to pay base annual rent on a monthly
basis as follows:

Base Rent
Per Square
Foot Per
Approx. % of Total Annum Lease Term
Lessee GLA Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
IL Department of
Employment 24,800 18.76 5.87 Currently 11/30/99
6.12 12/01/99 11/30/01
6.37 12/01/01 11/30/02

Ace Hardware 17,000 12.86 5.85 Currently 05/31/03
Option 1 6.89 06/01/03 05/31/10

For federal income tax purposes, the Company's depreciable basis in
Eastgate Shopping Center is approximately $5,800,000. Depreciation expense,
for tax purposes, is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes paid in 1997 for the tax year ended 1996 (the most recent tax
year for which information is generally available) were $119,000. The real
estate taxes were calculated by multiplying the assessed value by a tax rate of
6.6902%.

On July 7, 1998, a total of 119,495 square feet was leased to forty-two
tenants at Eastgate Shopping Center. The following tables set forth certain
information with respect to the amount of and expiration of the lease at this
Neighborhood Retail Center.

Approx. Current Rent per Square
GLA Lease Renewal Annual Rent Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
CellOne Antenna 1 06/00 4/5 yr. 3,600 -
John Cole & Assoc. 200 12/98 - 2,400 12.00
James Stephen 400 04/99 - 4,500 11.25
Farmers, Inc. 400 05/99 - 4,500 11.25
Early Times Chimney
Sweeps 1,049 05/01 - 11,015 10.50
Professional
Investigations 400 07/98 - 4,320 10.80
American Family
Insurance 400 06/99 - 4,500 11.25
Service Master 400 04/99 - 4,200 10.50
West-Tech Printing 4,000 02/01 - 28,640 7.16
Dr. Blankenship 1,200 03/01 - 13,800 11.50
Evershine Janitorial
Service 300 09/99 - 3,300 11.00
Eastgate Dental
Association 2,500 10/99 - 28,275 11.31
Eastgate Video 3,200 03/02 1/5 yr. 33,376 10.43
Second Time Around 3,600 09/00 - 32,256 8.96

Approx. Current Rent per Square
GLA Lease Renewal Annual Rent Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Eastgate Laundry 2,200 05/99 - 22,000 10.00
Creative
Confections 1,900 06/00 - 15,200 8.00
DuPage College 4,000 06/01 - 35,960 8.99
Call Communications 2,206 05/00 - 12,552 5.69
Kumon Math Center 400 12/98 - 4,500 11.25
DuPage Schools
Credit Union 2,325 04/01 1/3 yr. 19,763 8.50
Frank's Barber Shop 900 11/05 1/5 yr. 8,514 9.46
Color Inn #3 1,800 02/99 - 12,600 7.00
Pizza Hut 1,600 09/98 - 20,016 12.51
21 Century Hair
Fashion 1,800 04/00 - 13,500 7.50
IL Dept. of
Employment 24,800 12/02 - 145,576 5.87
LaSalle Craigan
Bank 3,200 12/98 - 38,400 12.00
Little Ones Reruns 3,306 04/99 - 26,448 8.00
Schroeder's Ace
Hardware 17,000 05/03 1/7 yr. 99,450 5.85
Tratorria Aurora 1,600 09/02 1/10 yr. 20,064 12.54
Fashion Exchange 2,000 06/00 - 17,000 8.50
Eastgate Cleaners 2,200 12/06 - 19,778 8.99
Hair by Mark 1,600 09/02 - 20,864 13.04
Early Times Chimney
Sweeps 2,294 05/01 - 13,764 6.00
Uniform Store 2,800 03/01 - 18,200 6.50
White Hen Pantry 2,500 02/11 4/5 yr. 16,550 6.62
State of IL Vehicle 4,368 04/99 1/5 yr. 24,810 5.68
Artworx Studio 464 12/00 1/3 yr. 4,872 10.50
Mr. Wonton 1,800 10/01 1/5 yr. 13,500 7.50
Secretary of State-
Drivers 7,632 05/00 - 47,624 6.24
Dreams Delight Cafe 1,360 05/01 - 16,320 12.00
Midwest Insurance
Group 2,640 05/03 - 29,040 11.00
Midwest Chimney
Supply 750 05/01 - 8,438 11.25
Vacant 12,713

1998 5 5,800 69,636 909,615 12.01 4.39 7.66

1999 10 16,074 135,833 865,445 8.45 12.16 14.07

2000 8 19,603 147,970 740,058 7.55 14.83 19.99

2001 10 21,578 193,898 597,224 8.99 16.32 32.47

2002 4 31,200 235,880 412,147 7.56 23.60 57.23

2003 2 19,640 128,490 176,883 6.54 14.86 72.64

2004 - - - 48,393 - - -

2005 1 900 8,514 49,185 9.46 .68 17.31

2006 1 2,200 22,396 40,671 10.18 1.66 55.07

2007 - - - 20,200 - - -

(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 existing at the time of
releasing.

</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 which reported a fair market value for the Eastgate Shopping Center
property, as of April 30, 1998, of $6,950,000. Appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.

Potential Property Acquisitions

The Company is considering the following potential property acquistions which is
subject to further negotiation and execution of definitive agreements and recipt
by the Company of acceptable appraisals and environmental reports. There can be
no assurance that the Company will complete the transaction described herein.

Park Center Plaza, Tinley Park, Illinois

The Company anticipates purchasing the entire fee simple interest in a Community
Center located at 16024 S. Harlem Avenue in Tinley Park, Illinois known as "Park
Center Plaza" from an unaffiliated third party for approximately $15,500,000.
Park Center Plaza was constructed in 1988 and consists of a one-story, multi-
tenant retail facility containing 193,179 leasable square feet. Its major
tenant is Cub Foods Store.

New Construction Projects

Staples Office Supply Store, Freeport, Illinois.

On April 22, 1998, the Company entered into a construction loan agreement under
which it agreed to loan an unaffiliated third party $2,507,038. As collateral
for the loan, the property owner, a trust, executed a mortgage in favor of the
Company and assigned the related leases. The beneficiary of the trust
guaranteed the loan and assigned their beneficial ownership interest in the
trust to the Company.
Disbursements are to be made periodically as work progresses in connection with
construction of a 24,049 square foot Staples Office Supply Store to be built at
Route 26 and North Powell Road in Freeport, Illinois. On April 23, 1998, the
Company made the first loan advance (approximately $870,000) toward the
construction loan to Chicago Title and Trust Company. It will be disbursed to
various contractors upon submission of signed lien waivers to Chicago Title and
Trust Company. The Company will earn interest on the outstanding loan balance
at the rate of 9.5% per annum, paid monthly in advance.

Joint Venture Transactions

Inland Joliet Commons L.L.C., Joliet, Illinois.

The Company anticipates entering into a joint venture arrangement under which
it would contribute approximately $50,000 in cash to acquire a 1%
equity interest in an Illinois limited liability company ("L.L.C.") which will
own Joliet Commons Shopping Center located at U.S. 30 and Willow Road, Joliet,
Illinois. An unaffiliated third party would contribute the center, valued
at approximately $19,800,000, and subject to an indebtedness of approximately
$14,700,000, to the L.L.C. in return for a 99% interest in the L.L.C. The
unaffiliated third party would have an option to convert its interest in the
L.L.C. into shares of stock of the Company after one year from the eventual
closing date.

There can be no assurance that the Company will complete this joint venture
transaction because it is subject to further negotiation and the execution of
definitive agreements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE 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 Supplement No. 8
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.

Liquidity and Capital Resources

As of July 24, 1996, the Company had received subscriptions for a total of
5,000,000 Shares, offered on a best efforts basis, at $10.00 per Share, thereby
completing the Company's initial Offering. On July 24, 1996, the Company
commenced an offering of an additional 10,000,000 Shares, the Second Offering,
at $10.00 per Share, on a best efforts basis. As of July 10, 1997, the Company
had received subscriptions for a total of 10,000,000 Shares, thereby completing
the Company's Second Offering. On July 14, 1997, the Company commenced an
offering of an additional 20,000,000 Shares, the Third Offering, at $10.00 per
Share, on a best efforts basis. As of March 19, 1998, the Company had received
subscriptions for a total of 20,000,000 Shares, thereby completing the Third
Offering. In addition, as of March 31, 1998, the Company has distributed
1,070,778 Shares through the Company's Distribution Reinvestment Program. As of
March 31, 1998, the Company has repurchased 53,100 Shares through the Company's
Share Repurchase Program. As a result, as of March 31, 1998, Gross Offering
Proceeds total $357,939,054 net of Shares repurchased through the Share
Repurchase Program.

The Company's capital needs and resources are expected to undergo changes as a
result of the completion of the Company's first follow-on public offering of
Shares, the commencement of the second follow-on Offerings 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 upon 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.

Cash and cash equivalents consists of cash and short-term investments. Cash and
cash equivalents at March 31, 1998 and December 31, 1997 were $77,208,219 and
$51,145,587 respectively. The increase in cash and cash equivalents since
December 31, 1997 is due to the additional sales proceeds raised and additional
loan proceeds from financing secured by the Company's properties. Partially
offsetting the increase in cash and cash equivalents was the purchase of
additional properties since December 31, 1997 and the payment of Offering Costs
relating to the Second and Third Offerings. The Company intends to use cash and
cash equivalents to purchase additional properties, to pay distributions and
to pay Offering Costs.

As of March 31, 1998, the Company had acquired fifty-nine 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 on
weighted average shares. Commencing with the fourth quarter of 1996, the
Company increased the monthly distributions from $.80 to $.83 per annum on
weighted average shares. Beginning March 1, 1997, the Company increased the
monthly distribution paid to $.85 per annum on weighted average shares.
Beginning August 1, 1997, the Company increased the monthly distribution paid to
$.87 per annum on weighted average shares. Distributions declared for the three
months ended March 31, 1998 were $6,263,131, a portion of which represents a
return of capital for federal income tax purposes. The return of capital portion
of the distributions cannot be determined at this time and will be calculated at
year end.

Management of the Company 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 three months ended March 31, 1998, the Company qualified as a
REIT.

Cash Flows From Operating Activities

Net cash provided by operating activities increased from $1,575,693 for the
three months ended March 31, 1997 to $8,191,805 for the three months ended March
31, 1998. This increase is due primarily to the purchase of additional
properties. As of March 31, 1998, the Company had acquired fifty-nine
properties, as compared to twenty-four properties as of March 31, 1997.

Cash Flows From Investing Activities

Cash flows used in investing activities were utilized primarily for the purchase
of and additions to properties.

Cash Flows From Financing Activities

For the three months ended March 31, 1998, the Company generated $130,446,863 of
cash flows from financing activities as compared to $27,550,217 of cash flows
generated from financing activities for the three months ended March 31, 1997.
This increase is due primarily to the increase in proceeds raised from the
Offering of $108,707,257 for the three months ended March 31, 1998, as compared
to $27,207,053 of Offering proceeds raised for the three months ended March 31,
1997. This increase is also due to $38,702,000 in financing placed on fifteen of
the Company's properties for the three months ended March 31, 1998, as compared
to $12,840,000 in financing placed on three of the Company's properties for the
three months ended March 31, 1997. This increase is partially offset by an
increase in the cash used for the payment of Offering costs for the three months
ended March 31, 1998 and 1997. The increase is also partially offset by an
increase in the amount of distributions paid for the three months ended March
31, 1998 of $5,592,993 as compared to the distributions paid for the three
months ended March 31, 1997 of $1,740,481.

In February 1998, the Company committed to additional financing secured by
Woodfield Shopping Center property for $9,600,000 from an unaffiliated lender.
Loan fees total approximately $85,500 in connection with this mortgage. The
mortgage loan has a term of seven years and, prior to maturity date, requires
payment of interest only, at 6.65%. Funding of the loan is expected to occur
during the second quarter 1998.

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 March 31, 1998, organizational and offering costs did
not exceed this limitation.

Results of Operations

As of March 31, 1998, subscriptions for a total of 35,933,050 Shares were
received from the public resulting in $357,939,054 in Gross Offering Proceeds,
which includes the Advisor's capital contribution of $200,000 and Shares
purchased through the DRP. At March 31, 1998, the Company owned forty-three
Neighborhood Retail Centers, seven Community Centers and nine Single-user retail
properties.

Funds from operations ("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 of real property and
amortization and other non-cash items. FFO and funds available for
distribution are calculated as follows:

March 31, 1998 March 31, 1997
---------------- ----------------
Net Income........................... $4,037,415 884,700
- --------------------------------------------------------------------------------
Depreciation......................... 2,200,954 741,920
----------- -----------

Funds from operations(1)............. 6,238,369 1,626,620

Normal amortizing principal
payments of debt..................... (16,980) (18,659)

Deferred rent receivable(2).......... (289,037) (99,411)

Acquistion cost expenses(3).......... 44,036 9,090

Rental income received under
Master lease agreements (4).......... 542,940 71,599
----------- -----------
Funds available for distribution..... $6,519,328 1,589,239
=========== ===========

(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 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 month rent, which is the average
monthly rent for the entire period of occupancy during the term of the
lease.

(3) Acquisition costs expenses include costs and expenses relating to the
acquisition of properties. These costs are estimated to be up to .5% of
the Gross Offering Proceeds and are paid from the Proceeds of the
Offering.

(4) As part of several purchases, the Company will receive rent under master
lease agreements on some of the spaces currently vacant for periods
ranging from one to two years 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.

Total income for the three months ended March 31, 1998 and 1997 was $13,268,496
and $4,857,771, respectively. This increase was due to the purchase of
additional properties. As of March 31, 1998, the Company had acquired fifty-nine
properties, as compared to twenty-four properties as of March 31, 1997. The
purchase of additional properties also resulted in increases in property
operating expenses to Affiliates and non-affiliates and depreciation expense.

The decrease in mortgage interest to Affiliates for the three months ended March
31, 1998, as compared to the three months ended March 31, 1997, is due to the
payoff of the acquisition financing totaling $8,000,000. The Company continues
to have a mortgage collateralized by the Walgreens, Decatur property payable to
an Affiliate.

The increase in mortgage interest to non-affiliates for the three months ended
March 31, 1998, as compared to the three months ended March 31, 1997, is due to
financing placed on previously acquired centers as well as mortgages assumed as
part of the purchases of Aurora Commons, Rivertree Court, Fashion Square and
Shoppes at Mill Creek. The mortgages payable totaled $154,129,456 as of March
31, 1998 as compared to $106,589,710 as of ended March 31, 1997.

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
three months ended March 31, 1998, as compared to the three months ended March
31, 1997, is due to the management of an increased number of real estate assets
and an increased number of investors.

The increase in acquisition cost expenses to Affiliates and non-affiliates is
due to the increased number of properties considered for acquisition by the
Company and not purchased.

The following table lists the approximate physical occupancy levels for the
Company's investment properties as of the end of each quarter during 1998 and
1997. N/A indicates the property was not owned by the Company at the end of the
quarter.

1997 1998
----------------------------- ----------------
at at at at at
Properties 03/31 06/31 09/31 12/31 03/31
- ---------- ----- ----- ----- ----- -----

Walgreens 100% 100% 100% 100% 100%
Decatur, Illinois

Eagle Crest 97% 97% 97% 97% 95%
Naperville, Illinois

Montgomery-Goodyear 77% 77% 77% 77% 77%
Montgomer, Illinois

Hartford/Naperville Plaza 100% 100% 94% 100% 100%
Naperville, Illinois

Nantucket Square 94% 94% 96% 96% 96%
Schaumburg, Illinois

1997 1998
----------------------------- ----------------
at at at at at
Properties 03/31 06/31 09/31 12/31 03/31
- ---------- ----- ----- ----- ----- -----

Antioch Plaza 59% 59% 68% 68% 68%
Antioch, Illinois

Mundelein Plaza 100% 96% 97% 100% 95%
Mundelein, Illinois

Regency Point 100% 100% 97% 97% 97%
Lockport, Illinois

Prospect Heights 83% 83% 83% 83% 83%
Prospect Heights, Illinois

Montgomery-Sears 85% 85% 85% 95% 95%*
Montgomery, Illinois

Zany Brainy 100% 100% 100% 100% 100%
Wheaton, Illinois

Salem Square 97% 97% 97% 97% 97%
Countryside, Illinois

Hawthorn Village 97% 98% 99% 99% 100%
Vernon Hills, Illinois

Six Corners 94% 94% 94% 90% 93%
Chicago, Illinois

Spring Hill Fashion 96% 96% 96% 100% 98%
Center
West Dundee, Illinois

Crestwood Plaza 100% 100% 100% 100% 100%
Crestwood, Illinois

Park St. Claire 100% 100% 100% 100% 100%
Schaumburg, Illinois

Lansing Square 90% 90% 90% 90% 90%
Lansing, Illinois

Summit of Park Ridge 82% 81% 84% 83% 83%
Park Ridge, Illinois

1997 1998
----------------------------- ----------------
at at at at at
Properties 03/31 06/31 09/31 12/31 03/31
- ---------- ----- ----- ----- ----- -----

Grand and Hunt Club 100% 100% 100% 100% 100%
Gurnee, Illinois

Quarry Outlot 100% 100% 100% 100% 100%
Hodgkins, Illinois

Maple Park Place 99% 97% 98% 98% 98%
Bolingbrook, Illinois

Aurora Commons 99% 100% 100% 98% 98%*
Aurora, Illinois

Lincoln Park Place 100% 100% 100% 60% 60%*
Chicago, Illinois

Ameritech N/A 100% 100% 100% 100%
Joliet, Illinois

Dominicks-Schaumburg N/A 100% 100% 100% 100%
Schaumburg, Illinois

Dominicks-Highland Park N/A 100% 100% 100% 100%
Highland Park, Illinois

Niles Shopping Center N/A 100% 87% 60% 60%*
Niles, Illinois

Mallard Crossing N/A 95% 95% 95% 95%*
Elk Grove Village,
Illinois

Cobblers Crossing N/A 91% 89% 89% 89%
Elgin, Illinois

Calumet Square N/A 100% 100% 100% 100%
Calumet City, Illinois

Sequoia Shopping Center N/A 96% 97% 93% 93%*
Milwaukee, Wisconsin

Riversquare Shopping Ctr. N/A 100% 100% 95% 95%
Naperville, Illinois

1997 1998
----------------------------- ----------------
at at at at at
Properties 03/31 06/31 09/31 12/31 03/31
- ---------- ----- ----- ----- ----- -----

Rivertree Court N/A N/A 97% 99% 99%*
Vernon Hills, Illinois

Shorecrest Plaza N/A N/A 96% 96% 96%*
Racine, Wisconsin

Dominicks-Glendale N/A N/A 100% 100% 100%
Heights
Glendale Heights,
Illinois

Party City Store N/A N/A N/A 100% 100%
Oak Brook Terrace, IL

Eagle Country Market N/A N/A N/A 100% 100%
Roselle, Illinois

Dominicks-Countryside N/A N/A N/A 100% 100%
Countryside, Illinois

Terramere Plaza N/A N/A N/A 80% 80%
Arlington Heights,
Illinois

Wilson Plaza N/A N/A N/A 100% 100%
Batavia, Illinois

Iroquois Center N/A N/A N/A 81% 81%
Naperville, Illinois

Fashion Square N/A N/A N/A 88% 80%
Skokie, Illinois

Naper West N/A N/A N/A 86% 88%*
Naperville, Illinois

Dominicks-West Chicago N/A N/A N/A N/A 100%
West Chicago, Illinois

Shops at Coopers Grove N/A N/A N/A N/A 96%*
Country Club Hills, IL

1997 1998
----------------------------- ----------------
at at at at at
Properties 03/31 06/31 09/31 12/31 03/31
- ---------- ----- ----- ----- ----- -----

Maple Plaza N/A N/A N/A N/A 100%
Downers Grove, Illinois

Orland Park Retail N/A N/A N/A N/A 84%*
Orland Park, Illinois

Wisner/Milwaukee Plaza N/A N/A N/A N/A 100%
Chicago, Illinois

Homewood Plaza N/A N/A N/A N/A 100%
Homewood, Illinois

Elmhurst City Center N/A N/A N/A N/A 99%*
Elmhurst, Illinois

Shoppes of Mill Creek N/A N/A N/A N/A 97%*
Palos Park, Illinois

Oak Forest Commons N/A N/A N/A N/A 99%*
Oak Forest, Illinois

Prairie Square N/A N/A N/A N/A 94%*
Sun Prairie, Wisconsin

Downers Grove Plaza N/A N/A N/A N/A 84%*
Downers Grove, Illinois

St. James Crossing N/A N/A N/A N/A 88%*
Westmont, Illinois

Woodfield Plaza N/A N/A N/A N/A 97%*
Schaumburg, Illinois

Lake Park Plaza N/A N/A N/A N/A 95%*
Michigan City, Indiana

Chestnut Court N/A N/A N/A N/A 85%*
Darien, Illinois

* As part of the purchase of these properties, the Company receives rent under
master lease agreements on the vacant space, which results in 100% economic
occupancy at March 13, 1998 for each of these centers, except Niles Shopping
Center where the master lease agreement results in 73% economic occupancy.

The master lease agreements are for periods ranging from one to two years
from the purchase date or until the spaces are leased.

Subsequent Events

In January 1998, the Company paid a distribution of $2,447,251 to the
Stockholders.

On April 16, 1998, the Company purchased the Bergen Plaza Shopping Center from
an unaffiliated third party for approximately $17,248,000. The property is
located in Oakdale, Minnesota and contains approximately 270,610 square feet of
leasable space. Its major tenants are Rainbow Foods and Kmart.

On April 24, 1998, the Company purchased the High Point Centre Shopping Center
from an unaffiliated third party for approximately $10,354,000. The property is
located in Madison, Wisconsin and contains approximately 86,204 square feet of
leasable space. Its major tenant is Pier 1 Imports.

On April 29, 1998, the Company purchased the Western Howard Plaza Shopping
Center from an unaffiliated third party for approximately $1,913,000. The
property is located in Chicago, Illinois and contains approximately 12,784
square feet of leasable space. Its major tenants are The Gap, Pearle Vision
and Payless Shoes.

On May 5, 1998, the Company purchased the Wauconda Shopping Center from an
unaffiliated third party for approximately $2,525,000. The property is located
in Wauconda, Illinois and contains approximately 31,357 square feet of leasable
space. Its major tenants are Sears Paint and Hardware and Spasso, Ltd.

On April 22, 1998, the Company entered into a construction loan agreement with
an unaffiliated third party, the borrower, for an entire loan amount of
$2,507,038. Disbursements are to be made periodically as work progresses in
connection with the construction of a Staples Office Supply store to be built in
Freeport, Illinois. The construction loan matures on October 15, 1998 and, prior
to maturity, requires the borrower to make payments of interest only, on amounts
disbursed at a rate of 9.5%. The Company made an initial advance of $864,134
on April 23, 1998.

On April 7, 1998, the Company commenced an offering of an additional 25,000,000
Shares at $11.00 per Share, on a best efforts basis, (the "Fourth Offering").
As of June 22, 1998, the Company had accepted subscriptions for 5,141,661
shares.

On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.

PLAN OF DISTRIBUTION

The Company commenced the Offering on April 7, 1998, and as of June 30, 1998 had
accepted subscriptions for 5,751,948 shares (59,763,913 net of Selling
Commissions, the Marketing Contribution and the Due Diligence Expense Allowance
Fees).

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 fees, as referenced in the Prospectus. As of June 30, 1998, these
commissions and fees totaled $6,010,785. An Affiliate of the Advisor is also
entitled to receive Property Management Fees for management and leasing
services. The Company incurred Property Management Fees of approximately
$1,120,000 for the year ended December 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. For the year ended December 31, 1997, the Company had incurred
Advisor Asset Management Fees of $843,000.

EXPERTS

The historical summary of gross income and direct operating expenses of High
Point Centre for the year ended December 31, 1997, the historical summary of
gross income and direct operating expenses of Woodland Heights Shopping Center
for the year ended December 31, 1997, the historical summary of gross income and
direct operating expenses of Eastgate Shopping Center for the year ended
December 31, 1997, and the historical summary of gross income and direct
operating expenses of Winnetka Commons for the year ended December 31, 1997,
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.

INDEX TO FINANCIAL STATEMENTS

Page
Inland Real Estate Corporation

Balance Sheets at March 31, 1998 and
December 31, 1997 (unaudited)......................................... F-1

Statements of Operations for three months ended March 31, 1998
and 1997 (unaudited) ................................................. F-3

Statements of Stockholders' Equity at March 31, 1998 and
December 31, 1997 (unaudited)......................................... F-4

Statements of Cash Flows for the three months ended March 31, 1998 and
1997 (unaudited) ..................................................... F-5

Notes to Financial Statements March 31, 1998 (unaudited) ............. F-7

Pro Forma Balance Sheet at March 31, 1998 (unaudited) ............... F-21

Notes to Pro Forma Balance Sheet at March 31, 1998 (unaudited) ...... F-23

Pro Forma Statement of Operations for the three months ended
March 31, 1998 (unaudited) .......................................... F-27

Notes to Pro Forma Statement of Operations for the three months
ended March 31, 1998 (unaudited) .................................... F-29

Pro Forma Statement of Operations for the year ended
December 31, 1997 (unaudited) ....................................... F-34

Notes to Pro Forma Statement of Operations for the year
ended December 31, 1997 (unaudited) ................................. F-36

High Point Centre

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

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1997 of High Point Centre ........... F-56

Notes to the Historical Summary of Gross Income and Direct Operating

F-i

Expenses for the year ended December 31, 1997 of High Point Centre .. F-57

Woodland Heights Shopping Center

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

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1997 of Woodland Heights Shopping Center
..................................................................... F-60

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Woodland Heights
Shopping Center ..................................................... F-61

Eastgate Shopping Center

Independent Auditors' Report ........................................ F-63

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1997 of Eastgate Shopping Center .... F-64

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Eastgate Shopping
Center .............................................................. F-65

Winnetka Commons

Independent Auditors' Report ........................................ F-67

Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1997 of Winnetka Commons ............ F-68

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Winnetka Commons ... F-69

F-ii

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets

March 31, 1998 and December 31, 1997
(unaudited)

Assets
------

1998 1997
Investment properties (Notes 1, 4 and 5): ---- ----
Land............................................ $113,382,037 75,801,319
Building and improvements....................... 286,373,103 200,509,519
------------- -------------
399,755,140 276,310,838
Less accumulated depreciation................... 7,866,437 5,665,483
------------- -------------
Net investment properties....................... 391,888,703 270,645,355
------------- -------------
Cash and cash equivalents including amounts
held by property manager (Note 1)............... 77,208,219 51,145,587
Restricted cash (Note 1).......................... 3,181,123 2,073,799
Accounts and rents receivable (Notes 1 and 5)..... 8,052,881 4,926,643
Deposits and other assets........................ 1,033,920 3,924,431
Deferred organization costs (net of accumulated
amortization of $12,358 and $10,985 at March 31,
1998 and December 31, 1997, respectively)
(Note 1)........................................ 15,104 16,477
Loan fees (net of accumulated amortization
of $172,400 and $131,266 at March 31, 1998 and
December 31, 1997, respectively) (Note 1)....... 1,298,633 857,839
------------- -------------

Total assets.................................. $482,678,583 333,590,131
============= =============

See accompanying notes to financial statements.

F-1

1 INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets
(continued)

March 31, 1998 and December 31, 1997
(unaudited)

Liabilities and Stockholders' Equity
------------------------------------

1998 1997
Liabilities: ---- ----
Accounts payable................................ $ 258,305 47,550
Accrued offering costs to Affiliates............ 794,033 544,288
Accrued offering costs to non-affiliates........ 86,331 36,574
Accrued interest payable to Affiliates.......... 4,627 4,641
Accrued interest payable to non-affiliates...... 865,699 560,821
Accrued real estate taxes....................... 9,209,918 7,031,732
Distributions payable (Note 7).................. 2,447,251 1,777,113
Security deposits............................... 1,035,016 754,359
Mortgages payable (Note 6)...................... 154,129,456 106,589,710
Unearned income................................. 966,508 495,535
Other liabilities............................... 1,506,433 493,116
Due to Affiliates (Note 2)...................... 501,319 337,825
------------- -------------
Total liabilities............................. 171,804,896 118,673,264
------------- -------------

Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 106,000,000 Shares
authorized; 35,933,050 and 35,879,950, issued
and outstanding at March 31, 1998 and 25,026,140
and 24,973,340 issued and outstanding at
December 31, 1997, respectively............... 358,800 249,733
Additional paid-in capital (net of offering
costs of $38,866,440 and $28,341,719 at March
31, 1998 and December 31, 1997, respectively,
of which $34,001,630 and $24,172,634 was paid
to Affiliates, respectively).................. 318,713,814 220,640,345
Accumulated distributions in excess
of net income................................. (8,198,927) (5,973,211)
------------- -------------
Total stockholders' equity.................... 310,873,687 214,916,867
------------- -------------
Total liabilities and stockholders' equity........ $482,678,583 333,590,131
============= =============

See accompanying notes to financial statements.

F-2

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Operations

For the three months ended March 31, 1998 and 1997
(unaudited)

1998 1997
---- ----
Income:
Rental income (Notes 1 and 5)................... $ 9,424,416 3,603,584
Additional rental income........................ 3,020,925 1,061,507
Interest income................................. 776,364 156,436
Other income.................................... 46,791 36,244
------------ ------------
13,268,496 4,857,771
------------ ------------
Expenses:
Professional services to Affiliates............. 18,000 9,500
Professional services to non-affiliates......... 98,198 30,410
General and administrative expenses
to Affiliates................................. 70,761 16,936
General and administrative expenses
to non-affiliates............................. 31,056 28,312
Advisor asset management fee.................... 432,183 233,337
Property operating expenses to Affiliates....... 494,528 172,537
Property operating expenses to non-affiliates... 3,466,494 1,686,924
Mortgage interest to Affiliates................. 13,888 44,454
Mortgage interest to non-affiliates............. 2,318,476 961,287
Depreciation.................................... 2,200,954 741,920
Amortization.................................... 42,507 38,364
Acquisition cost expenses to Affiliates......... 30,000 2,289
Acquisition cost expenses to non-affiliates..... 14,036 6,801
------------ ------------
9,231,081 3,973,071
------------ ------------
Net income.................................... $ 4,037,415 884,700
============ ============

Net income per weighted average common stock shares
outstanding, basic and diluted (29,073,250 and
9,384,792 for the three months ended March 31,
1998 and 1997, respectively..................... $ .14 .09
============ ============

See accompanying notes to financial statements.

F-3

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Stockholders' Equity

March 31, 1998 and December 31, 1997
(unaudited)

Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
----------- ------------ ------------ -----------

Balance January 1, 1997..... $ 81,000 70,512,073 (1,492,835) 69,100,238

Net income.................. - - 8,647,221 8,647,221

Distributions declared
($.86 for the year ended
December 31, 1997 per
weighted average common
stock shares outstanding). - - (13,127,597) (13,127,597)

Proceeds from Offering (net
of Offering costs of
$17,841,611).............. 168,935 150,548,904 - 150,717,839

Repurchase of Shares........ (465) (420,369) - (420,834)
----------- ------------ ------------ ------------
Balance December 31, 1997... 249,470 220,640,608 (5,973,211) 214,916,867

Net income.................. - - 4,037,415 4,037,415

Distributions declared
($.22 for the three months
ended March 31, 1998 per
weighted average common
stock shares outstanding). - - (6,263,131) (6,263,131)

Proceeds from Offering (net
of Offering costs of
$10,524,721............... 108,975 98,076,276 - 98,185,251

Repurchases of Shares....... (3) (2,712) - (2,715)
----------- ------------ ------------ ------------
Balance March 31, 1998...... $ 358,442 318,714,172 (8,198,927) 310,873,687
=========== ============ ============ ============

See accompanying notes to financial statements.

F-4

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statement of Cash Flows

For the three months ended March 31, 1998 and 1997
(unaudited)

1998 1997
Cash flows from operating activities: ---- ----
Net income.................................... $ 4,037,415 884,700
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................ 2,200,954 741,920
Amortization................................ 42,507 38,364
Rental income under master lease agreements. 542,940 71,599
Straight line rental income................. (289,037) (99,411)
Changes in assets and liabilities:
Accounts and rents receivable............. (2,837,201) (652,705)
Other assets.............................. (128,019) (218,111)
Accrued interest payable.................. 304,864 (52,421)
Accrued real estate taxes................. 2,178,186 363,177
Accounts payable.......................... 210,755 155,624
Unearned income........................... 470,973 310,980
Other liabilities......................... 1,013,317 (32,820)
Due to Affiliates......................... 163,494 (8,400)
Security deposits......................... 280,657 73,197
-------------- ------------
Net cash provided by operating activities....... 8,191,805 1,575,693
-------------- ------------
Cash flows from investing activities:
Restricted cash............................... (1,107,324) (995,290)
Additions to investment properties............ (49,282) (52,042)
Purchase of investment properties............. (114,437,960) (11,429,015)
Deposits on investment properties............. 3,018,530 (2,494,140)
-------------- ------------
Net cash used in investing activities........... (112,576,036) (14,970,487)
-------------- ------------
Cash flows from financing activities:
Proceeds from offering........................ 108,707,257 27,207,053
Payments of offering costs.................... (10,225,219) (2,502,720)
Loan proceeds................................. 38,702,000 12,840,000
Loan fees..................................... (481,928) (193,584)
Distributions paid............................ (5,592,993) (1,740,481)
Repayment of notes from Affiliates............ - (8,000,000)
Principal payments of debt.................... (662,254) (60,051)
-------------- ------------
Net cash provided by financing activities....... 130,446,863 27,550,217
-------------- ------------
Net increase in cash and cash equivalents....... 26,062,632 14,155,423

Cash and cash equivalents at beginning of period 51,145,587 8,491,735
-------------- ------------
Cash and cash equivalents at end of period...... $ 77,208,219 22,647,158
============== ============

See accompanying notes to financial statements.

F-5

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statement of Cash Flows
(continued)

For the three months ended March 31, 1998 and 1997
(unaudited)

Supplemental schedule of noncash investing and financing activities:

1998 1997
---- ----
Purchase of investment properties................ $(123,937,960) (28,992,900)
Assumption of mortgage debt.................... 9,500,000 9,563,885
Note payable to Affiliate...................... - 8,000,000
-------------- -------------
$(114,437,960) (11,429,015)
============== =============

Distributions payable............................ $ 2,447,251 749,856
============== =============

Cash paid for interest........................... $ 2,027,500 1,058,162
============== =============

See accompanying notes to financial statements.

F-6

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements

March 31, 1998
(unaudited)

The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Readers of
this Quarterly Report should refer to the Company's audited financial
statements for the fiscal year ended December 31, 1997, which are included in
the Company's 1997 Annual Report, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial statements
have been omitted from this Report. In the opinion of management, all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation have been included.

(1) Organization and Basis of Accounting

Inland Real Estate Corporation (the "Company") was formed on May 12, 1994. The
Company may acquire existing Neighborhood Retail Centers and Community Centers
located primarily within an approximate 400-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. The
Company is also permitted to construct or develop properties, or render
services in connection with such development or construction, subject to the
Company's compliance with the rules governing real estate investment trusts
under the Code, as amended. 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, ("Initial Offering") of 5,000,000 shares of common stock
("Shares"). 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
at $10.00 per Share, on a best efforts basis, (the "Second Offering"). As of
July 10, 1997, the Company had received subscriptions for a total of 10,000,000
Shares, thereby completing the Second Offering. On July 14, 1997, the Company
commenced an offering of an additional 20,000,000 Shares at $10.00 per Share,
on a best efforts basis, (the "Third Offering"). As of March 19, 1998, the
Company had received subscriptions for a total of 20,000,000 Shares, thereby
completing the Third Offering. In addition, as of March 31, 1998, the Company
has distributed 1,070,778 Shares through the Company's Distribution
Reinvestment Program ("DRP"). As of March 31, 1998, the Company has
repurchased a total of 53,100 Shares through the Share Repurchase Program. As
a result, as of March 31, 1998, Gross Offering Proceeds total $357,939,054 net
of Shares repurchased through the Share Repurchase Program.

F-7

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1998
(unaudited)

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.

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.

Restricted cash at March 31, 1998 includes $823,474 held in escrow for the
principal payments on the Aurora Commons mortgage payable and $146,465 held in
escrow by the mortgagee for the payment of real estate taxes at Aurora Commons
and Shoppes at Mill Creek Shopping Center. Restricted cash at March 31, 1998
also includes amounts held as vacancy escrows on Cobblers Crossing, Mallard
Crossing, Shorecrest Shopping Center, Sequoia Shopping Center, Shoppes at
Coopers Grove, Orland Park Retail, Prairie Square, Lake Park Plaza, Chestnut
Court and St. James Crossing. The monthly amounts drawn for rent under the
master lease escrows decrease the basis of the respective properties.
Restricted cash at March 31, 1998 also includes $556,025 held in escrow for the
second phase of construction at Oak Forest Commons and $95,985 held in escrow
for possible vacancies upon completion of the second phase at Oak Forest
Commons. Restricted cash at March 31, 1998 also includes $325,000 for tenant
improvement costs at Fashion Square.

Statement of Financial Accounting Standards No. 121 requires the Company to
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 operations and sale of properties. 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. As of March 31, 1998,
the Company does not believe any such impairments of its properties exists.

F-8

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1998
(unaudited)

Depreciation expense is computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 30 years for
the building and building improvements and 15 years for the site improvements.

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 on a straight-line basis
and the cash rent due under the provisions of the lease agreements is recorded
as deferred rent receivable.

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.

Certain reclassifications were made to the 1997 financial statements to conform
with the 1998 presentation.

(2) Transactions with Affiliates

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to each of the
Offerings. Such expenses include postage, data processing and marketing and
are reimbursed at cost. The collective costs to Affiliates incurred relating
to the Offerings were $873,048 and $1,047,694 as of March 31, 1998 and December
31, 1997, respectively, of which all was paid as of March 31, 1998 and $24,374
was unpaid as of December 31, 1997. In addition, an Affiliate of the Advisor
serves as dealer manager of each of the Offerings and is entitled to receive
selling commissions, a marketing contribution and a due diligence expense
allowance fee from the Company in connection with each of the Offerings. Such
amounts incurred were $33,128,582 and $23,124,939 as of March 31, 1998 and
December 31, 1997, respectively, of which $794,033 and $519,914 was unpaid as
of March 31, 1998 and December 31, 1997, respectively. Approximately
$28,314,000 and $19,581,000 of these commissions had been passed through from
the Affiliate to unaffiliated soliciting broker/dealers as of March 31, 1998
and December 31, 1997, respectively.

F-9

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1998
(unaudited)

As of March 31, 1998, the Company had incurred $38,893,902 of organization and
offering costs to Affiliates and non-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. Through the completion of the third Offering, organizational and
offering expenses did not exceed the 5.5% or 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
administration of the Company. Such costs are included in professional
services to Affiliates, general and administrative expenses to Affiliates and
acquisition costs expensed.

The Advisor has contributed $200,000 to the capital of the Company for which it
received 20,000 Shares.

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 $494,528 and $172,537 for the three months ended March 31,
1998 and 1997, respectively, all of which has been paid.

F-10

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1998
(unaudited)

(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 the date they
become a Director 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 March 31, 1998, options for
1,000 Shares have been exercised for $9.05 per Share.

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 $13.20 during the period commencing with the first date
upon which the Soliciting Dealer Warrants are issued and ending on the Exercise
Period. Notwithstanding the foregoing no Soliciting Dealer Warrant will be
exercisable until one year from the date of issuance. As of March 31, 1998,
none of these warrants were exercised.

F-11

<TABLE> INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties Initial Cost (A) Gross amount at which carried
<CAPTION> -------------------------- at end of period
Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------ ------------- ------------ ------------- ------------- -------------
Single-user Retail
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 1,626,033 664 838,000 1,626,697 2,464,697

Ameritech
Joliet, IL.............. 05/97 170,000 883,293 2,544 170,000 885,837 1,055,837

Dominicks-Schaumburg
Schaumburg, IL.......... 05/97 2,294,437 8,388,263 2,679 2,294,437 8,390,942 10,685,379

Dominicks-Highland Park
Highland Park, IL....... 06/97 3,200,000 9,593,565 2,200 3,200,000 9,595,765 12,795,765

Dominicks-Glendale Heights
Glendale Heights, IL.... 09/97 1,265,000 6,934,230 9,194 1,265,000 6,943,424 8,208,424

Party City
Oakbrook Terrace, IL.... 11/97 750,000 1,230,030 - 750,000 1,230,030 1,980,030

Eagle Country Market
Roselle, IL............. 11/97 966,667 1,935,350 1,150 966,667 1,936,500 2,903,167

Dominicks-West Chicago
West Chicago, IL........ 01/98 1,980,130 4,320,285 648 1,980,130 4,320,933 6,301,063

Neighborhood Retail Centers
- ---------------------------
Eagle Crest Shopping Center
Naperville, IL.......... 03/95 1,878,618 2,938,352 115,828 1,878,618 3,054,180 4,932,798

Montgomery-Goodyear
Montgomery, IL.......... 09/95 315,000 834,659 (11,158) 315,000 823,501 1,138,501

Hartford/Naperville Plaza
Naperville, IL.......... 09/95 990,000 3,427,961 13,002 990,000 3,440,963 4,430,963

Nantucket Square
Schaumburg, IL.......... 09/95 1,908,000 2,349,918 (69,881) 1,908,000 2,280,037 4,188,037

Antioch Plaza
Antioch, IL............. 12/95 268,000 1,360,445 (120,629) 268,000 1,239,816 1,507,816
------------ ------------- ------------ ------------- ------------- -------------
Subtotal $16,902,182 46,953,107 (53,760) 16,902,182 46,899,348 63,801,530

F-12

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties (Continued) 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
------- ------------ ------------- ------------ ------------- ------------- -------------

Subtotal $16,902,182 46,953,107 (53,760) 16,902,182 46,899,348 63,801,530

Mundelein Plaza
Mundelein, IL........... 03/96 1,695,000 3,965,560 (53,429) 1,695,000 3,912,131 5,607,131

Regency Point
Lockport, IL............ 04/96 1,000,000 4,720,800 (19,377) 1,000,000 4,701,423 5,701,423

Prospect Heights
Prospect Heights, IL.... 06/96 494,300 1,683,755 (9,724) 494,300 1,674,031 2,168,331

Montgomery-Sears
Montgomery, IL.......... 06/96 768,000 2,714,173 (122,122) 768,000 2,592,052 3,360,052

Salem Square
Countryside, IL......... 08/96 1,735,000 4,449,217 (16,960) 1,735,000 4,432,257 6,167,257

Hawthorn Village
Vernon Hills, IL........ 08/96 2,619,500 5,887,640 46,891 2,619,500 5,934,531 8,554,031

Six Corners
Chicago, IL............. 10/96 1,440,000 4,538,152 3,638 1,440,000 4,541,790 5,981,790

Spring Hill Fashion Corner
West Dundee, IL......... 11/96 1,794,000 7,415,396 3,955 1,794,000 7,419,351 9,213,351

Crestwood Plaza
Crestwood, IL........... 12/96 325,577 1,483,183 4,750 325,577 1,487,933 1,813,510

Quarry Outlot
Hodgkins, IL............ 12/96 522,000 1,278,431 8,872 522,000 1,287,303 1,809,303

Grand and Hunt Club
Gurnee, IL.............. 12/96 969,840 2,622,575 (52,811) 969,840 2,569,764 3,539,604

Summit of Park Ridge
Park Ridge, IL.......... 12/96 672,000 2,497,950 5,886 672,000 2,503,836 3,175,836

Park St. Claire
Schaumburg, IL.......... 12/96 319,578 986,920 226,674 319,578 1,213,594 1,533,172

Aurora Commons
Aurora, IL.............. 01/97 3,220,000 8,318,661 3,901 3,220,000 8,322,562 11,542,562
------------ ------------- ------------ ------------- ------------- ------------
Subtotal $34,476,977 99,515,520 (23,615) 34,476,977 99,491,905 133,968,882

F-13

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

Subtotal $34,476,977 99,515,520 (23,615) 34,476,977 99,491,905 133,968,882

Lincoln Park Place
Chicago, IL............. 01/97 819,000 1,299,902 (36,530) 819,000 1,263,372 2,082,372

Niles Shopping Center
Niles, IL............... 04/97 850,000 2,408,467 (31,837) 850,000 2,376,630 3,226,630

Mallard Crossing
Elk Grove Village, IL... 05/97 1,778,667 6,331,943 (37,901) 1,778,667 6,294,042 8,072,709

Cobblers Crossing
Elgin, IL............... 05/97 3,200,000 7,763,940 (97,688) 3,200,000 7,666,252 10,866,252

Calumet Square
Calumet City, IL........ 06/97 527,000 1,537,316 6,664 527,000 1,543,980 2,070,980

Sequoia Shopping Center
Milwaukee, WI........... 06/97 1,216,914 1,802,336 (11,780) 1,216,914 1,790,556 3,007,470

Riversquare Shopping Center
Naperville, IL.......... 06/97 2,853,226 3,124,732 103,872 2,853,226 3,228,604 6,081,830

Shorecrest Plaza
Racine, WI.............. 07/97 1,150,000 4,749,758 (17,469) 1,150,000 4,732,289 5,882,289

Dominicks-Countryside
Countryside, IL......... 12/97 1,375,000 925,106 - 1,375,000 925,106 2,300,106

Terramere Plaza
Arlington Heights, IL... 12/97 1,435,000 2,966,411 14,903 1,435,000 2,981,314 4,416,314

Wilson Plaza
Batavia, IL............. 12/97 310,000 984,720 10,550 310,000 995,270 1,305,270

Iroquois Center
Naperville, IL.......... 12/97 3,668,347 8,258,584 11,500 3,668,347 8,270,084 11,938,431

Fashion Square
Skokie, IL.............. 12/97 2,393,534 6,822,071 23,045 2,393,534 6,845,116 9,238,650
------------ ------------- ------------ ------------- ------------- ------------
Subtotal $56,053,665 148,490,806 (86,286) 56,053,665 148,404,520 204,458,185

F-14

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

Subtotal $56,053,665 148,490,806 (86,286) 56,053,665 148,404,520 204,458,185

Shops at Coopers Grove
Country Club Hills, IL.. 01/98 1,400,897 4,398,797 879 1,400,897 4,399,676 5,800,573

Maple Plaza
Downers Grove, IL....... 01/98 1,364,202 1,803,779 9,120 1,364,202 1,812,899 3,177,101

Orland Park Retail
Orland Park, IL......... 02/98 460,867 789,133 (8,459) 460,867 780,674 1,241,541

Wisner/Milwaukee Plaza
Chicago, IL............. 02/98 528,576 1,361,490 13,115 528,576 1,374,605 1,903,181

Homewood Plaza
Homewood, IL............ 02/98 534,599 1,380,841 11,138 534,599 1,391,979 1,926,578

Elmhurst City Center
Elmhurst, IL............ 02/98 2,050,217 2,724,783 (250,927) 2,050,217 2,473,856 4,524,073

Shoppes of Mill Creek
Palos Park, IL.......... 03/98 3,305,949 7,989,051 421 3,305,949 7,989,472 11,295,421

Prairie Square
Sun Prairie, WI......... 03/98 739,575 2,361,425 10,994 739,575 2,372,419 3,111,994

Oak Forest Commons
Oak Forest, IL.......... 03/98 2,795,519 9,013,698 5,762 2,795,519 9,019,460 11,814,979

Downers Grove Market
Downers Grove, IL....... 03/98 6,224,467 11,456,000 (2,268) 6,224,467 11,453,732 17,678,199

St. James Crossing
Westmont, IL............ 03/98 2,610,600 4,866,890 - 2,610,600 4,866,890 7,477,490

Community Centers
- -----------------
Lansing Square
Lansing, IL............. 12/96 4,075,000 12,179,383 18,087 4,075,000 12,197,470 16,272,470

Maple Park Place
Bolingbrook, IL......... 01/97 3,665,909 11,669,428 10,603 3,665,909 11,680,031 15,345,940
------------ ------------- ------------ ------------- ------------- ------------
Subtotal $85,810,042 220,485,504 (267,821) 85,810,042 220,217,683 306,027,725

F-15

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

Subtotal $85,810,042 220,485,504 (267,821) 85,810,042 220,217,683 306,027,725

Rivertree Court
Vernon Hills, IL........ 07/97 8,651,875 22,861,547 6,233 8,651,875 22,867,780 31,519,655

Naper West
Naperville, IL.......... 12/97 5,335,000 9,584,779 (55,611) 5,335,000 9,529,168 14,864,168

Woodfield Plaza
Schaumburg, IL.......... 01/98 4,612,277 14,589,498 25,563 4,612,277 14,615,061 19,227,338

Lake Park Plaza
Michigan City, IN....... 02/98 3,252,861 9,023,805 (189,292) 3,252,861 8,834,513 12,087,374

Chestnut Court
Darien, IL.............. 03/98 5,719,982 10,424,898 (116,000) 5,719,982 10,308,898 16,028,880
------------ ------------- ------------ ------------- ------------- ------------
Total $113,382,037 286,970,031 (596,928) 113,382,037 286,373,103 399,755,140
============ ============ =========== ============ ============ ============

</TABLE>

F-16

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1998
(unaudited)

(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. The cumulative amount of such payments was $1,523,995 and $981,055
as of March 31, 1998 and December 31, 1997, respectively. (Note 5)

(5) Operating Leases

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.

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 $289,037 and $99,411 for the three
months ended March 31, 1998 and 1997, of rental income for the period of
occupancy for which stepped rent increases apply and $1,075,653 and $786,616 in
related accounts receivable as of March 31, 1998 and December 31, 1997,
respectively. The Company anticipates collecting these amounts over the terms
of the related leases as scheduled rent payments are made.

F-17

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

March 31, 1998
(unaudited)

(6) Mortgages Payable

Mortgages payable consist of the following at March 31, 1998 and December 31,
1997:

Current Balance at
Property as Interest Maturity Monthly Mar. 31, Dec. 31,
Collateral Rate Date Payment(a) 1998 1997
- ------------- ---------- --------- ---------- ----------- -----------
Mortgage payable to Affiliate:
Walgreens 7.655% 05/2004 $ 5,689 $ 724,307 727,472

Mortgages payable to non-affiliates:
Regency Point 7.425% 08/2000 (b) 4,359,647 4,373,461
Eagle Crest 7.850% 10/2003 15,668 2,350,000 2,350,000
Nantucket Square 7.850% 10/2003 14,668 2,200,000 2,200,000
Antioch Plaza 7.850% 10/2003 5,834 875,000 875,000
Mundelein Plaza 7.850% 10/2003 18,735 2,810,000 2,810,000
Montgomery-Goodyear 7.850% 10/2003 4,200 630,000 630,000
Montgomery-Sears 7.850% 08/2003 10,967 1,645,000 1,645,000
Hartford/Naperville 7.850% 08/2003 15,401 2,310,000 2,310,000
Zany Brainy 7.590% 01/2004 8,026 1,245,000 1,245,000
Prospect Heights
Plaza 7.590% 01/2004 7,059 1,095,000 1,095,000
Hawthorn Village
Commons 7.590% 01/2004 27,590 4,280,000 4,280,000
Six Corners Plaza 7.590% 01/2004 19,984 3,100,000 3,100,000
Salem Square
Shopping Center 7.590% 01/2004 20,177 3,130,000 3,130,000
Lansing Square 7.800% 01/2004 53,991 8,150,000 8,150,000
Spring Hill Fashion
Mall 7.800% 01/2004 31,070 4,690,000 4,690,000
Aurora Commons (c) 9.000% 10/2001 70,556 9,347,327 9,392,602
Maple Park Place 7.650% 06/2004 49,704 7,650,000 7,650,000
Dominicks-Schaumburg 7.49% 06/2004 34,005 5,345,500 5,345,500
Summit Park Ridge 7.49% 06/2004 10,178 1,600,000 1,600,000
Lincoln Park Place 7.49% 06/2004 6,679 1,050,000 1,050,000
Crestwood Plaza 7.650% 06/2004 5,876 904,380 904,380
Park St. Claire 7.650% 06/2004 4,954 762,500 762,500
Quarry 7.650% 06/2004 5,848 900,000 900,000
Grand/Hunt Club 7.49% 06/2004 11,425 1,796,000 1,796,000
Rivertree Court (d) 10.030% 11/1998 131,226 15,700,000 15,700,000
Niles Shopping Center 7.23% 01/2005 9,932 1,617,500 1,617,500
Ameritech 7.23% 01/2005 3,208 522,375 522,375
Calumet Square 7.23% 01/2005 6,343 1,032,920 1,032,920

F-18

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

Current Balance at
Property as Interest Maturity Monthly Mar. 31, Dec. 31,
Collateral Rate Date Payment(a) 1998 1997
- ------------- ---------- --------- --------- ----------- -----------

Sequoia Shopping
Center 7.23% 01/2005 9,242 1,505,000 1,505,000
Dominick's Highland
Park 7.21% 12/2004 38,453 6,400,000 6,400,000
Fashion Square (e) 4.10% 12/2014 27,642 6,200,000 6,800,000
Mallard Crossing 7.28% 03/2005 25,041 4,050,000 -
Prairie Square 7.00% 03/2005 9,042 1,550,000 -
Orland Park Retail 7.00% 03/2005 3,646 625,000 -
Maple Plaza 7.00% 03/2005 9,231 1,582,500 -
Iroquois Center 7.00% 03/2005 34,708 5,950,000 -
Dominicks-Countryside 6.99% 03/2003 6,699 1,150,000 -
Wilson Plaza 7.00% 03/2005 3,792 650,000 -
Eagle Country Market 7.00% 03/2005 8,458 1,450,000 -
Terramere Plaza 7.00% 03/2005 12,848 2,202,500 -
Shops at Coopers
Grove 7.00% 03/2005 16,917 2,900,000 -
Party City 7.00% 03/2005 5,760 987,500 -
Cobbler Crossing 7.00% 02/2005 31,946 5,476,500 -
Dominicks-Glendale
Heights 7.00% 01/2005 23,917 4,100,000 -
Riversquare Shopping
Center 7.15% 01/2005 18,173 3,050,000 -
Shorecrest Plaza 7.10% 03/2003 17,620 2,978,000 -
Shoppes of Mill
Creek 8.00% 09/1999 63,333 9,500,000 -
------------ -----------
Mortgages Payable.................................... $154,129,456 106,589,710
============ ===========

(a) All payments are interest only, with the exception of the loans secured by
the Walgreens, Regency Point and Aurora Commons 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.

(c) The Company received a credit for interest expense on the debt at closing,
which is included in restricted cash along with an amount set aside by the
Company for principal payments on the debt. Interest income earned on the
restricted cash amounts, when netted with interest expense on the debt,
results in an adjusted interest rate on the debt of approximately 8.2%.

F-19

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(d) The Company received a credit for interest expense on the debt at closing.

(e) As part of the purchase of this property, the Company assumed the existing
mortgage-backed Economic Development Revenue Bonds, Series 1994 offered by
the Village of Skokie, Illinois. The interest rate floats and is reset
weekly by a re-marketing agent. The current rate is 4.10%. The bonds are
further secured by an Irrevocable Letter of Credit, issued by LaSalle Bank
at a fee of 1.25% of the bond outstanding. In addition, there is a .125%
re-marketing fee paid annually.

(7) Subsequent Events

In January 1998, the Company paid a distribution of $2,447,251 to the
Stockholders.

On April 24, 1998, the Company purchased the High Point Centre Shopping Center
from an unaffiliated third party for approximately $10,354,000. The property
is located in Madison, Wisconsin and contains approximately 86,204 square feet
of leasable space. Its anchor tenant is Pier 1 Imports.

On April 29, 1998, the Company purchased the Western Howard Plaza Shopping
Center from an unaffiliated third party for approximately $1,913,000. The
property is located in Chicago, Illinois and contains approximately 12,784
square feet of leasable space. Its tenants are The Gap, Pearle Vision and
Payless Shoes.

On April 22, 1998, the Company entered into a construction loan agreement with
an unaffiliated third party, the borrower, for an entire loan amount of
$2,507,038. Disbursements are to be made periodically as work progresses in
connection with the construction of a Staples Office Supply store to be built
in Freeport, Illinois. The construction loan matures on October 15, 1998 and,
prior to maturity, requires the borrower to make payments of interest only, on
amounts disbursed at a rate of 9.5%. The Company made an initial advance of
$864,134 on April 22, 1998. The Company has agreed to purchase this property
upon completion, contingent upon certain criteria stated in the contract.

On April 7, 1998, the Company commenced an offering of an additional 27,000,000
Shares at $11.00 per Share, on a best efforts basis, (the "Fourth Offering").
As of May 13, 1998, the Company had accepted subscriptions for 2,393,152
shares.

F-20

Inland Real Estate Corporation
Pro Forma Balance Sheet
March 31, 1998
(unaudited)

The following unaudited Pro Forma Balance Sheet of the Company is presented to
give effect to the acquisitions of the properties indicated in Note B of the
Notes to the Pro Forma Balance Sheet as though these transactions occurred
March 31, 1998. No pro forma adjustments were made for the Staples Office
Supply Store which is currently under construction. This unaudited Pro Forma
Balance Sheet should be read in conjunction with the March 31, 1998 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, 1998, 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-21

Inland Real Estate Corporation
Pro Forma Balance Sheet
March 31, 1998
(unaudited)

March 31,
March 31, 1998
1998 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------- ------------- --------------
Assets
- ------
Net investment in
properties.................. $391,888,703 79,291,980 471,180,683
Cash and cash equivalents..... 77,208,219 - 77,208,219
Restricted cash............... 3,181,123 - 3,181,123
Accounts and rents
receivable.................. 8,052,881 1,721,048 9,773,929
Other assets.................. 2,347,657 - 2,347,657
------------- ------------- -------------
Total assets.................. $482,678,583 81,013,028 563,691,611
============= ============= =============

Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and accrued
expenses.................... $ 2,008,995 - 2,008,995
Accrued real estate taxes..... 9,209,918 2,093,563 11,303,481
Distributions payable (C)..... 2,447,251 - 2,447,251
Security deposits............. 1,035,016 78,430 1,113,446
Mortgages payable............. 154,129,456 3,924,183 158,053,639
Unearned income............... 966,508 - 966,508
Other liabilities............. 1,506,433 - 1,506,433
Due to Affiliates............. 501,319 - 501,319
------------- ------------- -------------
Total liabilities............. 171,804,896 6,096,176 177,901,072
------------- ------------- -------------
Common Stock (D).............. 358,800 87,112 445,912
Additional paid in capital
(net of Offering costs) (D). 318,713,814 74,829,740 393,543,554
Accumulated distributions in
excess of net income........ (8,198,927) - (8,198,927)
------------- ------------- -------------
Total Stockholders' equity.... 310,873,687 74,916,852 385,790,539
------------- ------------- -------------
Total liabilities and
Stockholders' equity........ $482,678,583 81,013,028 563,691,611
============= ============= =============

See accompanying notes to pro forma balance sheet.

F-22

<TABLE>
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1998
(unaudited)

(A) The March 31, 1998 Historical column represents the historical balance sheet as presented in the March 31, 1998
10-Q 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 March 31, 1998. The terms are described in the notes that follow.
<CAPTION>

Pro Forma Adjustments
-----------------------------------------------------------------------------
Bergen High Point Western & Berwyn Woodland
Plaza Center Howard Wauconda Plaza Heights
Assets ------------ ------------ ------------ ------------ ----------- ------------
- ------
<S> <C> <C> <C> <C> <C> <C>
Net investment in
properties........... $17,247,680 10,354,000 1,913,000 2,525,000 1,837,000 9,600,000
Accounts and rents
receivable........... 110,015 109,240 44,600 52,163 143,425 485,000
------------ ------------ ------------ ------------ ------------ ------------
Total assets........... $17,357,695 10,463,240 1,957,600 2,577,163 1,980,425 10,085,000
============ ============ ============ ============ ============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ 113,418 112,619 44,600 52,163 143,425 564,803
Security deposits...... - 15,117 - - - 11,658
Mortgage payable....... - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities...... 113,418 127,736 44,600 52,163 143,425 576,371
------------ ------------ ------------ ------------ ------------ ------------
Common Stock........... 20,051 12,018 2,224 2,936 2,136 11,057
Additional paid in capital
(net of Offering
Costs)............... 17,224,226 10,323,486 1,910,776 2,522,064 1,834,864 9,497,572
------------ ------------ ------------ ------------ ------------ ------------
Total Stockholders'
equity............... 17,244,277 10,335,504 1,913,000 2,525,000 1,837,000 9,508,629
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity. $17,357,695 10,463,240 1,957,600 2,577,163 1,980,425 10,085,000
============ ============ ============ ============ ============ ============
</TABLE>
F-23

<TABLE>

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1998
(unaudited)

<CAPTION>
Pro Forma Adjustments
----------------------------------------------------------------
Total
Walgreens Schaumburg Winnetka Park Pro Forma
Woodstock Plaza Commons Eastgate Center Adjustments
------------ ------------ ------------ ------------ ------------ ------------
Assets
- ------
<S> <C> <C> <C> <C> <C> <C>
Net investment in
properties........... $ 1,162,000 6,987,300 4,435,000 7,731,000 15,500,000 79,291,980
Accounts and rents
receivable........... - 232,255 11,000 132,000 401,350 1,721,048
------------ ------------ ------------ ------------ ------------ ------------
Total assets........... $ 1,162,000 7,219,555 4,446,000 7,863,000 15,901,350 81,013,028
============ ============ ============ ============ ============ ============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ - 232,255 11,000 148,750 670,530 2,093,563
Security deposits...... - 37,051 14,694 - - 78,430
Mortgage payable....... - 3,924,183 - - - 3,924,183
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities...... - 4,193,489 25,694 148,750 670,530 6,096,176
------------ ------------ ------------ ------------ ------------ ------------
Common Stock........... 1,351 3,519 5,140 8,970 17,710 87,112
Additional paid in capital
(net of Offering
Costs)............... 1,160,649 3,022,547 4,415,166 7,705,280 15,213,110 74,829,740
------------ ------------ ------------ ------------ ------------ ------------
Total Stockholders'
equity............... 1,162,000 3,026,066 4,420,306 7,714,250 15,230,820 74,916,852
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity. $ 1,162,000 7,219,555 4,446,000 7,863,000 15,901,350 81,013,028
============ ============ ============ ============ ============ ============

F-24
</TABLE>

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1998
(unaudited)

Acquisitions of Property:

On April 16, 1998, the Company acquired Bergen Plaza from an unaffiliated
third party for the purchase price of $17,247,680 on an all cash basis,
funded from cash and cash equivalents.

On April 24, 1998, the Company acquired High Point Centre from an
unaffiliated third party for the purchase price of approximately
$10,354,000 on an all cash basis, funded from cash and cash equivalents.

On April 29, 1998, the Company acquired Western & Howard from an
unaffiliated third party for the purchase price of approximately $1,913,000
on an all cash basis, funded from cash and cash equivalents.

On May 5, 1998, the Company acquired Wauconda from an unaffiliated third
party for the purchase price of approximately $2,525,000 on an all cash
basis, funded from cash and cash equivalents.

On May 15, 1998, the Company acquired Berwyn Plaza from an unaffiliated
third party for the purchase price of approximately $1,837,000 on an all
cash basis, funded from cash and cash equivalents.

On June 5, 1998, the Company acquired Woodland Heights from an unaffiliated
third party for the purchase price of approximately $9,600,000 on an all
cash basis, funded from cash and cash equivalents.

On June 23, 1998, the Company acquired Walgreens Woodstock from an
unaffiliated third party for the purchase price of approximately $1,162,000
on an all cash basis, funded from cash and cash equivalents.

On June 30, 1998, the Company acquired Schaumburg Plaza from an
unaffiliated third party for the purchase price of approximately
$6,987,000. The Company assumed the existing debt of $3,924,183. The debt
requires monthly interest only payments at a rate of 9.25% per annum
through September 2004 and then requires principal and interest payments
through December 2009 at a rate of 9.25% based on a 30 year amortization
schedule. The balance of the purchase price was funded from cash and cash
equivalents.

On July 1, 1998, the Company acquired Winnetka Commons from an unaffiliated
third party for the purchase price of approximately $4,435,000 on an all
cash basis, funded from cash and cash equivalents.

On July 7, 1998, the Company acquired Eastgate from an unaffiliated third
party for the purchase price of approximately $7,731,000 on an all cash
basis, funded from cash and cash equivalents.

F-25

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1998
(unaudited)

Probable Acquisitions of Property:

The Company anticipates the acquisition of Park Center from an unaffiliated
third party for the purchase price of approximately $15,500,000 on an all
cash basis, to be funded from cash and cash equivalents.

The Company anticipates the acquisition of a Staples Office Supply Store to
be constructed in 1998. The total price will be approximately $2,694,000
and will be funded from cash and cash equivalents.

(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 $87,112,000, net of additional Offering
costs of $12,195,148 are reflected as received as of March 31, 1998, prior
to the purchase of the properties. Offering costs consist principally of
registration costs, printing and selling costs, including commissions.

F-26

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the three months ended March 31, 1998
(unaudited)

The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of the properties indicated in Note B of
the Notes to the Pro Forma Statement of Operations as though they occurred on
the earlier of January 1, 1997 or the date operations commenced. Pro forma
adjustments for Oak Forest Commons and Downers Grove Market are as of March 5,
1998 and March 25, 1998, respectively, as these are the dates that operations
commenced. Construction is not complete on the Staples Office Supply Store and
therefore, no pro forma adjustment has been made. This unaudited Pro Forma
Statement of Operations should be read in conjunction with the March 31, 1998
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, 1998, 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-27

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the three months ended March 31, 1998
(unaudited)

Pro Forma
Adjustments
-----------
March 31,
1998 1998 March 31,
Historical Acquisitions 1998
(A) (B) Pro Forma
------------ ------------ -----------

Rental income..... $ 9,424,416 3,037,581 12,461,997
Additional rental
income.......... 3,020,925 1,256,270 4,277,195
Interest
income(C)....... 776,364 - 776,364
Other income...... 46,791 - 46,791
------------ ------------ ------------
Total income.... 13,268,496 4,293,850 17,562,347
------------ ------------ ------------
Professional services
and general and
administrative
fees............ 218,015 - 218,015
Advisor asset
management fee.(F) 432,183 316,565 748,748
Property operating
expenses........ 3,961,022 1,699,534 5,660,556
Interest expense.. 2,332,364 217,413 2,549,777
Depreciation (D).. 2,200,954 791,708 2,992,662
Amortization...... 42,507 - 42,507
Acquisition costs
expensed........ 44,036 - 44,036
------------ ------------ ------------
Total expenses.... 9,231,081 3,025,219 12,256,300
------------ ------------ ------------
Net income...... $ 4,037,415 1,268,631 5,306,047
============ ============ ============

Weighted average
common stock
outstanding (E). 29,073,250 37,784,450
============ ============

Net income per weighted
average common stock
outstanding, basic and
diluted (E)..... $ .14 .14
============ ============

See accompanying notes to pro forma statement of operations.

F-28

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 1998
(unaudited)

(A) The 1998 Historical column represents the historical statement of
operations of the Company for the three months ended March 31, 1998
(unaudited), as filed with the SEC on Form 10-Q.

(B) Total pro forma adjustments for the three months ended March 31, 1998 are
as though the 1998 acquisitions of the following properties occurred the
earlier of January 1, 1998 or the date operations commenced. All
properties were purchased on an all cash basis except for Mill Creek. Pro
forma adjustments for interest expense on these properties were based on
the following terms.

Mill Creek Shopping Center

As part of the acquisition of Mill Creek Shopping Center, the Company
assumed the existing mortgage loan, maturing September 10, 1999, with the
balance funded with cash and cash equivalents. The loan requires interest
only monthly payments at a rate of 8% per annum.

Schaumburg Plaza

As part of the acquisition of Schaumburg Plaza, the Company assumed the
existing debt of $3,924,183. The debt requires monthly interest only
payments at a rate of 9.25% per annum through September 2004 and then
requires principal and interest payments through December 2009 at a rate of
9.25% per annum based on a 30 year amortization schedule.

F-29

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the three months ended March 31, 1998
(unaudited)

(B) Total pro forma adjustments for 1998 acquisitions are as though they were
acquired the earlier of January 1, 1997 or the date operations commenced.

West
Coopers Chicago Maple Lake Park Orland
Grove Dominick's Plaza Plaza Park
----------- ----------- ----------- ----------- -----------
Rental income..... $ 12,649 36,150 30,776 130,540 11,631
Additional rental
income.......... 9,364 - 11,154 49,688 5,600
----------- ----------- ----------- ----------- -----------
Total income...... 22,013 36,150 41,930 180,228 17,231
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 1,271 3,625 2,638 13,452 2,083
Property operating
expenses........ 10,754 1,085 13,041 60,970 7,200
Interest expense.. - - - - -
Depreciation...... 3,213 9,062 6,950 33,000 5,208
----------- ----------- ----------- ----------- -----------
Total expenses.... 15,238 13,772 22,629 107,422 14,492
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 6,775 22,378 19,301 72,806 2,739
=========== =========== =========== =========== ===========

Homewood Wisner Mill Prairie Elmhurst
Plaza Plaza Creek Square City Center
----------- ----------- ----------- ----------- -----------
Rental income..... $ 29,096 29,958 180,896 78,950 84,667
Additional rental
income.......... 22,945 12,915 123,799 29,500 15,971
----------- ----------- ----------- ----------- -----------
Total income...... 52,041 42,873 304,695 108,450 100,637
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 2,812 2,738 18,933 7,750 3,979
Property operating
expenses........ 25,287 14,844 142,668 34,380 23,473
Interest expense.. - - 126,667 - -
Depreciation...... 6,970 6,880 45,417 21,950 9,948
----------- ----------- ----------- ----------- -----------
Total expenses.... 35,069 24,462 333,685 64,080 37,400
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 16,972 18,411 (28,990) 44,370 63,238
=========== =========== =========== =========== ===========

F-30

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the three March 31, 1998
(unaudited)

St. James Chestnut Bergen Berwyn Western &
Crossing Court Plaza Plaza Howard
----------- ----------- ----------- ----------- -----------
Rental income..... $ 189,704 319,057 420,391 40,561 52,572
Additional rental
income.......... 54,985 82,340 163,669 33,524 18,711
----------- ----------- ----------- ----------- -----------
Total income...... 244,689 401,397 584,060 74,085 71,283
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 18,693 40,360 43,119 4,593 4,783
Property operating
expenses........ 65,996 134,035 195,014 38,255 21,538
Interest expense.. - - - - -
Depreciation...... 46,750 100,900 107,800 11,481 11,956
----------- ----------- ----------- ----------- -----------
Total expenses.... 131,439 275,295 345,933 54,329 38,277
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 113,250 126,102 238,127 19,756 33,006
=========== =========== =========== =========== ===========

High Point Woodland Walgreens Schaumburg
Wauconda Center Heights Woodstock Plaza
----------- ----------- ----------- ----------- -----------
Rental income..... $ 57,676 261,872 188,885 27,700 183,665
Additional rental
income.......... 15,431 61,585 178,362 - 78,979
----------- ----------- ----------- ----------- -----------
Total income...... 73,107 323,457 367,247 27,700 262,462
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 6,313 25,885 24,000 2,905 17,468
Property operating
expenses........ 18,721 63,490 223,924 - 128,000
Interest expense.. - - - - 90,746
Depreciation...... 15,781 77,109 58,333 6,333 43,333
----------- ----------- ----------- ----------- -----------
Total expenses.... 40,815 166,484 306,257 9,238 279,547
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 32,292 156,973 60,990 18,462 (17,085)
=========== =========== =========== =========== ===========

F-31

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the three March 31, 1998
(unaudited)

Total 1998
Winnetka Park Acquisitions
Commons Eastgate Center Pro Forma
----------- ----------- ----------- ------------
Rental income..... $ 116,041 216,332 337,812 3,037,581
Additional rental
income.......... 76,980 68,318 142,632 1,256,270
----------- ----------- ----------- ------------
Total income...... 193,021 284,650 480,444 4,293,850
----------- ----------- ----------- ------------
Advisor asset
management fee.. 11,087 19,328 38,750 316,565
Property operating
expenses........ 85,665 92,245 298,949 1,699,534
Interest expense.. - - - 217,413
Depreciation...... 23,333 43,125 96,875 791,708
----------- ----------- ----------- ------------
Total expenses.... 120,085 154,698 434,574 3,025,219
----------- ----------- ----------- ------------
Net income (loss). $ 72,936 129,952 45,870 1,268,631
=========== =========== =========== ============

F-32

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the three months ended March 31, 1998
(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, 1998 was calculated by estimating the additional shares
sold to purchase each of the Company's properties on a weighted average
basis.

(F) Advisor Asset Management Fees are calculated as 1% per annum of the Average
Invested Assets (as defined).

F-33

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of the properties indicated in Note B and
Note C of the Notes to the Pro Forma Statement of Operations as though they
occurred the earlier of January 1, 1997 or the date operations commenced. No
pro forma adjustments have been made for Orland Park, Oak Forest Commons and
Downers Grove Market as these centers were completed in 1997 and 1998 and no
significant operations existed for the year ended December 31, 1997.
Construction has not begun on Staples Office Supply Store and therefore, there
were no operations for the year ended December 31, 1997. This unaudited Pro
Forma Statement of Operations should be read in conjunction with the December
31, 1997 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, 1997, 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-34

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

Pro Forma Adjustments
---------------------------

1997 1997 1998
Historical Acquisitions Acquisitions 1997
(A) (B) (C) Pro Forma
------------ ------------ ------------ ------------

Rental income..... $21,112,365 9,903,951 16,841,468 47,857,784
Additional rental
income.......... 6,592,983 3,622,583 7,233,740 17,449,306
Interest
income(D)....... 1,615,520 - - 1,615,520
Other income...... 100,717 - - 100,717
------------ ------------ ------------ ------------
Total income.... 29,421,585 13,526,534 24,075,208 67,023,327
------------ ------------ ------------ ------------
Professional services
and general and
administrative
fees............ 482,954 - - 482,954
Advisor asset
management fee.(G) 843,000 1,832,719 1,727,596 4,403,315
Property operating
expenses........ 8,863,024 4,476,786 9,392,311 22,732,121
Interest expense.. 5,654,564 1,338,640 1,139,254 8,132,458
Depreciation (E).. 4,556,445 2,371,640 4,308,019 11,236,104
Amortization...... 124,884 - - 124,884
Acquisition costs
expensed........ 249,493 - - 249,493
------------ ------------ ------------ ------------
Total expenses.... 20,774,364 10,019,785 16,567,180 47,361,329
------------ ------------ ------------ ------------
Net income...... $ 8,647,221 3,506,749 7,508,028 19,661,998
============ ============ ============ ============

Weighted average
common stock
outstanding (F). 15,225,983 33,099,083
============ ============

Net income per weighted
average common stock
outstanding, basic and
diluted (F)..... $ .57 .59
============ ============

See accompanying notes to pro forma statement of operations.

F-35

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

(A) The 1997 Historical column represents the historical statement of
operations of the Company for the year ended December 31, 1997, as filed
with the SEC on Form 10-K.

(B) Total pro forma adjustments for the year ended December 31, 1997 are as
though the 1997 acquisitions of the following properties occurred the
earlier of January 1, 1997 or the date operations commenced (May 13, 1997
for the Glendale Heights Dominick's). All properties were purchased on an
all cash basis except for Maple Park, Aurora Commons, Lincoln Park Place
and Rivertree Court. Pro forma adjustments for interest expense on these
properties were based on the following terms:

Maple Park Shopping Center

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%.

Aurora Commons Shopping Center

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.

Lincoln Park Place Shopping Center

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.

F-36

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

Rivertree Court

As part of the acquisition of Rivertree Court, the Company assumed the
existing first mortgage loan, maturing January 1, 1999, with a balance of
$15,700,000. The loan requires interest only monthly payments at a rate of
10.03% per annum.

Fashion Square

As part of the acquisition of Fashion Square, the Company assumed the
existing bond financing, in the remaining principal balance of $6,200,000.
Monthly interest only payments are due on the financing through December 1,
2014 maturity date. The interest rate changes weekly and is currently
4.1%. The bond financing is secured by a Letter of Credit issued by
LaSalle National Bank, who receives an annual fee of 1.25% of the
outstanding principal balance.

F-37

<TABLE>
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

(B) Total pro forma adjustments for 1997 acquisitions are as though they were acquired the earlier of January 1, 1997 or
the date operations commenced.
<CAPTION>
Niles
Maple Park Aurora Lincoln Shopping Cobblers Mallard Calumet Ameritech
Place Commons Park Place Center Mall Mall Square Outlot
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income..... $ 39,736 82,740 14,159 98,780 341,053 356,037 130,663 36,768
Additional rental
income.......... 8,168 26,594 5,714 39,507 189,843 138,412 146,565 8,091
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Total income...... 47,904 109,334 19,873 138,287 530,896 494,449 277,228 44,859
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Advisor asset
management fee.. - - - - - - - -
Property operating
expenses........ 10,039 30,055 6,352 43,952 205,189 161,720 152,445 9,746
Interest expense.. - - - - - - - -
Depreciation...... - - - - - - - -
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Total expenses.... 10,039 30,055 6,352 43,952 205,189 161,720 152,445 9,746
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Net income (loss). $ 37,865 79,279 13,521 94,335 325,707 332,729 124,783 35,113
=========== =========== =========== =========== =========== ============ =========== ===========

Highland Glendale
Schaumburg Sequoia Park River Rivertree Shorecrest Heights
Dominicks Plaza Dominicks Square Court Plaza Dominicks Party City
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income..... $ 269,510 182,563 405,156 358,182 1,923,392 311,714 303,692 166,666
Additional rental
income.......... - 67,441 - 157,773 588,600 128,728 - 33,000
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Total income...... 269,510 250,004 405,156 515,955 2,511,992 440,442 303,692 199,666
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Advisor asset
management fee.. - - - - - - - -
Property operating
expenses........ 5,390 78,364 8,103 166,076 732,510 154,027 7,592 39,000
Interest expense.. - - - - - - - -
Depreciation...... - - - - - - - -
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Total expenses.... 5,390 78,364 8,103 166,076 732,510 154,027 7,592 39,000
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Net income (loss). $ 264,120 171,640 397,053 349,879 1,779,482 286,415 296,099 160,666
=========== =========== =========== =========== =========== ============ ============ ===========

F-38

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

(B) Total pro forma adjustments for 1997 acquisitions are as though they were acquired the earlier of January 1, 1997 or
the date operations commenced.
<CAPTION>
Roselle Wilson Terramere Iroquois Fashion Naper West
Eagle Countryside Plaza Plaza Center Square Plaza
----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income..... $ 307,980 256,000 136,100 419,563 1,376,053 808,935 1,578,508
Additional rental
income.......... 77,500 - 50,500 376,745 446,667 543,963 588,773
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total income...... 385,480 256,000 186,600 793,309 1,822,720 1,352,897 2,167,281
----------- ----------- ----------- ----------- ----------- ------------ ------------
Advisor asset
management fee.. - - - - - - -
Property operating
expenses........ 100,000 87,000 61,100 406,416 551,333 741,680 718,696
Interest expense.. - - - - - - -
Depreciation...... - - - - - - -
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total expenses.... 100,000 87,000 61,100 406,416 551,333 741,680 718,696
----------- ----------- ----------- ----------- ----------- ------------ ------------
Net income (loss). $ 285,480 169,000 125,500 389,892 1,271,387 611,217 1,448,585
=========== =========== =========== =========== =========== ============ ============
Total
1997
Pro Forma Acquisitions
Adjustments Pro Forma
----------- -------------
<S> <C> <C>
Rental income..... $ - 9,903,951
Additional rental
income.......... - 3,622,583
----------- ------------
Total income...... - 13,526,534
----------- ------------
Advisor asset
management fee.. 1,832,719 1,832,719
Property operating
expenses........ - 4,476,786
Interest expense.. 1,338,640 1,338,640
Depreciation...... 2,371,640 2,371,640
----------- ------------
Total expenses.... 5,542,999 10,019,785
----------- ------------
Net income (loss). $(5,542,999) 3,506,749
=========== ============

</TABLE>
F-39

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

West
Woodfield Coopers Chicago Maple Lake Park
Plaza Grove Dominick's Plaza Plaza
----------- ----------- ----------- ----------- -----------
Rental income..... $2,235,315 577,096 628,320 369,317 1,216,080
Additional rental
income.......... 755,071 401,492 - 129,431 472,163
----------- ----------- ----------- ----------- -----------
Total income...... 2,990,386 978,588 628,320 498,748 1,688,243
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 192,000 58,000 63,000 31,650 122,750
Property operating
expenses........ 873,792 488,067 18,850 133,667 543,398
Interest expense.. - - - - -
Depreciation...... 483,000 146,600 157,500 83,400 293,000
----------- ----------- ----------- ----------- -----------
Total expenses.... 1,548,792 692,667 239,350 248,717 959,148
----------- ----------- ----------- ----------- -----------
Net income (loss). $1,441,594 285,921 388,970 250,031 729,095
=========== =========== =========== =========== ===========

Homewood Wisner Elmhurst Mill Prairie
Plaza Plaza City Center Creek Square
----------- ----------- ----------- ----------- -----------
Rental income..... $ 220,375 206,312 508,377 1,085,374 315,796
Additional rental
income.......... 132,016 59,636 95,827 725,135 87,777
----------- ----------- ----------- ----------- -----------
Total income...... 332,391 265,948 604,204 1,810,509 403,573
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 19,363 18,853 47,750 113,600 31,000
Property operating
expenses........ 166,951 101,312 140,836 823,792 130,448
Interest expense.. - - - 760,000 -
Depreciation...... 46,500 45,900 119,375 272,500 87,800
----------- ----------- ----------- ----------- -----------
Total expenses.... 232,814 166,065 307,961 1,969,892 249,248
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 99,577 99,883 296,243 (159,383) 154,325
=========== =========== =========== =========== ===========

F-40

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
December 31, 1997
(unaudited)

St. James Chestnut Bergen Western & Berwyn
Crossing Court Plaza Howard Plaza
----------- ----------- ----------- ----------- -----------
Rental income..... $ 720,615 1,197,317 1,681,564 210,288 176,345
Additional rental
income.......... 183,197 306,682 980,649 69,180 131,460
----------- ----------- ----------- ----------- -----------
Total income...... 903,812 1,503,999 2,662,213 279,468 307,805
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 74,770 161,440 172,477 19,130 18,370
Property operating
expenses........ 265,225 593,967 1,105,206 88,145 147,830
Interest expense.. - - - - -
Depreciation...... 187,000 403,600 431,200 47,825 45,925
----------- ----------- ----------- ----------- -----------
Total expenses.... 526,995 1,159,007 1,708,883 155,100 212,125
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 376,817 344,992 953,330 124,368 95,680
=========== =========== =========== =========== ===========

High Point Woodland Walgreens Winnetka
Wauconda Center Heights Woodstock Commons
----------- ----------- ----------- ----------- -----------
Rental income..... $ 230,703 1,078,701 684,840 110,800 453,321
Additional rental
income.......... 72,913 251,518 754,544 - 343,033
----------- ----------- ----------- ----------- -----------
Total income...... 303,616 1,330,219 1,439,384 110,800 796,354
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 25,250 103,540 96,000 11,620 44,350
Property operating
expenses........ 72,912 305,583 844,901 4,986 327,566
Interest expense.. - - - - -
Depreciation...... 63,125 308,437 233,333 25,333 93,333
----------- ----------- ----------- ----------- -----------
Total expenses.... 161,287 717,560 1,174,234 41,939 465,249
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 142,329 612,659 265,150 68,861 331,105
=========== =========== =========== =========== ===========

F-41

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
December 31, 1997
(unaudited)

Total 1998
Schaumburg Park Acquisitions
Plaza Eastgate Center Pro Forma
----------- ----------- ----------- -----------
Rental income..... $ 734,658 844,830 1,375,124 16,841,468
Additional rental
income.......... 315,191 200,749 766,076 7,233,740
----------- ----------- ----------- -----------
Total income...... 1,049,849 1,045,579 2,141,200 24,075,208
----------- ----------- ----------- -----------
Advisor asset
management fee.. 69,873 77,310 155,500 1,727,596
Property operating
expenses........ 511,999 436,950 1,265,928 9,392,311
Interest expense.. 379,254 - - 1,139,254
Depreciation...... 173,333 172,500 387,500 4,308,019
----------- ----------- ----------- -----------
Total expenses.... 1,134,459 686,760 1,808,928 16,567,180
----------- ----------- ----------- -----------
Net income (loss). $ (84,610) 358,819 332,272 7,508,028
=========== =========== =========== ===========

F-42

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Woodfield Plaza, Schaumburg, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Woodfield Plaza
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $2,235,315 - 2,235,315
Additional rental income.. 755,071 - 755,071
----------- ----------- -----------
Total income.............. 2,990,386 - 2,990,386
----------- ----------- -----------
Advisor asset
management fee.......... - 192,000 192,000
Property operating
expenses................ 801,632 72,160 873,792
Depreciation.............. - 483,000 483,000
----------- ----------- -----------
Total expenses............ 801,632 747,160 1,548,792
----------- ----------- -----------
Net income (loss)......... $2,188,754 (747,160) 1,441,594
=========== =========== ===========

Acquisition of Coopers Grove, Country Club Hills, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Coopers Grove
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 577,096 - 577,096
Additional rental income.. 401,492 - 401,492
----------- ----------- -----------
Total income.............. 978,588 - 978,588
----------- ----------- -----------
Advisor asset
management fee.......... - 58,000 58,000
Property operating
expenses................ 428,031 60,036 488,067
Depreciation.............. - 146,600 146,600
----------- ----------- -----------
Total expenses............ 428,031 264,636 692,667
----------- ----------- -----------
Net income (loss)......... $ 550,557 (264,636) 285,921
=========== =========== ===========

F-43

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of West Chicago Dominick's, West Chicago, Illinois

This pro forma adjustment reflects the purchase of West Chicago Dominick's
as if the Company had acquired the property as of January 1, 1997, and is
based on information provided by the Seller.

West Chicago Dominick's
-------------------------------------
Year ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 628,320 - 628,320
Additional rental income.. - - -
----------- ----------- -----------
Total income.............. 628,320 - 628,320
----------- ----------- -----------
Advisor asset
management fee.......... - 63,000 63,000
Property operating
expenses................ - 18,850 18,850
Depreciation.............. - 157,500 157,500
----------- ----------- -----------
Total expenses............ - 239,350 239,350
----------- ----------- -----------
Net income (loss)......... $ 628,320 (239,350) 388,970
=========== =========== ===========

Acquisition of Maple Plaza, Downers Grove, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Maple Plaza
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 369,317 - 369,317
Additional rental income.. 129,431 - 129,431
----------- ----------- -----------
Total income.............. 498,748 - 498,748
----------- ----------- -----------
Advisor asset
management fee.......... - 31,650 31,650
Property operating
expenses................ 133,667 - 133,667
Depreciation.............. - 83,400 83,400
----------- ----------- -----------
Total expenses............ 133,667 115,050 248,717
----------- ----------- -----------
Net income (loss)......... $ 365,081 (115,050) 250,031
=========== =========== ===========

F-44

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Lake Park Plaza, Michigan City, Indiana

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Lake Park Plaza
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $1,216,080 - 1,216,080
Additional rental income.. 472,163 - 472,163
----------- ----------- -----------
Total income.............. 1,688,243 - 1,688,243
----------- ----------- -----------
Advisor asset
management fee.......... - 122,750 122,750
Property operating
expenses................ 467,427 75,971 543,398
Depreciation.............. - 293,000 293,000
----------- ----------- -----------
Total expenses............ 467,427 491,721 959,148
----------- ----------- -----------
Net income (loss)......... $1,220,816 (491,721) 729,095
=========== =========== ===========

Acquisition of Homewood Plaza, Homewood, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X to the Pro Forma Adjustments:

Homewood Plaza
-------------------------------------
Year ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 200,375 - 200,375
Additional rental income.. 132,016 - 132,016
----------- ----------- -----------
Total income.............. 332,391 - 332,391
----------- ----------- -----------
Advisor asset
management fee.......... - 19,363 19,363
Property operating
expenses................ 166,951 - 166,951
Depreciation.............. - 46,500 46,500
----------- ----------- -----------
Total expenses............ 166,951 65,863 232,814
----------- ----------- -----------
Net income (loss)......... $ 165,440 (65,863) 99,577
=========== =========== ===========

F-45

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Wisner Plaza, Chicago, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X to the Pro Forma Adjustments:

Wisner Plaza
-----------------------------------
Year ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 206,312 - 206,312
Additional rental income.. 59,636 - 59,636
----------- ----------- -----------
Total income.............. 265,948 - 265,948
----------- ----------- -----------
Advisor asset
management fee.......... - 18,853 18,853
Property operating
expenses................ 101,312 - 101,312
Depreciation.............. - 45,900 45,900
----------- ----------- -----------
Total expenses............ 101,312 64,753 166,065
----------- ----------- -----------
Net income (loss)......... $ 164,636 (64,753) 99,883
=========== =========== ===========

Acquisition of Elmhurst City Center, Elmhurst, Illinois

This pro forma adjustment reflects the purchase of Elmhurst City Center as
if the Company had acquired the property as of January 1, 1997, and is
based on information provided by the Seller.

Elmhurst City Center
-------------------------------------
Year ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 508,377 - 508,377
Additional rental income.. 95,827 - 95,827
----------- ----------- -----------
Total income.............. 604,204 - 604,204
----------- ----------- -----------
Advisor asset
management fee.......... - 47,750 47,750
Property operating
expenses................ 140,836 - 140,836
Depreciation.............. - 119,375 119,375
----------- ----------- -----------
Total expenses............ 140,836 167,125 307,961
----------- ----------- -----------
Net income (loss)......... $ 463,368 (167,125) 296,243
=========== =========== ===========

F-46

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Mill Creek, Palos Park, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Mill Creek
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $1,085,374 - 1,085,374
Additional rental income.. 725,135 - 725,135
----------- ----------- -----------
Total income.............. 1,810,509 - 1,810,509
----------- ----------- -----------
Advisor asset
management fee.......... - 113,600 113,600
Property operating
expenses................ 778,792 45,000 823,792
Interest expense.......... - 760,000 760,000
Depreciation.............. - 272,500 272,500
----------- ----------- -----------
Total expenses............ 778,792 1,191,100 1,969,892
----------- ----------- -----------
Net income (loss)......... $1,031,537 (1,191,100) (159,383)
=========== =========== ===========

Acquisition of Prairie Square, Sun Prairie, Wisconsin

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X to the Pro Forma Adjustments:

Prairie Square
-----------------------------------
Year Ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 315,796 - 315,796
Additional rental income.. 87,777 - 87,777
----------- ----------- -----------
Total income.............. 403,573 - 403,573
----------- ----------- -----------
Advisor asset
management fee.......... - 31,000 31,000
Property operating
expenses................ 130,448 - 130,448
Depreciation.............. - 87,800 87,800
----------- ----------- -----------
Total expenses............ 130,448 118,800 249,248
----------- ----------- -----------
Net income (loss)......... $ 273,125 (118,800) 154,325
=========== =========== ===========

F-47

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of St. James Crossing, Westmont, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

St. James Crossing
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 720,615 - 720,615
Additional rental income.. 183,197 - 183,197
----------- ----------- -----------
Total income.............. 903,812 - 903,812
----------- ----------- -----------
Advisor asset
management fee.......... - 74,770 74,770
Property operating
expenses................ 257,225 8,000 265,225
Depreciation.............. - 187,000 187,000
----------- ----------- -----------
Total expenses............ 257,225 269,770 526,995
----------- ----------- -----------
Net income (loss)......... $ 646,587 (269,770) 376,817
=========== =========== ===========

Acquisition of Chestnut Court, Darien, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Chestnut Court
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $1,197,317 - 1,197,317
Lease termination income.. 765,504 (765,504) -
Additional rental income.. 306,682 - 306,682
----------- ----------- -----------
Total income.............. 2,269,503 (765,504) 1,503,999
----------- ----------- -----------
Advisor asset
management fee.......... - 161,440 161,440
Property operating
expenses................ 593,967 - 593,967
Depreciation.............. - 403,600 403,600
----------- ----------- -----------
Total expenses............ 593,967 565,040 1,159,007
----------- ----------- -----------
Net income (loss)......... $1,675,536 (1,330,544) 344,992
=========== =========== ===========

F-48

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Bergen Plaza, Oakdale, Minnesota

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Bergen Plaza
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $1,681,564 - 1,681,564
Additional rental income.. 980,649 - 980,649
----------- ----------- -----------
Total income.............. 2,662,213 - 2,662,213
----------- ----------- -----------
Advisor asset
management fee.......... - 172,477 172,477
Property operating
expenses................ 1,105,206 - 1,105,206
Depreciation.............. - 431,200 431,200
----------- ----------- -----------
Total expenses............ 1,105,206 603,677 1,708,883
----------- ----------- -----------
Net income (loss)......... $1,557,007 (603,677) 953,330
=========== =========== ===========

Acquisition of Western & Howard, Chicago, Illinois

This pro forma adjustment reflects the purchase of Western & Howard as if
the Company had acquired the property as of January 1, 1997, and is based
on information provided by the Seller.

Western & Howard
-------------------------------------
Year ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 210,288 - 210,288
Additional rental income.. 69,180 - 69,180
----------- ----------- -----------
Total income.............. 279,468 - 279,468
----------- ----------- -----------
Advisor asset
management fee.......... - 19,130 19,130
Property operating
expenses................ 88,145 - 88,145
Depreciation.............. - 47,825 47,825
----------- ----------- -----------
Total expenses............ 88,145 66,955 155,100
----------- ----------- -----------
Net income (loss)......... $ 191,323 (66,955) 124,368
=========== =========== ===========

F-49

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Berwyn Plaza, Berwyn, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Berwyn Plaza
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 176,345 - 176,345
Additional rental income.. 131,460 - 131,460
----------- ----------- -----------
Total income.............. 307,805 - 307,805
----------- ----------- -----------
Advisor asset
management fee.......... - 18,370 18,730
Property operating
expenses................ 135,830 12,000 147,830
Depreciation.............. - 45,925 45,925
----------- ----------- -----------
Total expenses............ 135,830 76,295 212,125
----------- ----------- -----------
Net income (loss)......... $ 171,975 (76,295) 95,680
=========== =========== ===========

Acquisition of Wauconda, Wauconda, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Wauconda
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 230,703 - 230,703
Additional rental income.. 72,913 - 72,913
----------- ----------- -----------
Total income.............. 303,616 - 303,616
----------- ----------- -----------
Advisor asset
management fee.......... - 25,250 25,250
Property operating
expenses................ 72,912 - 72,912
Depreciation.............. - 63,125 63,125
----------- ----------- -----------
Total expenses............ 72,912 88,375 161,287
----------- ----------- -----------
Net income (loss)......... $ 230,704 (88,375) 142,329
=========== =========== ===========

F-50

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of High Point Centre, Madison, Wisconsin

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

High Point Centre
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $1,078,701 - 1,078,701
Additional rental income.. 251,518 - 251,518
----------- ----------- -----------
Total income.............. 1,330,219 - 1,330,219
----------- ----------- -----------
Advisor asset
management fee.......... - 103,540 103,540
Property operating
expenses................ 258,583 47,000 305,583
Depreciation.............. - 308,437 308,437
----------- ----------- -----------
Total expenses............ 258,583 458,977 717,560
----------- ----------- -----------
Net income (loss)......... $1,071,636 (458,977) 612,659
=========== =========== ===========

Acquisition of Woodland Heights, Streamwood, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Woodland Heights
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 684,840 - 684,840
Additional rental income.. 754,544 - 754,544
----------- ----------- -----------
Total income.............. 1,439,384 - 1,439,384
----------- ----------- -----------
Advisor asset
management fee.......... - 96,000 96,000
Property operating
expenses................ 844,901 - 844,901
Depreciation.............. - 233,333 233,333
----------- ----------- -----------
Total expenses............ 844,901 329,333 1,174,234
----------- ----------- -----------
Net income (loss)......... $ 594,483 (329,333) 265,150
=========== =========== ===========

F-51

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Walgreens, Woodstock, Illinois

This pro forma adjustment reflects the purchase of the Walgreens property
as if the Company had acquired the property as of January 1, 1997, and is
based on information provided by the seller.

Walgreens
------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 110,800 - 110,800
Additional rental income.. - - -
----------- ----------- -----------
Total income.............. 110,800 - 110,800
----------- ----------- -----------
Advisor asset
management fee.......... - 11,620 11,620
Property operating
expenses................ - 4,986 4,986
Depreciation.............. - 25,333 25,333
----------- ----------- -----------
Total expenses............ - 41,939 41,939
----------- ----------- -----------
Net income (loss)......... $ 110,800 (41,939) 68,861
=========== =========== ===========

Acquisition of Winnetka Commons, New Hope, Minnesota

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Winnetka Commons
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 453,321 - 453,321
Additional rental income.. 343,033 - 343,033
----------- ----------- -----------
Total income.............. 796,354 - 796,354
----------- ----------- -----------
Advisor asset
management fee.......... - 44,350 44,350
Property operating
expenses................ 327,566 - 327,566
Depreciation.............. - 93,333 93,333
----------- ----------- -----------
Total expenses............ 327,566 137,683 465,249
----------- ----------- -----------
Net income (loss)......... $ 468,788 (137,683) 331,105
=========== =========== ===========

F-52

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Schaumburg Plaza, Schaumburg, Illinois

This pro forma adjustment reflects the purchase of Schaumburg Plaza as if
the Company had acquired the property as of January 1, 1997, and is based
on information provided by the Seller.

Schaumburg Plaza
-------------------------------------
Year ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 734,658 - 734,658
Additional rental income.. 315,191 - 315,191
----------- ----------- -----------
Total income.............. 1,049,849 - 1,049,849
----------- ----------- -----------
Advisor asset
management fee.......... - 69,873 69,873
Property operating
expenses................ 511,999 - 511,999
Interest expense.......... 379,254 - 379,254
Depreciation.............. - 173,333 173,333
----------- ----------- -----------
Total expenses............ 891,253 243,206 1,134,459
----------- ----------- -----------
Net income (loss)......... $ 158,596 (243,206) (84,610)
=========== =========== ===========

Acquisition of Eastgate, Lombard, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Eastgate
------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 844,830 - 844,830
Additional rental income.. 200,749 - 200,749
----------- ----------- -----------
Total income.............. 1,045,579 - 1,045,579
----------- ----------- -----------
Advisor asset
management fee.......... - 77,310 77,310
Property operating
expenses................ 436,950 - 436,950
Depreciation.............. - 172,500 172,500
----------- ----------- -----------
Total expenses............ 436,950 249,810 686,760
----------- ----------- -----------
Net income (loss)......... $ 608,629 (249,810) 358,819
=========== =========== ===========

F-53

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Park Center, Tinley Park, Illinois

This pro forma adjustment reflects the purchase of Park Center as if the
Company had acquired the property as of January 1, 1997, and is based on
information provided by the Seller.

Park Center
------------------------------------
Year Ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $1,375,124 - 1,375,124
Additional rental income.. 766,076 - 766,076
----------- ----------- -----------
Total income.............. 2,141,200 - 2,141,200
----------- ----------- -----------
Advisor asset
management fee.......... - 155,500 155,500
Property operating
expenses................ 1,265,928 - 1,265,928
Depreciation.............. - 387,500 387,500
----------- ----------- -----------
Total expenses............ 1,265,928 543,000 1,808,928
----------- ----------- -----------
Net income (loss)......... $ 875,272 (543,000) 322,272
=========== =========== ===========

(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, 1997 was calculated by estimating the additional shares sold
to purchase each of the Company's properties on a weighted average basis.

(G) Advisor Asset Management Fees are calculated as 1% of the Average Invested
Assets (as defined).

F-54

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 High Point Centre for the year ended
December 31, 1997. 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.

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 Real Estate
Corporation, as described in note 2. The presentation is not intended to be a
complete presentation of High Point Centre'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 High Point Centre for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
April 15, 1998

F-55

High Point Centre
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Gross income:
Base rental income.............................. $1,078,701
Operating expense and real estate
tax recoveries................................ 251,518
-----------
Total Gross Income.............................. 1,330,919
-----------
Direct operating expenses:
Real estate taxes............................... 147,562
Operating expenses.............................. 78,273
Management fees................................. 12,000
Insurance....................................... 5,176
Utilities....................................... 15,572
-----------
Total direct operating expenses................. 258,583
-----------
Excess of gross income over
direct operating expenses..................... $1,071,636
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-56

High Point Centre
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

High Point Centre is located in Madison, Wisconsin. It consists of
approximately 86,000 square feet of gross leasable area and was 100% leased
and occupied at December 31, 1997. Approximately 10% of High Point Centre
is leased to one tenant representing approximately 13% of total rental
income. Inland Real Estate Corporation has signed a sale and purchase
agreement for the purchase of High Point Centre 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 High Point
Centre's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management of High Point
Centre 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

High Point Centre leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. The leases
include provisions under which High Point Centre 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 1997
expenses for which the tenants have not yet been billed.

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 $48,627 for the
year ended December 31, 1997.

F-57

High Point Centre
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
1998 $ 1,051,960
1999 972,278
2000 748,162
2001 653,440
2002 548,338
Thereafter 1,531,731
-----------
$ 5,506,909
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of High Point Centre. Costs
such as mortgage interest, depreciation, amortization and professional fees
are excluded from the Historical Summary.

High Point Centre is managed by an affiliate of the seller pursuant to the
terms of a management agreement for an annual fee of $12,000. Subsequent
to the sale of High Point Centre (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-58

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 Woodland Heights Shopping Center for
the year ended December 31, 1997. 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.

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 Woodland Heights Shopping Center for the year ended December 31,
1997, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
May 28, 1998

F-59

Woodland Heights Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Gross income:
Base rental income.............................. $ 684,840
Operating expense and real estate
tax recoveries................................ 609,728
Percentage rent................................. 144,816
-----------
Total Gross Income.............................. 1,439,384
-----------
Direct operating expenses:
Real estate taxes............................... 455,110
Operating expenses.............................. 320,239
Management fees................................. 38,307
Insurance....................................... 17,725
Utilities....................................... 13,520
-----------
Total direct operating expenses................. 844,901
-----------
Excess of gross income over
direct operating expenses..................... $ 594,483
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-60

Woodland Heights Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Woodland Heights Shopping Center is located in Streamwood, Illinois. It
consists of approximately 120,436 square feet of gross leasable area and
was 86% leased and occupied at December 31, 1997. Approximately 50% of
Woodland Heights Shopping Center is leased to one tenant representing
approximately 34% of base rental income. Inland Real Estate Corporation
has signed a sale and purchase agreement for the purchase of Woodland
Heights Shopping 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 Woodland
Heights Shopping Center's revenues and expenses. The Historical Summary
has been prepared on the accrual basis of accounting and requires
management of Woodland Heights Shopping 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

Woodland Heights Shopping 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 Woodland Heights
Shopping Center 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 1997 expenses for which the tenants
have not yet been billed. Certain of the leases provide for payment of
contingent rentals based on a percentage applied to the amount by which the
tenants' sales exceed predetermined levels. Certain leases contain renewal
options for various periods at various rental rates.

F-61

Woodland Heights Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
1998 $ 785,428
1999 713,022
2000 728,200
2001 675,880
2002 645,562
Thereafter 4,077,930
-----------
$ 7,626,022
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Woodland Heights Shopping
Center. Costs such as mortgage interest, depreciation, amortization and
professional fees are excluded from the Historical Summary.

Woodland Heights Shopping Center had not received its final real estate tax
bill for 1997. Real estate tax expense is estimated based upon bills for
1996. The difference between the estimate and the final tax bill is not
expected to have a material impact on the Historical Summary.

Woodland Heights Shopping Center is managed by an affiliate of the seller
pursuant to the terms of a management agreement for an annual fee of 5% of
base and percentage rents. Subsequent to the sale of Woodland Heights
Shopping Center (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

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 Eastgate Shopping Center for the
year ended December 31, 1997. 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.

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 Eastgate Shopping Center for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
May 28, 1998

F-63

Eastgate Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Gross income:
Base rental income.............................. $ 844,830
Operating expense and real estate
tax recoveries................................ 184,481
Other income.................................... 16,268
-----------
Total Gross Income.............................. 1,045,579
-----------
Direct operating expenses:
Real estate taxes............................... 119,007
Operating expenses.............................. 129,262
Management fees................................. 125,143
Insurance....................................... 12,574
Utilities....................................... 50,964
-----------
Total direct operating expenses................. 436,950
-----------
Excess of gross income over
direct operating expenses..................... $ 608,629
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-64

Eastgate Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Eastgate Shopping Center is located in Lombard, Illinois. It consists of
approximately 132,500 square feet of gross leasable area and was 86% leased
and occupied at December 31, 1997. Approximately 20% of Eastgate Shopping
Center is leased to one tenant representing approximately 25% of base
rental income. Inland Real Estate Corporation has signed a sale and
purchase agreement for the purchase of Eastgate Shopping 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 Eastgate
Shopping Center's revenues and expenses. The Historical Summary has been
prepared on the accrual basis of accounting and requires management of
Eastgate Shopping 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

Eastgate Shopping 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 Eastgate Shopping Center 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 1997 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 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 decreased base rental income by $47,688 for the
year ended December 31, 1997.

F-65

Eastgate Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
1998 $ 850,838
1999 728,528
2000 607,207
2001 434,352
2002 346,391
Thereafter 311,329
-----------
$ 3,278,645
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Eastgate Shopping Center.
Costs such as mortgage interest, depreciation, amortization and
professional fees are excluded from the Historical Summary.

Eastgate Shopping Center is managed by an affiliate of the seller pursuant
to the terms of a management agreement for an annual fee of 5% of base
rents and reimbursement of salaries for related property management
personnel of approximately $69,000 for the year ended December 31, 1997.
Subsequent to the sale of Eastgate Shopping Center (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-66

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 Winnetka Commons Shopping Center for
the year ended December 31, 1997. 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.

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 Winnetka Commons Shopping Center for the year ended December 31,
1997, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
June 19, 1998

F-67

Winnetka Commons Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Gross income:
Base rental income.............................. $ 453,321
Operating expense and real estate
tax recoveries................................ 321,438
Percentage rent................................. 21,595
-----------
Total Gross Income.............................. 796,354
-----------
Direct operating expenses:
Real estate taxes............................... 182,096
Operating expenses.............................. 85,231
Management fees................................. 13,207
Insurance....................................... 42,153
Utilities....................................... 4,879
-----------
Total direct operating expenses................. 327,566
-----------
Excess of gross income over
direct operating expenses..................... $ 468,788
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-68

Winnetka Commons Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Winnetka Commons Shopping Center is located in New Hope, Minnesota. It
consists of approximately 42,000 square feet of gross leasable area and was
100% leased and occupied at December 31, 1997. Approximately 28% of
Winnetka Commons Shopping Center is leased to one tenant representing
approximately 30% of base rental income. Inland Real Estate Corporation
has signed a sale and purchase agreement for the purchase of Winnetka
Commons Shopping 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 Winnetka
Commons Shopping Center's revenues and expenses. The Historical Summary
has been prepared on the accrual basis of accounting and requires
management of Winnetka Commons Shopping 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

Winnetka Commons Shopping 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 Winnetka Commons
Shopping Center is reimbursed for common area, real estate, and insurance
costs. Certain of the leases provide for payment of contingent rentals
based on a percentage applied to the amount by which the tenants' sales
exceed predetermined levels. Certain leases contain renewal options for
various periods at various rental rates.

F-69

Winnetka Commons Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
1998 $ 457,564
1999 464,388
2000 441,459
2001 368,997
2002 308,234
Thereafter 4,327,364
-----------
$ 6,368,006
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Winnetka Commons Shopping
Center. Costs such as mortgage interest, depreciation, amortization and
professional fees are excluded from the Historical Summary.

Winnetka Commons Shopping Center is managed pursuant to the terms of a
management agreement for an annual fee of 5% of base rents. Subsequent to
the sale of Winnetka Commons Shopping Center (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-70

PROSPECTUS
INLAND REAL ESTATE CORPORATION

$11.00 PER SHARE MINIMUM INITIAL PURCHASE - 300 SHARES
(100 SHARES FOR TAX-EXEMPT ENTITIES)

Inland Real Estate Corporation (the "Company"), a Maryland corporation,
is an infinite-life real estate investment trust (a "REIT"), formed in 1994 to
invest in Neighborhood Retail Centers and Community Centers located primarily
within a 400-mile radius of its headquarters in Oak Brook, Illinois as well as
single-user retail properties located throughout the United States. The Company
owns 43 Neighborhood Retail Centers, seven Community Centers and nine
single-user retail properties and intends to use the Net Proceeds of this
Offering (after funding appropriate working capital reserves) primarily to
acquire additional properties. See "Investment Objectives and Policies." The
Company's day-to-day operations are managed by Inland Real Estate Advisory
Services, Inc. (the "Advisor").

Of the 28,058,370 shares of the Company's common stock, $.01 par value
per share offered hereby (the "Shares"), a total of 25,000,000 Shares are being
offered on a "best efforts" basis (the "Offering"); a total of 2,000,000 Shares
are being offered for distribution to Stockholders participating in the
Company's Distribution Reinvestment Program (the "DRP"); up to 433,370 Shares
may be issued upon the exercise of warrants issued in connection with Prior
Offerings; and up to 625,000 Shares may be issued upon the exercise of warrants
granted in connection with the Offering. Capitalized terms used in this
Prospectus and not defined in the text are defined in the "Glossary."

AN INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 18. THESE RISKS INCLUDE THE FACT THAT:

o 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 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 suitable only
for those able to make a long-term investment; (page 18)

o The Offering is not conditioned upon the Company raising a minimum
amount of proceeds. 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 18)

o Although the Company intends to purchase properties, whenever possible,
on an all-cash basis, the Company assumed debt as part of the
acquisition price on seven properties and utilized short-term financing
acquired from an Affiliate to acquire six properties. The Company may
incur additional indebtedness secured by existing properties or
properties acquired in the future. Defaults on this indebtedness could
cause the Company to lose its investment in such properties; (page 19)

o Except for six properties, the Company has not specified any additional
acquisitions; (page 18)

o The Company relies on the Advisor and its Affiliates to operate the
Company on a daily basis and manage its assets and pays the Advisor and
its Affiliates substantial fees for rendering these services; (page 21)

o No person may own more than 9.8% of the Shares; (page 20)

o Affiliates of the Advisor are engaged in similar real estate activities
which may subject them to various conflicts of interest in managing the
Company's operations. These conflicts include competition for the time
and services of these individuals, payments which may not be on fair
market terms 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; and (page 21)

o 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 22)

================================================================================
<TABLE>
<CAPTION>
Selling Proceeds to
Price to Public Commissions (1) Company (2)
--------------- --------------- -----------

<S> <C> <C> <C>
Per Share $ 11.00 $ .77 $ 10.23
Minimum Purchase 300 Shares $ 3,300.00 $ 231.00 $ 3,069.00
Total Maximum if 27,000,000 Shares Sold(3) $ 295,900,000.00 $ 19,250,000.00 $ 276,650,000.00(3)
</TABLE>
================================================================================

The date of this Prospectus is April 7, 1998. (cover page continued)

(1) A total of 25,000,000 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, in
certain instances, issue a warrant to purchase one Share during the
Exercise Period at $13.20 per share for every 40 Shares sold (the
"Soliciting Dealer Warrants"). The Dealer Manager may retain or reallow
all or a part of this compensation, including the Soliciting Dealer
Warrants, to certain Soliciting Dealers unless prohibited by either
federal or state securities laws; provided that the Company will not
issue warrants to purchase more than 625,000 shares. The Dealer Manager
will also 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. Volume
discounts may be given on orders of 20,000 Shares or more.

(2) Before deducting Organization and Offering Expenses, payable from
proceeds of the Offering, estimated at $6,974,110 if 27,000,000 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 agrees to pay the excess
expenses.

(3) A total of 25,000,000 Shares are being offered on a "best efforts"
basis and a total of 2,000,000 Shares are being offered for
distribution to Stockholders participating in the Company's
Distribution Reinvestment Program. Participation in the DRP is limited
to those investors who purchased Shares in the Prior Offerings or who
purchase Shares in this Offering. Participants may purchase Shares at a
reduced price due to lower administrative costs ($10.45 per Share). In
addition, assuming all 625,000 warrants are issued to the Dealer
Manager, the Company will receive additional proceeds of $800.00;
assuming these warrants are exercised at the warrant price of $13.20,
the Company will receive additional proceeds of $8,250,000. No
commission will be paid in connection with the issuance of the warrants
or the Shares issuable upon exercise thereof.

The Shares offered hereby 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 April 6, 2000. Subscription proceeds received from
investors will be held in escrow by the Escrow Agent, pending release to the
Company. Since 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.

(end of cover page)

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUMMARY .................................................................... 1
ORGANIZATIONAL CHART .................................................................. 16
RISK FACTORS .......................................................................... 18
Investment Risks ................................................................ 18
Company Risks ................................................................... 20
Risks of Real Estate Ownership .................................................. 23
Tax Risks ....................................................................... 26
ERISA Risks ..................................................................... 28
ESTIMATED USE OF PROCEEDS OF OFFERING ................................................. 30
WHO MAY INVEST ........................................................................ 32
COMPENSATION TABLE .................................................................... 34
Nonsubordinated Payments ........................................................ 34
Special Provisions Relating to Fee Payments ..................................... 41
CONFLICTS OF INTEREST ................................................................. 45
Competition for the Time and Service of the Advisor and Affiliates .............. 45
Process for Resolving Conflicting Opportunities ................................. 45
Acquisition from Affiliates ..................................................... 46
The Company may Purchase Properties from Persons with whom Affiliates of the
Advisor have Prior Business Relationships ................................. 46
Property Management Services are being Rendered by an Affiliate of the Advisor .. 47
Receipt of Commissions, Fees and Other Compensation by the Advisor
and its Affiliates ........................................................ 47
Non-Arm's-Length Agreements ..................................................... 47
The Company and the Advisor have the Same Legal Counsel ......................... 48
Inland Securities Corporation is Participating as Dealer Manager in the Sale
of the Shares ............................................................. 48
The Advisor may have Conflicting Fiduciary Obligations in the Event the Company
Acquires Properties with Affiliates ....................................... 48
FIDUCIARY RESPONSIBILITY OF DIRECTORS AND
THE ADVISOR; INDEMNIFICATION .................................................... 49
General ......................................................................... 49
Limitation of Liability and Indemnification ..................................... 49
Business Judgment Presumption ................................................... 50
PRIOR PERFORMANCE OF THE COMPANY'S AFFILIATES ......................................... 51
Prior Investment Programs ....................................................... 51
Summary Information ............................................................. 52
Publicly Registered Limited Partnerships ........................................ 54
Private Partnerships ............................................................ 59
Private Placement Real Estate Equity Program .................................... 60
Private Placement Mortgage and Note Programs .................................... 60
</TABLE>

iii

<TABLE>
<CAPTION>
PAGE
<S> <C>
Loan Modifications and Work-Outs ................................................ 63
Effects of Property Exchanges on Investors ...................................... 66
Additional Information .......................................................... 67
MANAGEMENT ............................................................................ 68
General ......................................................................... 68
Directors and Executive Officers ................................................ 69
Committees of the Board of Directors ............................................ 71
Compensation of Directors ....................................................... 72
The Advisor ..................................................................... 72
Advisor Background .............................................................. 73
The Advisory Agreement .......................................................... 74
The Management Agent ............................................................ 76
Other Services .................................................................. 79
Independent Director Stock Option Plan .......................................... 79
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ........................................ 81
SELECTED FINANCIAL DATA ............................................................... 82
INVESTMENT OBJECTIVES AND POLICIES .................................................... 84
General ......................................................................... 84
Distributions ................................................................... 84
Types of Investments ............................................................ 85
Acquisition Standards ........................................................... 86
Description of Leases ........................................................... 90
Property Acquisition ............................................................ 90
Borrowing ....................................................................... 91
Sale or Disposition of Properties ............................................... 92
Change in Investment Objectives and Policies .................................... 93
Certain Investment Limitations .................................................. 93
Appraisals ...................................................................... 93
Return of Uninvested Proceeds ................................................... 93
Additional Offerings and Exchange Listing ....................................... 93
Joint Ventures .................................................................. 94
Other Policies .................................................................. 94
REAL PROPERTY INVESTMENTS ............................................................. 96
The Walgreens/Decatur Property .................................................. 107
Eagle Crest Shopping Center, Naperville, Illinois ............................... 108
Montgomery-Goodyear Shopping Center, Montgomery, Illinois ....................... 109
The Hartford/Naperville Plaza, Naperville, Illinois ............................. 110
Nantucket Square Shopping Center, Schaumburg, Illinois .......................... 110
Antioch Plaza, Antioch, Illinois ................................................ 110
Mundelein Plaza, Mundelein, Illinois ............................................ 111
Regency Point Shopping Center, Lockport, Illinois ............................... 111
Prospect Heights Plaza, Prospect Heights, Illinois .............................. 111
Montgomery-Sears Shopping Center, Montgomery, Illinois .......................... 111
The Zany Brainy Store, Wheaton, Illinois ........................................ 112
</TABLE>

<TABLE>
<CAPTION>
PAGE
<S> <C>
Salem Square Shopping Center, Countryside, Illinois ............................. 112
Hawthorn Village Commons, Vernon Hills, Illinois ................................ 112
Six Corners Plaza, Chicago, Illinois ............................................ 113
Spring Hill Fashion Corner, West Dundee, Illinois ............................... 113
Grand & Hunt Club Outlot Center, Gurnee, Illinois ............................... 113
The Quarry Outlot, Hodgkins, Illinois ........................................... 113
Crestwood Plaza Shopping Center, Crestwood, Illinois ............................ 114
Lansing Square Shopping Center, Lansing, Illinois ............................... 114
Park St. Clair Plaza, Schaumburg, Illinois ...................................... 114
The Summit of Park Ridge, Park Ridge, Illinois .................................. 114
Maple Park Place, Bolingbrook, Illinois ......................................... 115
Aurora Commons Shopping Center, Aurora, Illinois ................................ 115
Lincoln Park Place Shopping Center, Chicago, Illinois ........................... 116
Niles Shopping Center, Niles, Illinois .......................................... 116
Cobblers Mall, Elgin, Illinois .................................................. 116
Mallard Mall, Elk Grove Village, Illinois ....................................... 117
Ameritech Outlot Building, Joliet, Illinois ..................................... 117
Dominick's Finer Foods, Schaumburg, Illinois .................................... 117
Calumet Square Shopping Center, Calumet City, Illinois .......................... 117
Dominick's Finer Foods, Highland Park, Illinois ................................. 118
Sequoia Plaza Shopping Center, Milwaukee, Wisconsin ............................. 118
River Square Shopping Center, Naperville, Illinois .............................. 118
Rivertree Court Shopping Center, Vernon Hills, Illinois ......................... 118
Shorecrest Plaza Shopping Center................................................. 119
Dominick's Finer Foods, Glendale Heights, Illinois .............................. 119
Party City, Oak Brook Terrace, Illinois ......................................... 119
Roselle Eagle, Roselle, Illinois ................................................ 119
Countryside Shopping Center, Countryside, Illinois .............................. 120
Terramere Plaza, Arlington Heights, Illinois .................................... 120
Wilson Plaza, Batavia, Illinois ................................................. 120
Iroquois Center, Naperville, Illinois ........................................... 120
Fashion Square Shopping Center, Skokie, Illinois ................................ 120
Naper West Shopping Center, Naperville, Illinois ................................ 121
Woodfield Plaza, Schaumburg, Illinois ........................................... 121
Shops at Coopers Grove, Country Club Hills, Illinois ............................ 121
Dominick's Finer Foods, West Chicago, Illinois .................................. 122
Maple Plaza, Downers Grove, Illinois ............................................ 122
Orland Park Retail, Orland Park, Illinois ....................................... 122
Lake Park Plaza, Michigan City, Indiana ......................................... 122
Wisner/Milwaukee Plaza, Chicago, Illinois ....................................... 122
Homewood Plaza, Homewood, Illinois .............................................. 123
Elmhurst City Center, Elmhurst, Illinois ........................................ 123
Mill Creek, Palos Park, Illinois ................................................ 123
Oak Forest Commons, Oak Forest, Illinois ........................................ 124
Prairie Square, Sun Prairie, Wisconsin .......................................... 124
</TABLE>

<TABLE>
<CAPTION>
PAGE
<S> <C>
Downers Grove Plaza, Downers Grove, Illinois .................................... 124
St. James Crossing Shopping Center, Westmont, Illinois .......................... 124
Chestnut Court Shopping Center, Darien, Illinois ................................ 125
Potential Property Acquisitions ................................................. 125
CAPITALIZATION ........................................................................ 127
PRINCIPAL STOCKHOLDERS ................................................................ 128
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............................... 129
FEDERAL INCOME TAX CONSIDERATIONS ..................................................... 135
Taxation of the Company ......................................................... 136
Taxation of Stockholders ........................................................ 143
Other Tax Considerations ........................................................ 146
Taxpayer Relief Act of 1997 - Significant REIT Provisions ....................... 147
ERISA CONSIDERATIONS .................................................................. 150
DESCRIPTION OF SECURITIES ............................................................. 151
General ......................................................................... 151
Soliciting Dealer Warrants ...................................................... 153
Issuance of Additional Securities and Debt Instruments .......................... 154
Restrictions on Transfer ........................................................ 154
SUMMARY OF THE ORGANIZATIONAL DOCUMENTS ............................................... 155
Certain Article and Bylaw Provisions ............................................ 156
Stockholders' Meetings .......................................................... 156
Board of Directors .............................................................. 156
Stockholder Voting Rights ....................................................... 157
Stockholder Lists; Inspection of Books and Records .............................. 158
Amendment of the Organizational Documents ....................................... 158
Dissolution or Termination of the Company ....................................... 159
Advance Notice of Director Nominations and New Business ......................... 159
Restrictions on Certain Conversion Transactions and Roll-Ups .................... 159
Limitation on Total Operating Expenses .......................................... 161
Transactions with Affiliates .................................................... 162
Restrictions on Borrowing ....................................................... 162
Restrictions on Investments ..................................................... 163
PLAN OF DISTRIBUTION .................................................................. 165
General ......................................................................... 165
Escrow Conditions ............................................................... 166
Advisor Capital Contribution .................................................... 166
Subscription Process ............................................................ 166
Determination of Investor Suitability ........................................... 167
Compensation .................................................................... 167
Volume Discounts ................................................................ 169
Transfer of Shares .............................................................. 169
Indemnification ................................................................. 170
HOW TO SUBSCRIBE ...................................................................... 170
SALES LITERATURE ...................................................................... 171
DISTRIBUTION REINVESTMENT AND SHARE REPURCHASE PROGRAMS ............................... 172
Distribution Reinvestment Program ............................................... 172
</TABLE>

<TABLE>
<CAPTION>
PAGE
<S> <C>
Share Repurchase Program ........................................................ 173
REPORTS TO STOCKHOLDERS ............................................................... 174
LEGAL MATTERS ......................................................................... 176
EXPERTS ............................................................................... 176
ADDITIONAL INFORMATION ................................................................ 176
GLOSSARY .............................................................................. 177
INDEX TO FINANCIAL STATEMENTS ......................................................... F-i
PRIOR PERFORMANCE TABLES .............................................................. A-1
DISTRIBUTION REINVESTMENT PROGRAM ..................................................... B-1
SUBSCRIPTION AGREEMENT ................................................................ I-1
</TABLE>

vii

PROSPECTUS SUMMARY

The following summary is 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 The Company owns and operates 43 Neighborhood Retail
Centers, seven Community Centers (as hereinafter defined)
and nine single-user retail properties. The Company intends
to acquire additional existing Neighborhood Retail Centers,
Community Centers, and single-user retail properties. The
Company is permitted to acquire Neighborhood Retail Centers
and Community Centers located primarily within a 400 mile
radius of its headquarters in Oak Brook, Illinois. The
Company may acquire single-user retail properties located
throughout the United States including single-user retail
properties acquired in sale and leaseback transactions in
which creditworthy tenants enter into triple-net leases with
the Company. As of April 1, 1998, the Company had
approximately $64,600,000 available for acquisition of
additional properties.

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:

o Selectively acquiring well-located Neighborhood Retail
Centers and Community Centers, as well as single-user
retail properties, triple-net leased by creditworthy
tenants.

o Whenever possible, acquire properties on an all-cash
basis to provide the Company with a competitive
advantage over potential purchasers who must secure
financing. The Company may, however, acquire properties
subject to existing indebtedness or incur indebtedness
secured by properties previously purchased on an
all-cash basis if the Company believes favorable
financing terms are available. The proceeds from these
loans are used primarily to acquire additional
properties. A total of 48 of the Company's 59 properties
are encumbered by mortgage indebtedness including one
property where financing by an Affiliate was assumed.

Operations:

o Actively manage costs and minimize operating expenses by
centralizing all management, leasing, marketing,
financing, accounting, renovation and data processing
activities.

o Improve rental income and cash flow by aggressively
marketing rentable space.

o Emphasize regular maintenance and periodic renovation to
meet the needs of tenants and to maximize long-term
returns.

o Maintain a diversified tenant base at its Neighborhood
Retail Centers and Community Centers, consisting
primarily of retail tenants providing consumer goods and
services.

The Company is a Maryland corporation which has elected to
be treated as a real estate investment trust ("REIT") for
federal income tax purposes. See, generally "Federal Income
Tax Considerations." The Company is located at 2901
Butterfield Road, Oak Brook, Illinois 60523 (630) 218-8000.

SHARES OUTSTANDING
BEFORE OFFERING A total of 35,802,995 Shares (including 855,795 Shares
issued under the Company's Distribution Reinvestment Program
(the "DRP") and 20,000 Shares purchased by the Advisor) were
outstanding as of the date of this Prospectus. The Company
previously sold (i) 5,000,000 shares in a best efforts
offering at $10 per share and 78,509 shares under the DRP
that commenced on October 14, 1994 and was completed on July
22, 1996; (ii) an additional 10,000,000 shares in a best
efforts offering, also at $10 per share, plus 318,388 shares
under the DRP that commenced on July 24, 1996 and was
completed on July 10, 1997; and (iii) an additional
20,000,000 shares in a "best efforts" offering at a price of
$10 per share plus 661,928 shares under the DRP that
commenced on July 14, 1997 and was completed on March 31,
1998 (collectively the "Prior Offerings").

SHARES OUTSTANDING
POST OFFERING Assuming the sale of all Shares offered hereby on a "best
efforts" basis, the Company will have 60,000,000 shares
outstanding (not taking into account shares which may be
issued 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).

TERMS OF THE
OFFERING The Company is offering 28,038,370 shares of common stock,
$.01 par value per share (the "Shares"), of which 25,000,000
Shares are being offered on a "best efforts" basis;
2,000,000 Shares which may be issued to Stockholders who are
participating in the Company's

DRP; up to 433,370 Shares underlying 433,370 warrants issued
in Prior Offerings which may be issued upon the exercise of
the warrants; and up to 625,000 Shares underlying 625,000
warrants (also offered hereby) which may be issued upon the
exercise of the warrants granted in connection with the
Offering. A "best efforts" offering is one in which the
securities dealers participating in the Offering are under
no obligation to purchase any of the Shares being offered
and, therefore, no specified amount is guaranteed to be
raised. Except for shares purchased through the DRP or
acquired upon exercise of Soliciting Dealers Warrants,
subscribers must initially purchase a minimum of 300 Shares
($3,300), except for Tax-Exempt Entities (as defined herein)
who must purchase a minimum of 100 Shares. 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 April 6, 2000 (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 17. The following is a summary of the
risks which the Company believes are most relevant to an
investment in the Shares.

Investment Risks:

o There is currently no public trading market for the
Shares and, therefore, the Shares constitute an illiquid
investment. In addition, the offering price of the Shares
may not be indicative of the price that the Shares may
trade if they were listed on an exchange or of the
proceeds that a Stockholder may receive if the Company
was liquidated or dissolved.

o As of April 1, 1998, the Company had approximately
$64,600,000 available for additional acquisitions, and,
except for six properties, has not specified any
additional properties for acquisition.

o The Eagle Crest Shopping Center and the Walgreens/Decatur
property were acquired by the Company from Inland
Property

Sales, Inc., an Affiliate, and the Elmhurst City Center,
from an Independent Director of the Company. Acquisitions
from Affiliates and/or related parties 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 may be less advantageous to the Company
than an arm's-length transaction.

o The Company competes 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 properties which it
desires and have an adverse impact on the Company's
business.

o Acquisition of Neighborhood Retail Centers and Community
Centers (but not single-user retail properties) is
primarily limited to the approximate 400-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 and, hence, the
Company's results of operations and financial condition,
including the Company's ability to pay dividends.

o Defaults on indebtedness secured by the Company's
properties may result in the Company losing its
investment in the properties securing the loan.

o To satisfy certain federal income tax requirements for
qualification as a REIT, 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 Company's
shares of common stock. These limitations may discourage,
impede or prevent a merger, tender offer or proxy
contest, even if such an event would be favorable to the
interests of stockholders.

o The Company has established a working capital reserve of
approximately $3,500,000 (equal to 1% of the gross
offering proceeds from the Company's Prior Offerings) 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
cash needs of the Company which may be forced to obtain
financing from either affiliated or unaffiliated
sources. Additional financing would increase the
Company's indebtedness and the risks associated
therewith.

o Under certain circumstances, the Company may borrow
funds to maintain operations of one or more of its
properties or enable it to

maintain its REIT status, thus increasing the Company's
indebtedness.

Company Risks:

o 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 services which may not be on market terms
and the possibility that the Company may do business
with entities that have pre-existing relationships with
the Advisor or its Affiliates may result in a conflict
between the ongoing business relationship of the Advisor
or its Affiliates and the Company's business.

o The Company's ability to achieve its goals will
depend, to a large extent, on the quality of management
provided by the Advisor and its Affiliates. For the past
ten years, Affiliates of the Advisor have sponsored
seven programs. Certain of these programs have
experienced setbacks, such as commercial tenant defaults
or move-outs. These negative events, which vary by
program, have had the effect of reducing the benefits
which investors in those programs have received. See
"Prior Performance of the Company's Affiliates" and
"Prior Performance Tables."

o The Advisor and its Affiliates are paid substantial
fees and payments for services rendered to the Company
whether or not Stockholders receive Distributions.

o The Company may issue shares or other securities in
addition to Shares issued in this Offering, thereby
diluting the interest of existing Stockholders,
including investors in this Offering, none of whom have
preemptive rights.

o In most cases, matters requiring stockholder approval
may be approved by a vote of only a majority of the
Stockholders. 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 common stock.

Risks of Real Estate Ownership:

o All equity real estate investments are subject to some
degree of general economic risks, including lease
defaults, which could adversely affect the Company's
results of operations and financial condition, and the
Company's ability to make Distributions. This

risk is borne by Stockholders in proportion to the
number of shares of common stock owned by each
Stockholder.

o Adverse trends for the property types to be acquired by
the Company or adverse economic developments in general
could have an adverse effect on the Company's results of
operations and financial condition, including the
Company's ability to make Distributions.

o Violation of environmental and other governmental
regulations could result in substantial expenditures by,
or damages to, the Company and adversely affect the
Company's results of operations and financial condition,
including the Company's ability to make Distributions.

o Unanticipated renovation or remodeling costs incurred
to re-lease the Company's properties could adversely
affect the Company's results of operations and financial
condition, including the Company's ability to make
Distributions.

Tax Risks:

o 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 the Company will be able to satisfy these
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, due to certain of the Code provisions
applicable to REITS, the Company does not intend to hold
property as Inventory Property even though holding as
Inventory Property may produce higher selling prices.

o If the Company fails to qualify as a REIT, its
Distributions would not be deductible, which would
increase its tax liability substantially reducing the
funds available for distribution to Stockholders. The
Company could be forced to borrow to pay these tax
liabilities, liquidate certain investments or take other
steps which could adversely affect the Company's results
of operations and financial conditions, including its
ability to pay future Distributions.

o Shefsky & Froelich Ltd. ("Counsel") has rendered its
opinion that as of March 31, 1998, and, based on certain
representations of the Company as described throughout
the Prospectus regarding the Company's operations, 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 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. 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; it 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.

ERISA Risks:

o 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."

Failure by the Company to effectively manage the impact of
these risks may impair the Company's ability to meet its
investment objectives and, therefore, the benefits to the
Stockholders from their investment in the Company may be
reduced or entirely eliminated. See "Risk Factors" and
"Prior Performance of the Company's Affiliates."

INVESTMENT
OBJECTIVES The Company's investment objectives are to:
AND POLICIES

o Provide regular Distributions to Stockholders; the
amount of these Distributions may exceed the Company's
taxable income, particularly in the early years of the
Company's operations, due to

the "non-cash" nature of depreciation expense and, to
such extent, will constitute a 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,
these Distributions would constitute a return of capital
and would be sheltered from current taxation for
Stockholders. A return of capital, however, will reduce
a Stockholder's tax basis in his or her Shares, which
will result in more taxable gain or less taxable loss
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 upon sale of a
property. 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;

o 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; and

o Minimize leverage by acquiring well-located
Neighborhood Retail Centers, Community Centers and
single-user retail properties on an all-cash basis,
whenever possible. The Company will, in certain
instances, utilize borrowing to acquire properties or
incur mortgage indebtedness secured by the property if
the Company believes that post-acquisition financing
terms are favorable.

Currently, 48 of the Company's 59 properties are encumbered
by mortgage indebtedness. See "Real Property Investments."
The proceeds from these loans have been, and any such future
loans will be, used primarily to acquire additional
properties. The Company may also incur indebtedness to
finance improvements to the acquired properties. The Company
anticipates that aggregate borrowings secured by the
Company's properties will not exceed 50% of its combined
fair market value and the maximum amount of borrowings may
not exceed 300% of Net Assets without approval of a majority
of the Stockholders. As of March 31, 1998, the Company had
approximately $154,000,000 indebtedness secured by its
properties. The Company does not anticipate incurring
indebtedness to fund Distributions payable 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."

To the extent possible, the Company seeks to avoid
fluctuations in Distributions which might result if
Distributions were based on actual cash received during the
Distribution period. To do this the Company may utilize Cash
Flow generated during prior periods, or utilize Cash Flow
generated 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 utilize this policy is dependent upon
the availability of Cash Flow and the applicable REIT rules.
The Company seeks, 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. Since inception through September 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 $.87 per share.

Affiliates of the Advisor have extensive experience in
acquiring and managing properties similar to those which
have been acquired, or which the Company anticipates
acquiring. There is no assurance, however, that the Company
will achieve its investment objectives. Although the Company
owns 43 Neighborhood Retail Centers, seven Community Centers
and nine single-user properties, except for six properties,
it has not specified any other properties to be acquired.
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 acquire properties,
pay expenses of the Offering and Acquisition Expenses, and
to pay expenses associated with operating the Company
(primarily the fees due to Affiliates described herein) 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" and
"Compensation to be Paid to the Advisor and Its Affiliates."

THE ADVISOR Inland Real Estate Advisory Services, Inc. (the "Advisor"),
a wholly-owned subsidiary of Inland Real Estate Investment
Corporation, a Delaware corporation ("IREIC"), serves as
Advisor to the Company. The Advisor is an Illinois
corporation with its principal place of business located at
2901 Butterfield Road, Oak Brook, Illinois 60523 (630)
218-8000. As of June 30, 1997, IREIC had an audited net
worth of approximately $95.1 million, much of which is
illiquid. Limited partnerships for which IREIC is
responsible own in excess of 11.9 million square feet of
commercial property. See "Management."

COMPENSATION TO BE
PAID TO THE ADVISOR
AND ITS AFFILIATES The Advisor and its Affiliates will be paid substantial
amounts for managing the Company's business. The most
significant items of compensation are:

Offering Stage: Selling commissions to Inland Securities
Corporation, the Dealer Manager, of 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 equal to 2.5% of the Gross
Offering Proceeds (the "Marketing Contribution and Due
Diligence Expense Allowance Fee"), some of which may be
retained or reallowed to Soliciting Dealers. As of December
31, 1997, the Company had paid selling commissions and
Marketing Contribution and Due Diligence Expense Allowance
Fees totaling $23,125,028 in connection with the Prior
Offerings. Approximately $19,580,000 of this amount was
reallowed to Soliciting Dealers as of December 31, 1997. In
certain cases, the Dealer Manager will receive one
Soliciting Dealer Warrant for each 40 Shares sold by each
Soliciting Dealer during the Offering, some or all of which
may be retained or reallowed to the Soliciting Dealers. Each
Soliciting Dealer Warrant will entitle the holder to
purchase one Share from the Company at a price of $13.20
during the Exercise Period. See "Compensation Table" and
"Description of Securities--Soliciting Dealer Warrants."

Acquisition Stage: Reimbursement for actual out-of-pocket
acquisition expenses to the Advisor of approximately 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 to the Advisor. The Company and the Advisor have
agreed that if the Company is unable to pay Distributions in
an amount equal to a non-compounded return equal to 8% per
annum on Invested Capital (the "Current Return"), the
Advisor will remit the Advisor Asset Management Fee to the
Company. An Affiliate of the Advisor, Inland Commercial
Property Management, Inc., also receives a Property
Management Fee equal to not more than 4.5% of the gross
income

earned from the Company's properties (90% of the fee
typically charged by a third party), paid monthly. For the
year ended December 31, 1997, the Company incurred and paid
Advisor Asset Management Fees of $843,000 (.45% of the
Average Invested Assets). The Company incurred and paid
Property Management Fees of $1,120,000 for the year ended
December 31, 1997. 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 paid to the
Advisor 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. 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 paid to the
Advisor. In the event the Company's shares of common stock
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 of
common stock and the Company will no longer be obligated to
pay fees to the Advisor. See "Compensation Table."

The Advisor and its Affiliates may receive a number of other
incidental fees for services or expense reimbursement during
the operational and liquidation stages of the Company. See,
generally, "Compensation Table" and "Management--Other
Services."

REAL PROPERTY
INVESTMENTS The Company owns 43 Neighborhood Retail Centers, seven
Community Centers and nine single-user retail properties.
The Company utilized $250,000,000 raised in the Prior
Offerings to acquire these properties. Forty-eight of the
properties are encumbered by outstanding indebtedness of
approximately $154,000,000, as of March 31, 1998. The
Company has approximately $64,600,000 available for
investment in additional properties plus an additional
$11,500,000 available from loan commitments not yet funded.
The Company has specified six additional properties for
investment. See "Real Property Investments--Potential
Property Acquisitions."

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 price of any
particular property did not exceed its appraised value at
the time of acquisition. Two of the properties were acquired
from an Affiliate and one from an Independent Director of
the Company. There can be no assurance that the prices paid
for these properties did not exceed that which would be paid
by an unrelated 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 and/or unaffiliated
third parties as co-owners of a property. With respect to
investments made with Affiliates, 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
SUMMARY The Inland organization, during the past ten years, has
sponsored six public real estate programs and one private
real estate program which have raised in excess of
$174,500,000 from over 15,800 investors.

Two of the Inland-sponsored public programs have investment
objectives similar to the Company's. 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. These
negative events, which vary by program, have had the effect
of reducing the benefits which investors in those programs
have received from those originally contemplated. See "Prior
Performance of the Company's Affiliates" and "Prior
Performance Tables."

ORGANIZATIONAL
DOCUMENTS Investors should be particularly aware of the following
provisions contained in the Company's Second Articles of
Amendment and Restatement, as amended (the "Articles"):

o Limitation on accumulation of shares: In order for the
Company to qualify as a REIT, no more than 50% of the
outstanding shares of common stock 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 contain restrictions
on the number of shares of common stock that may be owned
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 of common stock, which offers may be attractive to
Stockholders; or (iii) limit the opportunity for
Stockholders to receive a premium for their shares of

common stock in the event an investor is making purchases
of shares of common stock in order to acquire a block of
shares of common stock. See "Description of
Securities--Restrictions on Transfer."

o Voting rights: Each share of common stock is entitled to
one vote and the Articles do not provide for cumulative
voting. Stockholders owning a majority of the outstanding
shares of common stock 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 are bound by the vote of Stockholders owning
a majority of the outstanding shares of common stock,
even if a Stockholder does not vote with the majority.
Stockholders owning in the aggregate at least 10% of the
outstanding shares of common stock may request the
Directors to call a meeting for the purpose of voting on
any of the foregoing.

o Stockholders owning at least two-thirds of the
outstanding shares of common stock must approve certain
exchange offers, mergers, consolidations or similar
transactions commonly known as "Roll-Ups," which affect
certain Stockholder rights. These 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,
which offers may be attractive to Stockholders; and (iii)
limiting the opportunity for Stockholders to receive a
premium for their shares of common stock in the event an
investor is making purchases of shares of common stock in
order to acquire a block of shares of common stock.

o Changes in investment objectives and policies: The
Company's investment objectives or policies may only be
changed by amending the Articles, which requires the
affirmative vote of Stockholders holding a majority of
the outstanding shares of common stock.

o Distributions: Distributions are payable out of funds
legally available to pay distributions.

See "Summary of the Organizational Documents" and
"Description of Securities."

DISTRIBUTION REINVESTMENT
AND SHARE REPURCHASE
PROGRAMS The Company provides the following programs to facilitate
investment in the Shares and to provide limited liquidity
for Stockholders:

o The Distribution Reinvestment Program (the "DRP") allows
Stockholders who have purchased shares in the Prior
Offerings or who purchase Shares in this Offering to
purchase additional shares by automatically reinvesting
Distributions, subject to the limitations on share
ownership contained in the Articles. These purchases may
be made at $10.45 per share, a reduction from the
Offering Price reflecting lower costs associated with
these issuances. See "Distribution Reinvestment and
Share Repurchase Programs -- Distribution Reinvestment
Program."

o The Share Repurchase Program allows, subject to certain
restrictions, existing Stockholders to sell Shares back
to the Company at a price equal to $9.05 per share. The
Company repurchases shares on a first come, first served
basis, subject to the following limits: (i) not more
than $500,000 worth of the outstanding shares (based on
the repurchase price) may be repurchased in any given
year; and (ii) the funds utilized to repurchase are
limited to available proceeds received by the Company
from the sale of shares under the Distribution
Reinvestment Program. Shares purchased by the Company
pursuant to the Share Repurchase Program will be
canceled and have the status as authorized but unissued
shares. The repurchased shares will not be reissued
unless they are first registered with the Commission.
The Company may terminate the Share Repurchase Program
if a secondary market for the Company's shares develops
or if the shares are listed on a national securities
exchange or included 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, income and other suitability
requirements which investors must satisfy prior to
subscribing for Shares. 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 for investors residing in certain
states. See "Who May Invest."

ANNUAL VALUATIONS Stockholders 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. The Company
will cease providing these annual statements of value if

the shares become listed on a national stock exchange or are
included for quotation on a national market system. See
"ERISA Considerations."

GLOSSARY OF TERMS For definitions of terms used in this Prospectus that are
not defined in the text, see "Glossary."

[ORGANIZATIONAL CHART]

Solid lines indicate ownership. Broken lines indicate services.

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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 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, if at all. See "Investment Objectives and Policies--Additional
Offerings and Exchange Listing."

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,
only six additional properties have been specified for acquisition by the
Company. 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
funds available for investment ($64,600,000) or with the Net Proceeds of this
Offering (after funding of appropriate working capital reserves). There may be
a delay between the sale of the Shares and the Company's purchase of other
properties, which could result in a delay in the benefits to investors, if any,
of an investment in the Company.

The Advisor evaluates potential additional property
acquisitions and engages in discussions with sellers on behalf of the Company.
During the pendency of the Offering, as soon as the Advisor believes a
reasonable probability exists that a property will be acquired on specified
terms 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 stage require negotiation of final binding agreements and
there can be no assurance that a property will be acquired on the same terms as
described in the relevant supplement or other disclosure document prepared with
respect thereto. In addition, properties which are identified for acquisition
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 the 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 and Community Centers. Acquisition of Neighborhood
Retail Centers and Community Centers (but not single-user retail properties) is
limited primarily to the approximate 400-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 properties.

Company's Experience in Acquiring Properties Within a 400
Mile Radius is Limited. A majority of the Company's properties were acquired
within a 150-mile radius of the Company's headquarters located in Oak Brook,
Illinois. In March of 1998, a majority of the Company's Stockholders adopted a
proposal to amend the Company's investment objectives and policies to permit
the Company to expand the geographic area in which the Company may acquire
properties from the 150-mile radius to an area primarily within a 400-mile
radius. The Company has limited experience purchasing properties outside of
the original 150-mile radius on terms and conditions acceptable to the Company,
if at all. Failure to be able to purchase properties within the expanded
radius may have an adverse material effect on the Company's financial condition
and results of operation.

Insufficient Reserves. The Company has established a working
capital reserve of $3,500,000 (equal to 1% of the gross offering proceeds from
the Prior Offerings) and will supplement this reserve with an additional 1% of
the Gross Offering Proceeds from this Offering. However, if these reserves
prove insufficient to meet the Company's cash needs, the Company may have to
obtain financing from either affiliated or unaffiliated sources to fund these
cash requirements. 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. The Company has and will continue, in certain
instances, to utilize borrowing to acquire properties and incur or increase
mortgage indebtedness by obtaining loans secured by selected properties. The
proceeds from these loans have been and will be used primarily to acquire
additional properties. 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. Incurring mortgage indebtedness increases the
risk of loss since defaults on indebtedness secured by the Company's properties
may result in foreclosure actions initiated by the lenders and loss by the
Company of the property securing the loan which is in default. For tax
purposes, 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. If the outstanding balance of the debt secured by the mortgage
exceeds the Company's basis in the property, the Company would recognize
taxable income on foreclosure, but would not receive any cash proceeds. The
Company anticipates that aggregate borrowings secured by all of the Company's
properties will not exceed 50% of their combined fair market values; provided
that in the absence of the consent of a majority of the Stockholders,
indebtedness may not exceed 300% of Net Assets. As of March 31, 1998, the
Company's total indebtedness is approximately $154,000,000.

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 of common stock may be owned, directly or indirectly, by
five or fewer individuals at any time during the last half of each 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. These restrictions may: (i)
discourage a change of control of the Company; (ii) deter individuals and
entities from making tender offers for shares of common stock, which offers may
be attractive to Stockholders; or (iii) limit the opportunity for Stockholders
to receive a premium for their shares of common stock in the event an investor
is making purchases of shares of common stock in order to acquire a block of
shares of common stock. See "Description of Securities--Restrictions on
Transfer."

Objectives of Joint Venture Partners May Conflict with the
Company's Objectives. The Company may, from time to time, make property
investments in joint ventures between the Company and Affiliates of the Advisor
or unaffiliated third parties. Investments in joint ventures which own
properties may involve risks not otherwise present when the Company purchases
the property directly. For example, the Company's co-venturer may file for
bankruptcy protection, may have economic or business interests or goals which
are inconsistent with the interests or goals of the Company or take actions
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 result in other adverse consequences. See "Investment
Objectives and Policies--Joint Ventures."

Company's Ability to Enter into Joint Venture or Other
Partnership Arrangements with Entities Unaffiliated with the Advisor and its
Affiliates. In March of 1998, a majority of the Company's Stockholders adopted
a proposal to amend the Company's investment objectives and policies to permit
the Company to enter into joint venture or other partnership arrangements with
entities unaffiliated with the Advisor or its Affiliates. Prior to March of
1998, the Company was permitted to invest in general partnerships with
Affiliates of the Advisor other than publicly-registered Affiliates under
certain circumstances. The risk of entering into these arrangements with
unaffiliated entities is that the unaffiliated entities may have goals and
objectives that differ from those of the Company.

Seller Financing by Company May Delay Liquidation or
Reinvestment. The Company may sell its properties by providing financing to
purchasers. 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 property sales, the Company bears the risk
of default by the borrower and is subject to remedies provided by law.
Additionally, as a result of accepting promissory notes or other property in
lieu of cash from property sales, distribution of sales proceeds may be delayed
or spread over a number of years. See "Investment Objectives and
Policies--Sale or Disposition of Properties."

Loss on Dissolution and Termination. In the event of
dissolution or termination of the Company, the undistributed proceeds realized
from the liquidation of assets, if any, will be distributed to Stockholders
after satisfying 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. There
can be no assurance that any proceeds will be available after satisfying the
claims of creditors and paying the expenses of liquidation.

2. COMPANY RISKS

Prices Paid for Properties Acquired from Affiliates may Exceed
Prices that would have been 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 and one property,
Elmhurst City Center, from an Independent Director. The Articles provide that
the Company may not purchase any property from an Affiliate unless: (i) 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 (ii) the price to the Company is no greater than the cost of
the asset to the Affiliate unless substantial justification for a greater price
exists and the additional price is reasonable. In no event may the cost to the
Company exceed the property's current appraised value. All of the Directors
(including a majority of the disinterested Independent Directors) approved the
purchases described above. However, there can be no assurance that the prices
paid for these properties, or properties which may in the future be acquired
from Affiliates and/or related parties, did not or would not exceed that which
would be paid by an unrelated buyer.

Conflicts of Interest Between the Company and its Affiliates
and Payments to Affiliates. The operation and management of the Company may be
influenced or affected by conflicts of interest arising out of the Advisor's
relationship with its Affiliates on the one hand, and the Company on the other
hand. For example, the Company competes with Affiliates for the Advisor's time
and services. Further, the due diligence investigation of the Company by the
Dealer Manager, also an Affiliate, 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 Offering, including sales commissions of up to 7% of Gross
Offering Proceeds which the Dealer Manager may reallow to Soliciting Dealers
($19,250,000 assuming the Maximum Offering is sold) and marketing contribution
and due diligence expense allowance fees equal to 2.5% of Gross Offering
Proceeds ($6,875,000 assuming the Maximum Offering is sold). An Affiliate will
be reimbursed for costs related to organizing and offering the Shares for sale.
The amount of these reimbursable expenses cannot be estimated at this time. An
Affiliate will also be reimbursed for actual out-of-pocket acquisition expenses
of approximately 0.5% of Gross Offering Proceeds ($1,479,500 assuming the
Maximum Offering is sold) including proceeds raised from the sale of shares in
the DRP. Further, an Advisor Asset Management Fee of not more than 1% per
annum of the Average Invested Assets is paid quarterly to the Advisor and a
Property Management Fee equal to not more than 4.5% of the gross income earned
from each of the Company's properties on a monthly basis is paid to an
Affiliate, which fee is dependent upon results of operations. The Advisor
also receives 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. After receipt by Stockholders of a cumulative noncompounded 8%
per annum return of Invested Capital and a return of their Invested Capital, an
Incentive Advisory Fee equal to 15% of the net proceeds from the sale of a
property may be paid to the Advisor. In addition to property management, the
Advisor and its Affiliates provide other property-level services to the Company
and receive compensation for these services, in such amounts that are dependent
upon results of operations and therefore cannot be determined at the present
time. The fees received by the Advisor or its Affiliates may cause the Advisor
to delay sale of properties or liquidation of the Company, even if sale or
liquidation were otherwise in Stockholder's best interests. The Advisor and
its Affiliates will receive substantial fees and payments for services rendered
to the Company irrespective of whether Stockholders receive Distributions.
These fees will also be greater than the costs that the Company would incur if
it was self-administered and performed these services in-house. If an
Affiliate breaches its fiduciary obligations to the Company, or does not
resolve conflicts ofinterest 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. See "Compensation Table" and "Management--The Advisory
Agreement."

Dependence on the Directors and Advisor. The Company's
ability to achieve its investment objectives 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. Therefore,
the Company is 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 these 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) subsequently sells additional shares
or securities convertible into shares; or (ii) issues shares of common stock 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 of common stock 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
Offerings and to be issued in connection with this Offering 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. Therefore, a substantial
minority of the Stockholders will 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 Articles, in the case of the Directors, officers,
employees and agents of the Company, and the Advisory Agreement, in the case of
the Advisor, require the Company to indemnify those individuals or entities for
certain actions taken by them on behalf of the Company in good faith and
without negligence or misconduct, except for those individuals that are or were
Independent Directors, in which case such action must have been without gross
negligence or willful misconduct. As a result, the Company and the
Stockholders may have more limited rights against the Directors, officers,
employees and agents of the Company and the Advisor than they would otherwise
have under common law and, furthermore, may be obligated to fund the defense
costs incurred by these individuals or entities in certain cases. Neither the
Directors, officers, employees, and agents of the Company nor the Advisor may
be held liable to the Company or the Stockholders for monetary damages unless:
(a) it is proven 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. 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 are generally illiquid and,
therefore, the Company's ability to promptly vary its portfolio in response to
changing economic, financial and investment conditions is limited. Real
property investments are also subject to adverse changes in general economic
conditions or local conditions which reduce the demand for the goods or
services of tenants, as well as 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; (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 Company's results of operations and
financial condition. See "Prior Performance of the Company's Affiliates--Loan
Modifications and Work-Outs."

Competition for Tenants and Customers. The Company could be
adversely affected if competitive types of properties 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 and may require the Company to make capital improvements to its properties
which it would not have otherwise made which may have a material adverse effect
on the Company's results of operations and financial condition.

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. These statutes typically allow
liens to be placed on the affected property. In addition, there are various
local, state and federal health and safety regulations which the Company may,
under certain circumstances, be required to comply with, and liability in the
form of fines or damages for noncompliance. The Company's properties are
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 complying 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 indemnification. State
and federal laws in this area are constantly evolving, and the Company intends
to monitor these 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's
results of operations or financial condition will not be adversely affected by
these laws.

Costs Associated with Complying with the Americans with
Disabilities Act. Under the ADA, all public accommodations are required to
comply with 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 acquire
properties which comply with the ADA or place the burden on the seller to
ensure compliance with the ADA, although there can be no assurance that the
Company will be able to do so.

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 for a specific
type of use. If the tenant fails to renew or defaults on its lease
obligations, the property may not be readily marketable to a new tenant without
substantial capital improvements or remodeling which may have a material
adverse effect on the Company's results of operation and financial condition.

Competition with Others for the Acquisition of Properties.
The Company competes 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. All of which could have a material
adverse effect on the Company's results of operations, financial condition and
prospects.

Reliance on Certain Tenants. The Company's results of
operations and financial condition and ability to make Distributions may be
adversely affected by the bankruptcy or insolvency, or a downturn in the
business, of (i) any tenant generally occupying approximately 30% or more of
the gross leasable area ("GLA") of a Neighborhood Retail Center or a Community
Center, or (ii) the tenant of any single-user property (each an "Anchor
Tenant"), including the decision by an Anchor Tenant not to renew its lease.
Currently, within the Company's 43 Neighborhood Retail Centers, seven Community
Centers and nine single-user retail properties, there are 40 Anchor Tenants.
In addition, lease termination by one or more Anchor Tenant 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. 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 or Community Center and thereby reduce the income
generated by that center and could also allow other tenants to make reduced
rental payments or to terminate their leases at the center.

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 when due. 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 a material
adverse effect on the Company's results of operation and financial position,
including its ability to pay Distributions.

Restrictions on Re-leasing Space. In many cases, tenant
leases contain provisions giving the tenant the exclusive right to sell certain
types of merchandise or provide certain types of services within the
particular Neighborhood Retail Center or Community Center, or limit the
ability of other tenants to sell such merchandise or provide such services.
When re-leasing space after a vacancy occurs, these provisions may limit the
number and types of prospective tenants for the vacant space.

Uninsured Losses; Unavailability of Insurance. Each lessee is
responsible for insuring its goods and premises and, in certain circumstances,
may be required to reimburse the Company for a share of the cost of acquiring
comprehensive insurance for the property, 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 typically are required
to pay all insurance costs associated with those properties. However, there
are certain types of losses (generally of a catastrophic nature, such as losses
due to war) which are either uninsurable or not economically insurable. If
such an event occurred to, or caused 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.
The Company intends to enter into sale and leaseback transactions, pursuant to
which the Company will purchase a property from an entity and lease the
property back to the seller. 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 properties. 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 the Construction and Development of
Property. The Company may construct or develop properties or render services
in connection with development or construction. These activities may expose
the Company to additional risks such as cost overruns, increases in carrying
costs of projects under construction and development, lack of availability or
increases in the cost of materials and labor, adverse weather conditions, and
limitations on construction and development imposed by governmental regulation.

Risks Associated with Investments in Unimproved Real Property.
The Company may invest up to 10% of its assets in unimproved real property.
Investment in unimproved properties is inherently speculative because, in
addition to the risks of real estate investment in general, its success depends
upon events beyond the Company's control, such as risks and uncertainties
associated with re-zoning the land for a higher use or development and
environmental concerns of governmental entities and/or community groups.

4. TAX RISKS

General. There are various federal income tax risks
associated with investing 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 investing 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 investing in the Company. The continued treatment of the
Company as a REIT is dependent on laws 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 its 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, the Company may be required to borrow funds,
liquidate certain of its investments or take other steps which could affect its
operating results due to this tax liability. 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 of common stock
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 value of the Shares received. Therefore,
Stockholders (other than Tax-Exempt Entities) will have to use funds from other
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 (as
defined herein) 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 should 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
requirements necessary to maintain status as a REIT, and Counsel will not
review compliance

with the REIT Requirements on a continuing basis after the initial effective
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. The determination of 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."

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. 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 with the accounts of the Advisor and its Affiliates. As of the
date of this Prospectus, the Company owns 59 properties comprised of 43
Neighborhood Retail Centers, seven Community Centers and nine single-user
retail properties and has approximately $64,600,000 available for additional
investments plus an additional $11,500,000 available from loan commitments not
yet funded. The Company estimates that 87.31% of Gross Offering Proceeds will
be used to acquire properties if the Maximum Offering is sold. If the Maximum
Offering is sold, 8.37% of the Gross Offering Proceeds will be utilized to pay
selling and due diligence expenses to unaffiliated third parties and 2.82% 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.

MAXIMUM OFFERING
(INCLUDING SHARES SOLD UNDER THE
DISTRIBUTION REINVESTMENT PROGRAM) (1)

<TABLE>
<CAPTION>
AMOUNT PERCENT
------ -------
<S> <C> <C>
Gross Offering Proceeds: $295,900,000 100.00%
Less Expenses:
Selling Commissions (2) 19,250,000 6.51%

Marketing Contribution and Due Diligence
Expense Allowance Fee (2) 6,875,000 2.32%

Organization and Offering Expenses (3) 6,974,110 2.36%

Total Public Offering Expenses 33,099,110 11.19%

Gross Amount Available for Investment 262,800,890 88.81%

Acquisition Expenses (4)(5) 1,479,500 0.50%

Working Capital Reserve (6) 2,959,000 1.00%

Net Amount Available for
Investment (7) $258,362,390 87.31%
============ ======
</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% or $19,250,000 of the gross offering proceeds from the Shares offered
on the "best efforts" basis and, under certain circumstances, one
Soliciting Dealer Warrant for every 40 Shares sold, all or part of which
compensation may be retained or reallowed to Soliciting Dealers; provided
that the Company will not issue more than 625,000 Soliciting Dealer
Warrants. The Dealer Manager will also receive the Marketing Contribution
and Due Diligence Expense Allowance Fee equal up to 2.5% or $6,875,000 of
the gross offering proceeds from the Shares offered on the "best efforts"
basis, some portion of which may be reallowed to Soliciting Dealers. This
category of expense includes all amounts attributable to marketing and
bona fide due diligence expenses. Certain volume discounts may be given
on orders of 20,000 Shares or more. The Company will not pay any selling
commission on Shares purchased by the Advisor, its Affiliates, the Dealer
Manager or Soliciting Dealers. Any Shares purchased by the Advisor or its
Affiliates will be purchased for investment purposes only and not with a
view toward resale. A maximum of 2,000,000 Shares available for issuance
under the Distribution Reinvestment Program will be sold at a price equal
to $10.45 or $0.55 less than the "best- efforts" offering price due to
decreased costs associated with these issuances ($20,900,000 if all of
those 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) Reflects the Advisor's best estimates of legal, accounting, printing and
other offering expenses, including amounts to reimburse the Advisor for
marketing, salaries and direct expenses of its employees while directly
engaged in registering and marketing the Shares and other marketing and
organization expenses. The Advisor has agreed to pay 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 agreement 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 equal to 0.5% of the Gross Offering
Proceeds ($1,479,500, 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. Expenses incurred in connection with
incurring indebtedness will be payable from the proceeds of such
borrowings ($739,750, 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 selecting, evaluating and
acquiring the Company's properties, whether or not acquired, including,
but not limited to: surveys, appraisals, title insurance and escrow fees,
non-refundable option payments, 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.

(7) This amount is allocated for acquisition costs of additional properties.

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 ($3,300) or Tax-Exempt
Entities which purchase a minimum of 100 Shares ($1,100), except for investors
resident in the State of Iowa where the minimum investment for IRAs will be 300
Shares ($3,300) and for investors resident in the State of Minnesota where the
minimum investment for IRAs and qualified plan accounts will be 200 Shares
($2,200). 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. Certain states
may impose higher suitability standards.

Investors who reside in California, Massachusetts, or Tennessee 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.

Investors who reside in Maine 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.

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.

In purchasing Shares, custodians or trustees of employee pension
benefits plans or IRAs may be subject to the fiduciary duties imposed 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."

As noted above, suitability standards may be higher in certain states.
Investors must meet all of the applicable requirements set forth in the
Company's subscription agreement relating to the Shares (the "Subscription
Agreement"). Under the laws of certain states, an investor may transfer
his/her 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 agreements between the Dealer Manager and each of the Soliciting
Dealers require each Soliciting Dealer 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 based upon information provided by the
prospective purchaser regarding his or her 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, by tendering
payment for Shares and by accepting confirmation of purchase or delivery of the
Shares, an investor represents that he or she 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 compensation arrangements between the Company and Advisor and its
Affiliates were not determined by arm's- length negotiations. See "Conflicts
of Interest." The following table discloses the significant compensation which
may be received by the Advisor and its Affiliates from the Company. 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."

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.

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
Selling Commissions (payable to The Dealer Manager will receive The actual amount to be received
the Dealer Manager and Soliciting $0.77 per Share for each Share depends upon the number of Shares
Dealers) sold in the "best-efforts" sold. In the Prior Offerings,
portion of the Offering and, $24,500,000 was incurred,
under certain circumstances, will including $17,054,160 incurred
be granted a Soliciting Dealer and paid as of December 31, 1997.
Warrant for each 40 Shares sold; A total of $19,250,000 in selling
provided that the Company will commissions will be paid if the
not issue warrants to purchase Maximum Offering is sold.
more than 625,000 shares. The
Dealer Manager may reallow the
selling commissions and
Soliciting Dealer Warrants to
Soliciting Dealers for each Share
they sell. (1) Shares purchased
under the Distribution
Reinvestment Program will be
purchased at a reduced price to
reflect decreased administrative
costs. The Dealer Manager will
not receive any selling
commissions in connection with
the sale of Shares under the DRP.
</TABLE>

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
Marketing Contribution and Due An amount equal to up to 2.0% of The actual amount to be paid
Diligence Expense Allowance Fee the Gross Offering Proceeds, some depends upon the number of Shares
(payable to the Dealer Manager portion of which may be reallowed sold. Expenses of $7,000,000 and
and Soliciting Dealers) to Soliciting Dealers, to pay the $1,750,000 were incurred in the
expenses associated with the Prior Offerings for the Marketing
Marketing Contribution Expense Contribution and Due Diligence
Allowance Fee may be paid to the Expense Allowance respectively,
Dealer Manager as a contribution including $4,858,241 and
for marketing expenses. An $1,212,627 incurred and paid as
additional 0.5% of the Gross of December 31, 1997. A total of
Offering Proceeds may be paid to $6,875,000 will be paid for the
the Dealer Manager, some portion Marketing Contribution and Due
of which may be reallowed to the Diligence Expense Allowance if
Soliciting Dealers, as the Maximum Offering is sold.
reimbursement for the Due
Diligence Expenses. The Dealer
Manager will not receive this fee
for Shares purchased under the
Distribution Reinvestment
Program.
</TABLE>

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
Reimbursable Expenses (payable to The Advisor or its Affiliates may Reimbursable Expenses of
the Advisor and its Affiliates) advance Organization and Offering approximately $5,216,691 were
Expenses to the Company and will incurred and paid as of
be reimbursed for actual costs December 31, 1997 in connection
incurred in connection with the with the Prior Offerings (for
Offering on behalf of the Organization and Offering
Company, including legal and Expenses, but excluding selling
accounting fees, registration and commissions and the Marketing
filing fees, printing costs and Contributions and Due Diligence
selling expenses. However, if the Expense Allowance Fee). No
aggregate of all Organization and estimate is available for the
Offering Expenses, including amount of reimbursable expenses
selling commissions and the that may be incurred in this
Marketing Contribution and Due Offering.
Diligence Expense Allowance Fee,
exceeds 15% of the Gross Offering
Proceeds, or if the aggregate of
all Organization and Offering
Expenses, excluding the selling
commissions and the Marketing
Contribution and Due Diligence
Expense Allowance Fee, exceeds
5.5% of the Gross Offering
Proceeds, the Advisor or its
Affiliates agree to pay such
excess expenses and the Company
will have no liability for such
expenses at any time thereafter.
</TABLE>

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
ACQUISITION STAGE:

Acquisition Expenses for the An amount estimated to be up to Acquisition Expenses of
costs and expenses of the 0.5% of the Gross Offering approximately $973,000 were
acquisition of properties Proceeds in connection with the incurred and paid for as of
including surveys, appraisals, expenses associated with a December 31, 1997. If the
title insurance and escrow fees, property acquisition. (2) Maximum Offering is sold, the
legal and accounting fees and Company may pay up to $1,479,500
expenses, computer use related of the Gross Offering Proceeds as
expenses, architectural and Acquisition Expenses. The actual
engineering reports, amount cannot be determined at
environmental and asbestos the present time. In no event
audits, travel and communication will the Company pay Acquisition
expenses and other related Expenses associated with any
expenses (payable to the Advisor single property exceeding 6% of
and its Affiliates). the purchase price of the
property.
OPERATIONAL STAGE (3):

Property Management Fee (payable A Property Management Fee equal The actual amounts to be paid are
to an Affiliate of the Advisor) to not more than 4.5% of the dependent upon results of
gross income earned by the operations. Property Management
Company on the properties will be Fees of approximately $1,120,000
paid monthly to Inland Commercial were incurred and paid for the
Property Management, Inc., an year ended December 31, 1997.
Affiliate of the Advisor (the
"Management Agent").
</TABLE>

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
Compensation for Services In addition to property The actual amounts to be paid are
management, the Advisor and its dependent upon results of
Affiliates provide other operations and, therefore, cannot
property-level services to the be determined at the present
Company, and may receive time. For the year ended
compensation for such services, December 31, 1997, approximately
including leasing fees, $23,674 was incurred and paid to
development fees, construction the Advisor and its Affiliates
management fees, loan origination for loan servicing fees.
and servicing fees, property tax
reduction fees and risk
management fees. However, this
compensation may not exceed 90%
of that which would be paid to
third parties providing
comparable services and all such
compensation must be approved by
a majority of the Independent
Directors. See "Management--
Other Services."

Reimbursable Expenses (payable to Certain expenses of the Advisor The actual amounts to be paid are
the Advisor and its Affiliates) and its Affiliates will be dependent upon results of
reimbursed by the Company. (4) operations; approximately
(5) (6) $211,429 was incurred and paid
through December 31, 1997.
</TABLE>

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
LIQUIDATION STAGE:

Property Disposition Fee (payable A property disposition fee, The actual amounts to be received
to the Advisor and its payable upon the sale of each of depend upon the sale price of
Affiliates) the Company's properties, in an Company properties and,
amount equal to the lesser of: therefore, cannot be determined
(i) 3% of the contract sales at the 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") may be paid
to the Advisor and its
Affiliates. The amount paid,
when added to the sums paid to
unaffiliated parties, may 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>

SPECIAL PROVISIONS RELATING TO FEE PAYMENTS

The final payment of the following fees payable to the Advisor and its
Affiliates by the Company is subject to payment of certain specified returns to
the Stockholders as set forth below:

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
OPERATIONAL STAGE (3):

Advisor Asset Management Fee An Advisor Asset Management Fee The actual amounts to be paid are
(payable to the Advisor) of not more than 1% of the dependent upon results of
Average Invested Assets will be operations. Advisor Asset
paid to the Advisor. The fee Management Fees of $843,000 (.45%
will be payable quarterly in an of the Average Invested Assets)
amount equal to 1/4 of 1% of the were incurred and paid for the
Average Invested Assets of the year ended December 31, 1997.
Company, as of the last day of
the immediately preceding
quarter. The Company and the
Advisor have agreed that if the
Company is unable to pay
Distributions in an amount equal
to a non-compounded return equal
to 8% per annum on Invested
Capital (the "Current Return"),
then the Advisor will remit the
Advisor Asset Management Fee to
the Company. 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.
</TABLE>

<TABLE>
<CAPTION>
ESTIMATED MAXIMUM
TYPE OF COMPENSATION METHOD OF COMPENSATION DOLLAR AMOUNT
-------------------- ---------------------- -------------
<S> <C> <C>
LIQUIDATION STAGE (3):

Incentive Advisory Fee (payable After the Stockholders have first The actual amounts to be paid
to the Advisor) received: (i) their 8% depend upon the sale price of
Cumulative Return; and (ii) a Company properties and,
return of their Invested Capital, therefore, cannot be determined
an Incentive Advisory Fee equal at the present time.
to 15% of the remaining proceeds
from the sale of a property will
be paid to the Advisor. At such
time as the Advisory Agreement is
terminated due to the listing for
trading of the Shares on a
national exchange or market or
otherwise, 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 $13.20 per Share during the period beginning from the
date the Soliciting Dealer Warrants are issued and ending on April 6,
2003. 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 may not 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 may not exceed 6% of the Contract Price for the
Property.

(3) The Advisor and its Affiliates assist the Company in determining the types
of transactions entered into by the Company. The Advisor benefits, in the
form of fees, by the Company retaining ownership of its properties and
leveraging its properties, while Stockholders may be better served by sale
or disposition of the properties or not incurring indebtedness secured by
the properties. Furthermore, the Advisor's ability to receive or retain
certain fees and reimbursements is dependent upon the Company continuing
to invest in properties. Therefore, the interest of the Advisor in
receiving such fees may conflict with the interest of the 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 are 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, record keeping, preparing and
disseminating Company reports, preparing and maintaining records
regarding Stockholders, record keeping and administration of the DRP and
Share Repurchase Programs, preparing and disseminating responses to
Stockholder inquiries and other communications with Stockholders and any
other record keeping required for the Company.

(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 is 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 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 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 may 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 to manage and
oversee the daily operation of the Company and 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.

The Company believes that the compensation payable 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, by its terms, may be terminated
by a majority vote of the Stockholders upon 60 days prior written notice. See
"Management--The Advisory Agreement."

2. Process for Resolving 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 the

Company's. 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. The Advisory Agreement grants the
Company the first opportunity to buy Neighborhood Retail Centers and Community
Centers placed under contract by the Advisor or its Affiliates provided the
Company is able to close the purchase of the property within 60 days and the
right to purchase 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 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 the property by the Advisor; (iii) the
property meets the Company's acquisition criteria; provided that if more than
one real estate program sponsored by Affiliates of the Advisor has funds
available to make the purchase, the 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 evaluating 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."

The Company believes that these factors, together with the
obligations of the Advisor and its Affiliates to present the Company with 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. The Company acquired two of its
properties from an Affiliate and one property from an Independent Director.
The purchase prices for these properties were not the subject of arm's-length
negotiations. The Articles provide that the purchase price of any property
acquired from such parties: (i) 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 (ii) must be
approved by a majority of the Directors (including a majority of the
Independent Directors) not interested in the transaction as fair and reasonable
to the Company. The Directors (including a majority of the disinterested
Independent Directors) approved these acquisitions, however, there can be no
assurance that the prices paid to the Affiliate and/or these parties did not
exceed those which would have been paid by a third party.

4. The Company may Purchase Properties from Persons with whom
Affiliates of the Advisor have Prior Business Relationships. The Company may
purchase properties from third parties who have sold properties in the past or
who may sell properties in the future to the Advisor or its Affiliates. In the
event the Company purchases properties from these third parties, 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 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 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 of the Company. The Company pays the Management Agent a
monthly management fee of no greater than four and one half percent (4.5%) of
gross income for the month for which the payment is made. The property
management services agreement between the Company and the Management Agent is
for a term of one year and is subject to one-year successive renewals unless
thirty (30) days prior to the expiration of the agreement, either party
notifies the other in writing that it elects to terminate the agreement.

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 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
encumbering the Company's properties with indebtedness, while Stockholders may
be better served by sale or disposition or not incurring indebtedness secured
by the properties. Furthermore, the receipt and retention of certain fees and
reimbursements is dependent upon the Company's ability to continue investing 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 have represented to
the Company 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
respective fiduciary duties. 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 its Affiliates are not the result of arm's-length negotiations, but the
Company believes that these agreements and arrangements approximate the terms
of arm's-length transactions.

While the Company does not make loans to the Advisor or its
Affiliates, the Company has borrowed money from an Affiliate for various
purposes including funding 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.
All money borrowed from an Affiliate was repaid within 90 days. See "Real
Property Investments."

The Advisor and its Affiliates may provide services to, and
otherwise deal or do 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 provision of the
Advisory Agreement.

8. The Company and the Advisor have the Same Legal Counsel.
Shefsky & Froelich Ltd. serves as counsel to the Company, as well as to the
Advisor and some of its Affiliates. Shefsky & Froelich 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, Shefsky
& Froelich Ltd. may be precluded from representing any one or all of these
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 adequate
protection of their respective interests. 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 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 the Dealer Manager of the Offering and
is entitled to selling commissions and Soliciting Dealer Warrants, some or all
of 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 an independent review and 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
joint ventures with Affiliates. In addition, the Articles require a majority
of the Directors (including a majority of the Independent Directors) not
otherwise interested in the transaction to 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 to the Company entering into the
venture. 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 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 the Advisor and its Affiliates is
limited to the fullest extent permitted by the MGCL. Accordingly, the Directors
and the Advisor and its Affiliates may not be held liable to the Company or its
Stockholders for monetary damages unless: (a) it is proven 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, or any officer, employee, or
agent of the Company (each an "Indemnified Party") provided, that: (i) the
Indemnified Party has 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 Indemnified Party was 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 assets of the Stockholders.

The Company may not indemnify an Indemnified Party 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 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 an Indemnified Party 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
advancement; and (iii) the Indemnified Party receiving these advances undertakes
to repay the monies advanced to the Company, together with interest at the
applicable legal rate thereon, if the party is found not to be entitled to
indemnification.

The Company may 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 may 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. As of the date of this Prospectus, the Company has
not purchased any insurance on behalf of an Indemnified Party.

Neither the amendment nor the adoption of any other provision of the
Articles or the Bylaws will apply to or affect, in any respect, the Indemnitee's
right to indemnification for actions or failures to act which occurred prior to
such amendment, repeal or adoption.

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.

BUSINESS JUDGMENT PRESUMPTION

Generally, the Directors owe fiduciary duties to the Company and its
Stockholders. These fiduciary obligations include the duty of care and the duty
of loyalty. The duty of care requires that Directors exercise the care that a
reasonably prudent person would exercise under similar circumstances. The duty
of loyalty prohibits the Director from self-dealing. The "business judgment
rule" is a specific application of this directorial standard of conduct. It is a
legal presumption provided by Maryland law which presumes that when making a
business decision, the Director acted on an informed basis, in good faith, and
in the honest belief that the action taken was in the best interest of the
Company. Therefore, should a Director by sued by the Stockholders because of the
Director's business decision, the court will examine the directorial decision
only to

the extent necessary to verify the presence of a business decision,
disinterestedness and independence of the Director, due care of the Director,
good faith of the Director, and the absence of an abuse of discretion on behalf
of the Director. These elements are presumed to be present unless the
Stockholder is able to provide evidence to overcome the presumption. Thus, the
business judgment rule is a tool of judicial review rather than a standard of
conduct and it applies both in actions seeking to impose liability for money
damages upon Directors for their decision and in actions seeking injunctive
relief. In proving his or her case of breach of fiduciary duty, the Stockholder
bears the burden of overcoming this presumption and, if successful, the burden
shifts to the Director to show that he/she acted both in good faith and as a
reasonable prudent person. In making the Company's business decisions, the
Directors are entitled to rely on information, opinions, reports, or records
prepared by experts including accountants, consultants and counsel who were
selected with reasonable care.

There are also certain defenses which may be raised by the Directors,
the Advisor and its Affiliates, and officers, employees or agents of the Company
under Maryland law and the Articles in the event of a Stockholder action. For
example, 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 absent a Stockholder vote in certain
circumstances.

PRIOR PERFORMANCE OF THE COMPANY'S AFFILIATES

PRIOR INVESTMENT PROGRAMS

The Inland organization, during the past ten years, has sponsored six
public real estate programs and one private real estate program which have
raised in excess in $174,500,000. In excess of 15,800 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, pre-development land and 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 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, 1988 through December 31, 1997, 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>

Prior Prior
Public Private
Programs Programs
-------- --------
<S> <C> <C>
Number of programs sponsored.................................. 6 1
Aggregate amount raised from investors........................ $172,240,771 $2,275,000
Aggregate number of investors................................. 15,800 85
Number of properties purchased................................ 84 7
Aggregate cost of properties (1).............................. $145,020,714 $1,951,930

Percentage of properties (based on cost) that were:
Commercial
Retail................................................... 2.9% 0.0%
Single-user retail net-lease............................. 9.8% 0.0%
Nursing homes............................................ 9.9% 0.0%
Offices.................................................. 0.0% 0.0%
Industrial............................................... 0.0% 0.0%
Health clubs............................................. 5.2% 0.0%
Mini-storage............................................. 0.0% 0.0%
Total commercial....................................... 27.8% 0.0%

Multi-family residential.................................... 8.5% 0.0%
Land........................................................ 63.8% 100.0%

Percentage of properties (based on cost) that were:
Newly constructed (within a year of acquisition............. 0.0% 0.0%
Existing.................................................... 100.0% 0.0%
Construction................................................ 0.0% 0.0%

Number of properties sold..................................... 11 1
22.9% (2)
Number of properties exchanged................................ 0 0

</TABLE>

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

(1) Includes purchase price and acquisition fees and expenses.
(2) Based on costs of property including portions of land parcels sold at
December 31, 1997, and costs capitalized subsequent to acquisition.

During the three years prior to December 31, 1997, publicly registered
investment programs sponsored by IREIC purchased one parcel of land totaling 387
acres 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 this
acquisition.

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, 1997, cash
distributions have been maintained at an 8% level and on an accrual basis have
totaled $415.41 per $500 unit or $23,641,195 including $20,623,400 from
operating cash flow, $380,207 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, Family Entertainment Center, a Mexican restaurant and a
cigarette store. These tenants took possession of their spaces at the center
from 1990 through 1997, 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 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, 1997 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, 1997, cash
distributions have been maintained at or above an 8% level and on an accrual
basis have totaled $416.49 per $500 unit or $19,636,316, including $15,240,751
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. 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, 1997 totaled $528.35 per
$1,000 unit or $4,697,141, including $1,461,428 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.

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, 1997 totaled
$1,162.12 per $1,000 unit or $4,590,702, including $927,931 from operations and
$3,662,771 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, 1997, Land Fund I
has had multiple sales transactions involving all or portions of 15 parcels
which generated $12,173,287 in net sales proceeds. Land Fund I's cost basis in
the land parcels sold was $9,068,698 resulting in a gain, net of selling
expenses and commissions, of $3,104,589 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, 1997 totaled $5,996,219, 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,
1997, Land Fund II has had multiple sales transactions involving all or portions
of nine parcels which generated $12,415,359 in net sales proceeds. Land Fund
II's cost basis in the land parcels sold was $7,690,453 resulting in a gain, net
of selling expenses and commissions, of $4,724,906 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, 1997 totaled $6,836,753, including
$6,115,753 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. As of December 31, 1997, Land Fund III
has had multiple sales transactions, involving the house and portions of three
parcels which generated $1,974,816 in net sales proceeds. Land Fund III's cost
basis in the land parcels sold was $742,595 resulting in a gain, net of selling
expenses and commissions, of $1,232,221 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, 1997 totaled $1,646,334, 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, 299 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 1997, investors in Inland's private
partnerships have received total distributions in excess of $174,806,500,
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. Arguments were

heard by the Appellate Court in February, 1997, and subsequently the Appellate
Court affirmed the trial court decision in favor of IREIC.

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. Parcel 5, which consists of
sixty-three improved lots in the Village of Mount Horeb has had twenty-eight lot
sales since 1995 for a total gross sales proceed amount of $1,117,400.
Thirty-five remaining lots continue to be marketed for sale. On October 1, 1997,
Parcel 6, located in Windsor, Wisconsin, was sold for $566,597 which represents
191% of original parcel capital.

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.

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, 1997 totaled $557,185, of which $433,747
was interest earnings, $110,544 was a return of capital resulting from the
amortization of mortgage loans and $12,894 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,
1997 totaled $1,619,147, of which $1,614,837 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, 1997 totaled $1,557,369, of which $1,554,176
was interest earnings and $3,193 was 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, 1997 totaled
$2,142,984, of which $2,123,528 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, 1997 totaled $1,411,617, of which
$380,617 was interest earnings and $1,031,000 was a return of capital. This
partnership was liquidated in 1997.

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
was liquidated in 1997.

LOAN MODIFICATIONS AND WORK-OUTS

Between 1990 and December 31, 1997, 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.

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 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 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 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 Marsailles 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, 1997, eighteen 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. Fifteen
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, 1997, 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

GENERAL

The Company operates under the direction of a Board of Directors which
is responsible for the overall management and control of the Company's affairs.
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 are reviewed and approved by the Directors (including a majority of the
Independent Directors) with sufficient frequency (but not less than annually) to
ensure 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 Company's total fees and
expenses in light of the Company's investment experience and the fees and
expenses of companies performing comparable services. Each determination, along
with the supporting rationale, is set forth in the minutes of the meetings of
the Board.

The Independent Directors are required to determine, from time to time,
but not less than annually, that the compensation paid by the Company to the
Advisor is reasonable in relation to the nature and quality of the services
performed and within the limits prescribed by applicable state regulatory
authorities. The Independent Directors are also required to supervise the
Advisor's performance 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 must be based on at least the factors set forth below
and other factors that the Independent Directors may deem relevant. The findings
of the Independent Directors on each such factor must be recorded in the minutes
of the Board. These 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 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 comprised of five individuals, a majority of whom are
independent (the "Independent Directors"). Election of Board members is
conducted on an annual basis. Each individual elected to the Board serves a
one-year term or until his or her successor is elected. See "Summary of
Organizational Documents."

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
Company's Directors and executive officers:

<TABLE>

Name Age Position and Office with the Company
---- --- ------------------------------------

<S> <C>
Robert D. Parks 54 President, Chief Executive Officer, Chief Operating
Officer and Affiliated Director
G. Joseph Cosenza 54 Affiliated Director
Roland W. Burris 60 Independent Director
Joel G. Herter 60 Independent Director
Heidi N. Lawton 36 Independent Director
Roberta S. Matlin 53 Vice President -- Administration
Kelly Tucek 35 Secretary, Treasurer and Chief Financial Officer
Patricia A. Challenger 45 Assistant Secretary

</TABLE>

ROBERT D. PARKS President, Chief Executive Officer, Chief Operating
Officer and Director of the Company since its formation in 1994. Mr. Parks
joined The Inland Group, Inc. ("TIGI") and its affiliates in 1968. Mr. Parks is
a Director of TIGI and is Chairman of Inland Real Estate Investment Corporation
("IREIC") and is a Director of both Inland Securities Corporation and the
Advisor. Mr. Parks is responsible for the ongoing administration of existing
partnerships, corporate budgeting and administration for IREIC. In this capacity
he oversees and coordinates the marketing of all investments nationwide and has
overall responsibility for investor relations. Mr. Parks received his B.A.
Degree from Northeastern Illinois University in 1965 and M.A. from the
University of Chicago in 1968. 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 Director of the Company since its formation in 1994.
Mr. Cosenza is a Director and Vice Chairman of The Inland Group, Inc. Mr.
Cosenza oversees, coordinates and directs TIGI's many enterprises and, in
addition, immediately supervises a staff of eight property acquisition
personnel. Mr. Cosenza has been 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 in 1966 and his M.S. Degree
from Northern Illinois University in 1972. From 1967 to 1968, Mr. Cosenza taught
at the LaGrange School District in Hodgkins, Illinois, and from 1968 to 1972, he
served as Assistant Principal and taught in the Wheeling, Illinois School
District. Mr. Cosenza 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 has
served on the board of directors of Continental Bank of Oakbrook Terrace. He is
presently chairman of the board of Westbank, in Westchester, Illinois.

ROLAND W. BURRIS Independent Director of the Company 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 law. From 1973 to 1995, Mr.
Burris held various governmental positions in the State of Illinois including
State Comptroller (1979 to 1991) and Attorney General (1991 to 1995). Mr. Burris
completed his undergraduate studies at Southern Illinois University in 1959 and
studied international law as an exchange student at the University of Hamburg in
Germany. Mr. Burris graduated from Howard University Law School in 1963. Mr.
Burris serves on the board of 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 and is an adjunct professor in the Master of Public Administration
Program at Southern Illinois University.

JOEL G. HERTER Independent Director of the Company since 1997, Mr.
Herter is a senior partner of Wolf & Company LLP ("Wolf") where he has been
employed since 1978. Mr. Herter graduated from Elmhurst College in 1959 with a
Bachelor of Science degree in business administration. His business experience
includes accounting and auditing, tax and general business services including
venture and conventional financing, forecasts and projections and strategic
planning to a variety of industries. From 1978 to 1991, Mr. Herter served as
managing partner for Wolf. Mr. Herter is a member of the American Institute of
Certified Public Accountants and the Illinois CPA Society and was a past
president and director of the Elmhurst Chamber of Commerce and was appointed by
Governor Thompson of the State of Illinois to serve on the 1992 World's Fair
Authority. Mr. Herter currently serves as chairman of the Board of Trustees,
Elmhurst Memorial Hospital; director of Suburban Bank and Trust Company;
"chairman elect" of the Board of Trustees, Elmhurst College; chairman of the
DuPage Water Commission; treasurer to the House Republican Campaign Committee
and Friends of Lee Daniels Committee; treasurer for Illinois Attorney General
Jim Ryan. Mr. Herter has also been appointed by Governor Edgar of the State of
Illinois to the Illinois Sports Facilities Authority.

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. The
firm specializes in commercial, industrial and investment real estate brokerage.
Ms. Lawton is responsible for all aspects of the operations of the company,
including structuring real estate investments, 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, Ms.
Lawton was managing broker for VCR Realty in Addison, Illinois. Ms. Lawton has
been licensed as a real estate professional since 1982 and 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 TIGI in 1984 as Director of Investor
Administration and currently serves as Senior Vice President - Investments of
IREIC directing the day-to-day internal operations. Ms. Matlin is a Director of
both Inland Securities Corporation and the Advisor. Prior to joining TIGI, Ms.
Matlin was employed for eleven years by 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 in
1966 and is registered with the NASD as a general securities principal.

KELLY TUCEK Secretary, Treasurer and Chief Financial Officer of the
Company since August 1996. Ms. Tucek joined TIGI in 1989 and is an Assistant
Vice President of IREIC. Ms. Tucek 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 TIGI, 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 in 1984.

PATRICIA A. CHALLENGER Assistant Secretary of the Company since March
1995. Ms. Challenger joined TIGI in 1985. She is currently a Senior Vice
President of IREIC in charge of the Asset Management Department where she is
responsible for developing operating and disposition strategies for properties
owned by IREIC related entities. Ms. Challenger received her B.S. Degree from
George Washington University in 1975 and her Master's Degree from Virginia Tech
University in 1980. 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 governmental properties. Ms. Challenger is a licensed real estate broker,
NASD registered securities sales representative and is a member of the Urban
Land Institute.

COMMITTEES OF THE BOARD OF DIRECTORS

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 attending (in person or by
telephone) at each meeting of the Board or committee thereof. The Directors who
are affiliated with the Advisor or its affiliates (Messrs. Parks and Cosenza) do
not receive director fees. Each Independent Director has also been granted
options to purchase 3,000 Shares at a price of $9.05 per Share under the
Company's Independent Director Stock Option Plan. In addition, each year on the
date of the annual meeting of the Company's Stockholders, each Independent
Director then in office receives an additional grant of options to purchase 500
Shares at fair market value. See "--Independent Director Stock Option Plan" in
this Section.

THE ADVISOR

The Advisor, an Illinois corporation, is a wholly owned subsidiary of
IREIC. The following table sets forth information regarding the executive
officers and directors of the Advisor. The biographies of Robert D. Parks, G.
Joseph Cosenza, Roberta S. Matlin and Patricia A. Challenger are set forth
above.

Name Position and Office with the Advisor
---- ------------------------------------
<S> <C>
Robert D. Parks Chairman of the Board and President
G. Joseph Cosenza Director
Norbert J. Treonis Director
Roberta S. Matlin Director
Patricia A. Challenger Vice President -- Asset Management
Catherine L. Lynch Treasurer and Secretary

</TABLE>

NORBERT J. TREONIS (age 47) 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 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.

CATHERINE L. LYNCH (age 39) joined Inland in 1989 and is the Treasurer
of Inland Real Estate Investment Corporation. 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 LLP since 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.

ADVISOR BACKGROUND

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 were 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 1997 were ranked by
Crain's Chicago Business as the 37th 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.

The TIGI-affiliated companies developed expertise in real estate
financing as it bought and sold properties over the years. In 1977, Inland
Mortgage Corporation, an Illinois corporation ("IMC") was incorporated. IMC,
during its history, 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 December 31, 1997, owned a $79,375,000 loan portfolio, and IMSC serviced a
loan portfolio of 381 loans exceeding approximately $431,000,000.

THE ADVISORY AGREEMENT

Under the terms of the Advisory Agreement, the Advisor generally is
responsible 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 by another party (the "Management Agent") the
Company's properties and renders other services as the Directors deem
appropriate. The Advisor is subject to the supervision of the Directors and
performs only those functions delegated to it by the Directors.

The Advisor bears the expenses it incurs in connection with performing
its duties under the Advisory Agreement, including employee expenses; certain
travel and other expenses of its directors, officers and employees; 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 other investments of the Company or relating to its performance
under the Advisory Agreement. The Advisor is reimbursed for the cost to the
Advisor and its Affiliates of goods and services used for and by the Company and
obtained from unaffiliated parties and administrative services related thereto.
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
renewable for successive one-year terms upon the mutual consent of the parties.
The agreement 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. If the Advisory Agreement is terminated, the Advisor is required to
cooperate with the Company and to take all reasonable steps requested by the
Board to assist it in making an orderly transition of the advisory function.

The Advisor receives an Acquisition Expense reimbursement up 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. If the Advisor or its Affiliates
perform services that are outside of the scope of the Advisory Agreement, the
Company will compensate the Advisor or the Affiliate at such rates and in such
amounts as agreed upon by the Advisor and the Independent Directors. See
"Compensation Table."

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 grants the Company the first opportunity to buy
any Neighborhood Retail Centers and Community 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; and (iii) the property meets the Company's acquisition
criteria; provided that if 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.

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, such as an advisor, to perform management functions on its
behalf. Accordingly, should the Company 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 and the Management Agent to merge into the Company.

If the Advisory Agreement is terminated because the Shares are listed
for trading on a national stock exchange or market system, the Advisor will no
longer be paid any of the fees described above. 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 forgone or waived by the Advisor and the Management
Agent. 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 will also
terminate.

Under the Advisory Agreement, the Company is required to indemnify the
Advisor and to 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 negligence or
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 assets of the Stockholders.

The Company may advance amounts to persons entitled to indemnification
under the Advisory Agreement for legal and other expenses only if: (i) the legal
action relates to acts or omissions with respect to the performance of duties or
services by the indemnified party; (ii) the legal action is initiated by a third
party 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 which such party would not be
entitled to indemnification.

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 is an Illinois corporation and is a wholly-owned subsidiary of
Mid-America Management Corp. ("Mid-America"), which manages approximately 14,600
multi-family units, including approximately 13,600 units in the Chicago
metropolitan area which Mid-America believes is 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 13.1 million square feet by December 1997.

ICPM is responsible for collecting rent and leasing and maintaining the
commercial properties which it manages. A substantial portion of the portfolio,
approximately 8.8 million square feet, consists of properties triple-net leased
to creditworthy tenants, which means the tenant operates and maintains the
property and pays rent which is net of property taxes, insurance and operating
expenses.

ICPM is paid a monthly management fee of no greater than four and one
half percent (4.5%) of gross income for the month for which the payment is made.
The Company and ICPM have entered into an agreement for a term of one year,
subject to one-year successive renewals, unless either party notifies the other
in writing of its intent to terminate the agreement.

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 47 Chairman of the Board of Directors
Robert H. Baum 54 Director
Daniel L. Goodwin 54 Director
D. Scott Carr 32 President
Kristi Wells 32 Vice President
Robert M. Barg 44 Secretary/Treasurer

</TABLE>

ROBERT H. BAUM has been with TIGI and its affiliates since 1968 and is
one of the four original principals. Mr. Baum is a Vice Chairman and Executive
Vice President-General Counsel of TIGI. In his capacity as General Counsel, Mr.
Baum is responsible for supervising the legal activities of TIGI and its
affiliates, including supervising the Inland Law Department and serving

as liaison with outside counsel. Mr. Baum has served as a member of the North
American Securities Administrators Association Real Estate Advisory Committee
and as a member of the Securities Advisory Committee to the Secretary of State
of Illinois. He is a member of the American Corporation Counsel Association and
has also been a guest lecturer for the Illinois State Bar Association. Mr. Baum
has been admitted to practice before the Supreme Court of the United States, as
well as the bars of several federal courts of appeals and federal district
courts and the State of Illinois. Mr. Baum has served as a director of American
National Bank of DuPage. Currently, he serves as a director of Westbank and is a
member of the Governing Council of Wellness House, a charitable organization
that provides emotional support for cancer patients and their families.

DANIEL L. GOODWIN is Chairman of the Board of Directors of TIGI, a
billion dollar real estate and financial organization located in Oak Brook,
Illinois. Among Inland'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 Oak Brook Terrace. He was 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.

HOUSING

Mr. Goodwin has been in the housing industry for more than 28 years and
has demonstrated a lifelong interest in housing-related issues. He is a licensed
real estate broker and a member of the National Association of Realtors. He has
developed thousands of housing units in the Midwest, New England, Florida and
the Southwest. He is also the author of a nationally recognized real estate
reference book for managing residential properties, entitled The Landlord's
Handbook.

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. Recently,
Governor Edgar appointed him Chairman of the Housing Production Committee for
the Illinois State Affordable Housing Conference. He 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 heeds. The City of Hope designated him as the Man of the Year
for the Illinois construction industry. In 1989, the Chicago Metropolitan
Coalition on Aging presented 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 The Inland Group as the leading corporate provider of
transitional housing for the homeless people of DuPage County. Mr. Goodwin also
serves as Chairman of New Directions Housing Corporation, a leading provider of
affordable housing in northern Illinois.

EDUCATION

Mr. Goodwin is a product of Chicago-area schools and obtained his
Bachelor's and Masters's Degrees from Illinois Universities. Following
graduation, he taught for five years in the Chicago Public Schools. His
commitment to education has continued through his work with the Better Boys
Foundation's Pilot Elementary School in Chicago and the development of the
Inland Vocational Training Center for the Handicapped located at Little City in
Palatine, Illinois. He personally established an endowment which funds a
perpetual scholarship program for inner-city disadvantaged youth. 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. More than 12 years ago, under Mr.
Goodwin's direction, Inland instituted a program to educate disabled students
about the workplace. Most of those original students are still employed at
Inland today, and Inland continues as one of the largest employers of the
disabled in DuPage County. Mr. Goodwin has served as a member of the Board of
Governors of Illinois State Colleges and Universities, and he is currently a
trustee of Benedictine University. He was elected Chairman of the Northeastern
Illinois University Board of Trustees in January 1996.

ACKNOWLEDGMENTS

Mr. Goodwin served as a member of Governor Jim Edgar's Transition Team.
In 1988, he received the Outstanding Business Leader Award from the Oak Brook
Jaycees and has been the General Chairman of the National Football League
Players Association Mackey Awards for the benefit of inner-city youth. He served
as the recent Chairman of the Speakers Club of the Illinois House of
Representatives. In March 1994, he won the Excellence in Business Award for the
DuPage Area Association of Business and Industry. Additionally, he was honored
by Little Friends on May 17, 1995 for rescuing their Parent-Handicapped Infant
Program when they lost their lease. He was the recipient of the 1995 March of
Dimes Life Achievement Award and was recently recognized as the 1997 Corporate
Leader of the Year by the Oak Brook Area Association of Commerce and Industry.

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, 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
management fees. However, under no circumstances will such compensation exceed
90% of that which would 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 has an Independent Director Stock Option Plan (the
"Independent Director Stock Option Plan") under which non-employee Directors who
are "disinterested persons" as defined under Rule 16b-3 of the Exchange Act are
eligible to participate.

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 will be
made in the number and kind of shares that may be issued pursuant to options. A
corresponding adjustment to the exercise price of the options granted prior to
any change will also be made. Any such adjustment, however, will 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 exercise price for each
share.

The Independent Director Stock Option Plan provides for the grant of
non-qualified stock options to purchase 3,000 shares of common stock at fair
market value to each individual becoming an Independent Director (the "Initial
Options"), and subsequent grants of options to purchase 500 Shares on the date
of each annual stockholder's meeting so long as the individual is still in
office (the "Subsequent Options," collectively with the Initial Options referred
to herein as "Option" or "Options"). As of the date of this Prospectus, Options
to purchase an aggregate of 13,500 shares at $9.05 per share (the "Option
Price") have been granted to the existing Independent Directors. The Option
Price for subsequent options will be equal to the fair market value of the
Common Stock on the last business day preceding the annual meeting.

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 4,000 Shares have been granted to Joel G. Herter of which
1,000 have vested; options to purchase 4,500 Shares have been granted to Roland
W. Burris of which 2,000 have vested and 1,000 of which have been exercised; and
options to purchase 5,000 Shares have been granted to Heidi Lawton of which
3,500 have vested. Options granted under the Independent Director Stock Option
Plan are 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 will terminate, and any outstanding
options will 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 exercise 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 will continue in the manner and under
the terms so provided; or (iii) for the payment in cash or shares of common
stock in lieu of and in complete satisfaction of such options.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On February 25, 1998, the Company purchased the properties commonly
known as Elmhurst City Center and Ruby's Apparel Shop from One City Center,
L.L.C. ("City Center"), an entity owned, indirectly, by Heidi N. Lawton, a
director of the Company. City Center purchased the properties during 1997 for an
aggregate price of $4,485,000. The Company purchased the properties for an
aggregate price of $4,775,000. As part of the transaction, Lawton Realty Group,
Inc., an entity owned directly by Ms. Lawton, received a $41,000 commission from
the previous owner of Ruby's Apparel Shop. The purchase price under the
agreement was based on the fair market value estimate contained in the appraisal
performed by an unaffiliated third party. The Company's purchase of the
properties was approved by a majority of the disinterested Independent
Directors. See "Real Property Investments -- Elmhurst City Center."

Additionally, Robert D. Parks and G. Joseph Cosenza, Directors of the
Company, are also Directors of the Advisor. See "Management -- The Advisor."
Pursuant to the Advisory Agreement, upon the occurrence of certain events, the
Advisor is entitled to receive certain fees and to have certain expenses
reimbursed by the Company. The amount of such fees are set forth in the
"Compensation Tables." Because of the positions of Messrs. Parks and Cosenza in
the Company and the Advisor, they may have an indirect interest in the Company's
transactions.

SELECTED FINANCIAL DATA(1)

The following table sets forth selected financial information derived
from the financial statements of the Company. Balance sheet data and income
statement data for the years ended December 31, 1997, 1996 and 1995 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>
For the Years Ended December 31,
--------------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Total assets ........................... $ 333,590,131 $ 104,508,686 $ 18,750,877
Mortgages payable ...................... 106,589,710 30,838,233 750,727
Total income ........................... 29,421,585 6,327,734 1,180,422
Net income ............................. 8,647,221 2,452,221 496,514
Net income per share (2) ............... .57 .55 .53
Distribution declared .................. 13,127,597 3,704,943 736,627
Distributions per share (2) ............ .86 .82 .78
Funds from Operations (2)(3) ........... 13,203,666 3,391,365 666,408
Funds available for distribution (3) ... 13,141,242 3,680,824 787,011
Cash flows from operating
activities .................... 15,923,839 5,529,709 978,350
Cash flows from investing
activities .................... (146,994,619) (68,976,841) (6,577,843)
Cash flows from financing
activities .................... 173,724,632 71,199,936 6,327,490
Weighted average number of common shares
outstanding ............................ 15,225,983 4,494,620 943,156

</TABLE>

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

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

(2) The net income and distributions per share are based upon the weighted
average number of common shares outstanding. The $.86 per share
Distribution for the year ended December 31, 1997, represented

99.4% of the Company's Funds From Operations ("FFO") and 99.9% of funds
available for distribution for that period. See Footnote (3) 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
1997, $3,388,364 (or 25.81% of the $13,125,597 Distribution paid for
1997) 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 $9,252,000 for 1997. Taxable income does not include net
capital gains. 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 expenditures, the annual distribution
required to maintain REIT status under the Code and other factors the
Board of Directors may deem relevant.

(3) "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 of real property
and amortization and other non-cash items. FFO and funds available for
distribution are calculated as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1997 1996
-----------------------------
<S> <C> <C>
Net income ......................... $ 8,647,221 $ 2,452,221
Depreciation ....................... 4,556,445 939,144
------------ -----------
Funds from operations(a) .. 13,203,666 3,391,365
Normal amortizing principal payments
of debt ................... (67,300) (55,670)
Deferred rent receivable(b) ........ (654,978) (119,225)
Acquisition cost expenses(c) ....... 249,493 26,676
Rental income received under master
lease agreements(d) ....... 410,361 437,678
------------ -----------
Funds available for distribution ... $ 13,141,242 $ 3,680,824
============ ===========
</TABLE>

(a) 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.

(b) 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.

(c) Acquisition cost expenses include costs and expenses relating to the
acquisition of properties. These costs are estimated to be up to .5% of
the Gross Offering Proceeds and are paid from the Proceeds of the
Offering.

(d) 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. GAAP requires that as these payments are received, they be
recorded as a reduction in the purchase price of the properties rather
than as rental income.

INVESTMENT OBJECTIVES AND POLICIES

1. General . The Company's investment objectives are to: (i) make
regular Distributions to the Stockholders equal to at least 95% of the Company's
taxable income, provided that these Distributions may be in amounts which 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; (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 realize capital
appreciation; and (iii) preserve Stockholders' capital. Currently Leases
representing approximately 42% of the Company's total GLA provide for scheduled
rent escalations.

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 have generated sufficient cash flow to
cover operating expenses of the Company plus pay a monthly Distribution of $.87
per share. The Company's ability to pay Distributions and the size of these
Distributions depend upon a variety of factors. There can be no assurance that
Distributions will be made. Distributions for the year ended December 31, 1996
and December 31, 1997 totaled $3,704,943, and $13,127,597 respectively, of
which $611,418, and $3,388,364 respectively constituted a return of capital for
federal income tax purposes. Additionally, to date, the Company has paid
Distributions of $3,814,439 in 1998.

To the extent possible, the Company seeks to avoid the
fluctuations in Distributions which might result if Distributions were based on
actual cash received during the Distribution period. To avoid fluctuation, the
Company may use Cash Flow received during prior periods, or

Cash Flow received subsequent to the Distribution period and prior to the
payment date for such Distribution, in order to pay annualized Distributions
consistent with the Distribution level established from time to time by the
Board. The Company's ability to maintain this policy is dependent upon the
Company's Cash Flow and applicable REIT rules. There can be no assurance that
there will be Cash Flow available to pay Distributions, or that Distribution
amounts will not fluctuate. Monthly Distributions will be calculated with daily
record and Distribution declaration dates. However, the Board could, at any
time, elect to pay Distributions quarterly, to reduce administrative costs. As a
matter of policy, the Company, subject to applicable REIT rules, seeks 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 may acquire existing
Neighborhood Retail Centers and Community Centers located primarily within an
approximate 400-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. The Company intends, whenever possible, to acquire
properties free and clear of permanent mortgage indebtedness by paying the
entire purchase price in cash or for shares of the Company's stock. The Company
has in the past incurred, and may in the future incur, indebtedness to acquire
properties where the Board determines that incurring such indebtedness is in the
Company's best interest. Currently, the Company has financing on 48 of its 59
properties. In addition, from time to time, the Company has acquired properties
on an all-cash basis and later incurred mortgage indebtedness secured by the
property if favorable financing terms are available. The Company intends to
continue this strategy. The proceeds from such loans are used primarily to
acquire additional properties. Certain of the Company's properties may be
subject to "net" leases. "Net" leases typically require tenants to 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 are long-term
(typically 15 to 25 years, but generally not less than ten years) and require
the lessee to pay a base minimum annual rent with periodic increases. For
purposes hereof, a creditworthy tenant is 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.

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 is also permitted to construct or develop
properties, or render services in connection with such development or
construction, subject to the Company's compliance with the rules governing real
estate investment trusts under the Code, as amended. The construction and
development of properties exposes the Company to certain risks such as cost
overruns, carrying costs of projects under construction and development,
availability and costs of materials and labor, weather conditions, and
government regulation.

Before purchasing a property, the Advisor examines and
evaluates 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 evaluating a property for acquisition,
the Advisor requires the seller to provide a current Phase I environmental
report and, if necessary, a Phase II environmental report. In a sale-leaseback
situation, since the seller of the property generally is assuming the operating
risk the price paid for the property by the Company may be greater than if it
was not leased back to the Seller. All acquisitions from Affiliates must be
approved 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 acquisition or financing by the Company,
the completion of construction of the property or any other purpose related to
the business of the Company.

4. Acquisition Standards . Through its experience gained through
the acquisition of approximately 750 properties by Company's Affiliates, the
Advisor believes the Company has the ability to identify quality properties
capable of meeting the investment objectives. In evaluating potential
acquisitions, the Company considers a number of factors, including a property's:
(i) geographic location and type; (ii) construction quality and condition; (iii)
current and projected cash flow; (iv) potential for capital appreciation; (v)
rent roll, including the potential for rent increases; (vi) potential for
economic growth in the tax and regulatory environment of the community in which
the property is located; (vii) potential for expanding the physical layout of
the property and/or the number of sites; (viii) occupancy and demand by tenants
for properties of a similar type in the same geographic vicinity; (ix) prospects
for liquidity through sale, financing or refinancing of the property; (x)
competition from existing properties and the potential for the construction of
new properties in the area; and (xi) treatment under applicable federal, state
and local tax and other laws and regulations.

Statistics in this section are excerpted from Woods & Poole Economics,
Inc., 1997 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. Statistics
for the Metropolitan Statistical Area/Primary Metropolitan Statistical Area, as
defined by the Office of Management and Budget are provided below for

metropolitan areas located within 400 miles of the Company's headquarters in Oak
Brook, Illinois. All earnings, personal income and retail sales data are
presented in inflation-adjusted 1992 "constant" dollars.

CHICAGO

In 1994, Chicago had the third largest total residential population
among 315 metropolitan areas in the nation with approximately 7.6 million
people. The Chicago metropolitan area is one of the nation's largest
metropolitan areas and retail market. Population is forecast to increase 0.32%
per year in the Chicago metropolitan area, compared to 1.02% for the nation as a
whole; job growth is forecasted to grow 0.93% on an annual basis for Chicago,
compared to 1.05% for the nation while for retail sales are forecasted to grow
from 1994 to 2020 33% for Chicago and 49% for the nation.

Woods & Poole Economics, Inc. projects that from 1994 through
2020, the Chicago metropolitan area will add 867,850 persons, the 17th largest
increase among the nation's 315 metropolitan areas.

From 1994 through 2020, Woods & Poole projects that the
Chicago area will: (i) experience a 43% rise in per capita income, improving the
area's ranking from 21st to 14th among the nation's 315 metropolitan areas; (ii)
lead the nation in the number of new jobs created, with 1,225,860; and (iii)
experience a rise in annual retail sales from $64.4 billion to $85.6 billion,
the fourth largest increase among any metropolitan area in the nation and will
at that time be the largest retail market in the nation.

DETROIT

In 1994, Detroit had the seventh largest total residential population
among 315 metropolitan areas in the nation with approximately 4.3 million
people. Population is forecast to increase .19% per year in the Detroit
metropolitan area, compared to 1.02% for the nation as a whole; job growth is
forecasted to grow .92% on an annual basis for Detroit, compared to 1.05% for
the nation while for retail sales are forecasted to grow from 1994 to 2020 28%
for Detroit and 49% for the nation.

Woods & Poole Economics, Inc. projects that from 1994 through 2020, the
Detroit metropolitan area will add 324,430 persons, the 42nd largest increase
among the nation's 315 metropolitan areas.

From 1994 through 2020, Woods & Poole projects that the
Detroit area will: (i) experience a 41% rise in per capita income, improving the
area's ranking from 32nd to 26th among the nation's 315 metropolitan areas; (ii)
the number of new jobs created is forecast to be 617,140; and (iii) experience a
rise in annual retail sales from $ 37.2 billion to $ 47.6 billion.

INDIANAPOLIS

In 1994, Indianapolis had the 35th largest total residential population
among 315 metropolitan areas in the nation with approximately 1.46 million
people. Population is forecast to increase .98% per year in the Indianapolis
metropolitan area, compared to 1.02% for the nation as a whole; job growth is
forecasted to grow 1.15% on an annual basis for Indianapolis, compared to 1.05%
for the nation while for retail sales are forecasted to grow from 1994 to 2020
50.5% for Indianapolis and 49% for the nation.

Woods & Poole Economics, Inc. projects that from 1994 through 2020, the
Indianapolis metropolitan area will add 407,350 persons, the 34th largest
increase among the nation's 315 metropolitan areas.

From 1994 through 2020, Woods & Poole projects that the
Indianapolis area will: (i) experience a 29% rise in per capita income; (ii) the
number of new jobs created is forecast to be 323,550; and (iii) experience a
rise in annual retail sales from $ 13.9 billion to $ 20.9 billion.

MILWAUKEE

In 1994, Milwaukee had the 36th largest total residential population
among 315 metropolitan areas in the nation with approximately 1.45 million
people. Population is forecast to increase .34% per year in the Milwaukee
metropolitan area, compared to 1.02% for the nation as a whole; job growth is
forecasted to grow .80% on an annual basis for Milwaukee, compared to 1.05% for
the nation while for retail sales are forecasted to grow from 1994 to 2020
29.8% for Milwaukee and 49% for the nation.

Woods & Poole Economics, Inc. projects that from 1994 through 2020, the
Milwaukee metropolitan area will add 89,920 persons, the 119th largest increase
among the nation's 315 metropolitan areas.

From 1994 through 2020, Woods & Poole projects that the
Milwaukee area will: (i) experience a 43% rise in per capita income, improving
the area's ranking from 43rd to 29th among the nation's 315 metropolitan areas;
(ii) the number of new jobs created is forecast to be 210,740; and (iii)
experience a rise in annual retail sales from $ 12.6 billion to $ 16.3
billion.

MINNEAPOLIS/ST. PAUL

In 1994, Minneapolis/St. Paul had the 12th largest total residential
population among 315 metropolitan areas in the nation with approximately 2.68
million people. Population is forecast to increase 1.01% per year in the
Minneapolis/St. Paul metropolitan area, compared to 1.02% for the nation as a
whole; job growth is forecasted to grow 1.13% on an annual basis for
Minneapolis/St. Paul, compared to 1.05% for the nation while for retail sales
are forecasted to grow from 1994 to 2020 52% for Minneapolis/St. Paul and 49%
for the nation.

Woods & Poole Economics, Inc. projects that from 1994 through 2020, the
Minneapolis/St. Paul metropolitan area will add 854,630 persons, the 19th
largest increase among the nation's 315 metropolitan areas.

From 1994 through 2020, Woods & Poole projects that the
Minneapolis/St. Paul area will: (i) experience a 28% rise in per capita income;
(ii) the number of new jobs created is forecast to be 619,720; and (iii)
experience a rise in annual retail sales from $ 20.5 billion to $ 38.8 billion.

ST. LOUIS

In 1994, St. Louis had the 16th largest total residential population
among 315 metropolitan areas in the nation with approximately 2.54 million
people. Population is forecast to increase .39% per year in the St. Louis
metropolitan area, compared to 1.02% for the nation as a whole; job growth is
forecasted to grow .77% on an annual basis for St. Louis, compared to 1.05% for
the nation while for retail sales are forecasted to grow from 1994 to 2020 31%
for St. Louis and 49% for the nation.

Woods & Poole Economics, Inc. projects that from 1994 through 2020, the
St. Louis metropolitan area will add 319,000 persons, the 43rd largest increase
among the nation's 315 metropolitan areas.

From 1994 through 2020, Woods & Poole projects that the St.
Louis area will: (i) experience a 37% rise in per capita income; (ii) the number
of new jobs created is forecast to be

325,750; and (iii) experience a rise in annual retail sales from $ 21.1 billion
to $ 27.8 billion.

5. Description of Leases . The Company anticipates entering into
"net leases" which require lessees to pay a share, either pro rata or fixed, of
the real estate taxes, insurance, utilities and common area maintenance of the
properties. The Company intends to include 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 in most of its leases. The leases with most
Anchor Tenants generally have initial terms of ten to twenty-five years, with
one or more renewal options available to the lessee. By contrast, smaller tenant
leases typically have three- to five-year terms.

During the initial term of a "net" lease, which generally
covers fifteen to twenty-five years (typically not less than ten years), the
tenant is required to 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 is required to pay its share of the
cost of the liability insurance covering the properties owned by the Company.
The third-party liability coverage insures, among others, the Company and the
Advisor. Each tenant is required to obtain, at its own expense, 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 must
remain liable under the lease unless the assignee meets certain income and net
worth tests.

6. Property Acquisition . The Company has acquired to date, and
in the future anticipates acquiring, 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 and own 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 and "Federal Income Tax
Considerations -- Taxpayer Relief Act of 1997 - Significant REIT Provisions --
Qualified REIT Subsidiaries."

As of the date of this Prospectus, the Company had acquired 43
Neighborhood Retail Centers, seven Community Centers, and nine single-user
retail properties. A total of two properties, the Eagle Crest Shopping Center
and the Walgreen/Decatur property, were acquired from an Affiliate and one
property, Elmhurst City Center, was acquired from an Independent Director. The
prices paid for each of these properties were not the subject of arm's-length
negotiations. Under the Articles, the Company is prohibited from purchasing 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 the Affiliate, provided that if
the price to the Company is greater, substantial justification for the excess
must exist and the excess must be reasonable. In no event may the cost of the
asset exceed its current appraised value. A majority of the Directors (including
a majority of the Independent Directors) approved the purchases of Eagle Crest
Shopping Center, the Walgreen/Decatur property, and Elmhurst City Center as
being fair and reasonable to the Company. There can be no assurance, however,
that the prices paid to the Affiliate and/or related party for Eagle Crest
Shopping Center, the Walgreens/Decatur property, and Elmhurst City Center or for
future acquisitions of properties from Affiliates and/or related parties, if
any, did not or would not exceed that which would be paid by an unrelated 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. For example, the Company purchased Oak Forest Commons
and Downers Grove Plaza, both of which are Neighborhood Retail Centers which
were redeveloped. See "Real Property Investments" below. 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 is also
permitted to construct or develop properties, or render any services in
connection with such development or construction, subject to the Company's
compliance with the rules governing REITs under the Code. See "Investment
Objectives and Policies -- Types of Investment."

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. The price will be based on the
estimated cost of 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, 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.

7. Borrowing . The Company intends, 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, incur indebtedness to acquire
properties. With respect to 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. The
Company may also incur indebtedness to finance improvements to its properties.
The Company anticipates that aggregate borrowings secured by all of the
Company's properties will not exceed 50% of their combined fair market value;
however, the maximum amount of borrowings as a

percentage of Net Assets will, in the absence of the consent of a majority of
the Stockholders, not exceed 300% of Net Assets. See "Summary of the
Organizational Documents--Restrictions on Borrowing."

If the Company does incur indebtedness secured by its
properties, it intends to do so only on a non-recourse basis, which means that a
lender's rights on default will generally be limited to foreclosing 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. The Company also seeks 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.

8. Sale or Disposition of Properties . The Board will determine
whether a particular property should be sold or otherwise disposed of after
considering the 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, the Company holds
its properties prior to sale, for a minimum of four years. See "Federal Income
Tax Considerations--Taxation of the Company--Prohibited Transactions."
Furthermore, the Company generally reinvests proceeds from the sale, financing,
refinancing or other disposition of its properties into additional properties or
uses these proceeds to fund maintenance or repair of existing properties or to
increase reserves for such purposes. The objective of reinvesting the sale,
financing and refinancing proceeds in new properties will be to increase the
real estate assets owned by the Company, and the Company's net income which the
Board believes will enhance the Company's chances of listing the Company's
shares on a national securities exchange or market. 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 whether to distribute these proceeds 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 including the
shares for quotation on a national market system and compliance with REIT
regulations. Because the Company may reinvest 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 of common stock, will force the Company to
liquidate its assets and dissolve. See "Summary of the Organizational
Documents--Dissolution or Termination of the Company." To date, the Company has
not sold any properties.

In selling a property, the Company generally seeks to obtain
an all-cash sale price. However, a purchase money obligation secured by a
mortgage on the property may be taken as partial 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 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 available for distributions 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. To date the Company has not sold any properties. See "Federal Income Tax
Considerations."

9. Change in Investment Objectives and Policies . Directors may
not make any material changes in the Company's investment objectives described
herein under the caption "Investment Objectives and Policies" without the
affirmative vote of Stockholders holding a majority of the outstanding shares of
stock.

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. Appraisals are, however, 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 each appraisal
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 investment within the later of: (i)
twenty-four months from the original effective date of this Prospectus; or (ii)
twelve 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
receipt until expiration of the period discussed above and may be used to fund
expenses incurred to operate the properties which have been acquired to
reimburse the Advisor for certain expenses of the Company, to the extent
allowable under the Advisory Agreement, and to pay Advisor and Property
Management fees. 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 calendar year 1999, the Directors will determine whether it
is in the best interests of the Company to apply to have the Company's 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. The Company believes that an exchange listing may 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.

14. Joint Ventures . The Company is 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 is also 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.

Investors should consider the potential risk of the Company
and its joint venture partner being 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. In
addition, the Company may enter into joint venture or partnership arrangements
with unaffiliated third parties. Therefore, the Company may enter into
acquisitions with sellers who are desirous of transactions in tax advantaged
structures such as arrangements typically referred to as "Down REITS." 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 the
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.

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. These
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 43 Neighborhood Retail Centers, seven Community
Centers and nine 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. None of the Company's 59 properties
individually account for more than 10% of the book value of the Company's total
assets or gross revenues for the Company's fiscal year ended December 31, 1997.

The following tables describe the Company's properties and tenants at those
properties.

Property Mix
(at March 31, 1998)

<TABLE>
<CAPTION>
Gross % of Annualized % of Total
Leasable Total Base Rental Base Rental
No. Area (Sq Ft) GLA Revenue Revenue
--- ------------ --- ------- -------
<S> <C> <C> <C> <C> <C>
Single-User
Retail Property 9 371,551 8.73% $ 4,923,964 11.14%
Neighborhood
Retail Centers 43 2,395,053 56.28 25,521,553 57.77
Community Centers 7 1,488,820 34.99 13,735,994 31.09
-- --------- ----- ---------- -----
59 4,255,424 100% $44,181,511 100%
== ========= ===== =========== =====

</TABLE>

<TABLE>
<CAPTION>
Gross Percent of 1998
Leasable Percent GLA leased Annualized Current
Date Year Area of as of Base Rental No. of
Property Acq. Built (Sq.Ft.) Total GLA 3/31/98 Revenue(2) Tenants Major Tenants(1)
-------- ---- ----- -------- ---------- -------- ---------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
SINGLE-USER
RETAIL PROPERTY

Walgreens ................. 01/95 1988 13,500 .32% 100% $ 127,819 1 Walgreens
Decatur, IL
Zany Brainy ............... 07/96 1995 12,499 .29 100 274,978 1 Zany Brainy
Wheaton, IL
Ameritech Outlot .......... 05/97 1995 4,504 .11 100 112,768 1 Ameritech
Joliet, IL
Dominick's Finer Foods .... 05/97 1996 71,400 1.68 100 1,108,842 1 Dominick's Finer Foods
Schaumburg, IL
Dominick's Finer Foods .... 06/97 1996 71,442 1.68 100 1,325,934 1 Dominick's Finer Foods
Highland Park, IL
Dominick's Finer Foods .... 09/97 1997 68,923 1.62 100 809,328 1 Dominick's Finer Foods
Glendale Heights, IL
Party City ................ 11/97 1985 10,000 .23 100 200,004 1 Party City
Oak Brook Terrace, IL
Roselle Eagle ............. 11/97 1990 42,283 .99 100 335,971 1 Eagle Food Centers
Roselle, IL
Dominick's Finer Foods .... 1/98 1990 77,000 1.81 100 628,320 1 Dominick's Finer Foods
West Chicago, IL

NEIGHBORHOOD RETAIL CENTERS

Eagle Crest ............... 03/95 1991 67,650 1.59 95 567,613 11 Eagle Food Centers
Naperville, IL

</TABLE>

<TABLE>
<CAPTION>
Gross Percent Percent of 1998
Leasable of GLA leased Annualized Current
Date Year Area Total as of Base Rental No. of
Property Acq. Built (Sq.Ft.) GLA 3/31/98 Revenue(2) Tenants Major Tenants(1)
-------- ---- ----- -------- -------- ---------- ----------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Montgomery-Goodyear 09/95 1991 12,903 .30% 77% $115,080 2 Goodyear Tire & Rubber
Montgomery, IL Merlin Corp.

Hartford/Naperville Plaza 09/95 1995 43,862 1.03 100 545,193 8 Blockbuster Video
Naperville, IL Sears Roebuck & Co.

Nantucket Square 09/95 1980 56,981 1.34 96 580,806 18 Hallmark
Schaumburg, IL Super Trak Auto
Dental Store

Antioch Plaza 12/95 1995 19,810 .47 68 144,945 5 Blockbuster Video
Antioch, IL Radio Shack

Mundelein Plaza 03/96 1990 68,056 1.60 95 689,253 7 Sears, Roebuck & Co.
Mundelein, IL

Regency Point 04/96 1993/ 54,876 1.29 97 614,533 18 Walgreens
Lockport, IL 1995 Ace Hardware

Prospect Heights 06/96 1985 28,080 .66 83 199,450 4 Walgreens
Prospect Heights, IL Blockbuster Video

Montgomery-Sears 06/96 1990 34,600 .81 95 388,000 5 Sears Roebuck & Co.
Montgomery, IL Blockbuster Video

Salem Square 08/96 1973/ 112,310 2.64 97 682,532 5 TJ Maxx
Countryside, IL 1985 Marshalls

Hawthorn Village 08/96 1979 98,686 2.32 100 951,498 22 Dominick's Finer Foods
Vernon Hills, IL Walgreens

Six Corners 10/96 1966 80,650 1.90 93 990,929 7 Bally's Chicago Health
Chicago, IL Club
IL Masonic Health Center

</TABLE>

<TABLE>
<CAPTION>
Gross Percent Percent of 1998
Leasable of GLA leased Annualized Current
Date Year Area Total as of Base Rental No. of
Property Acq. Built (Sq.Ft.) GLA 3/31/98 Revenue(2) Tenants Major Tenants(1)
-------- ---- ----- -------- -------- ---------- ----------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Spring Hill Fashion Corner 11/96 1985 125,198 2.94% 98% $1,230,469 20 TJ Maxx
West Dundee, IL Michaels Crafts

Grand and Hunt Club 12/96 1996 21,222 .50 100 394,844 2 Helzberg's Diamond Shop
Gurnee, IL Super Crown Books

Quarry Outlot 12/96 1996 9,650 .23 100 201,450 3 Dunkin Donuts/Baskin
Hodgkins, IL Robbins
The Casual Male
Helzberg's Diamond Shop

Crestwood Plaza 12/96 1992 20,044 .47 100 203,007 2 Entenmann's
Crestwood, IL Pet Supplies Plus

Park St. Claire 12/96 1994 11,859 .28 100 181,216 2 Ameritech
Schaumburg, IL Hallmark

Summit of Park Ridge 12/96 1986 33,252 .78 83 360,447 13 LePeep Restaurant
Park Ridge, IL Giappos Pizza

Aurora Commons 01/97 1988 127,292 2.99 98 1,212,740 24 Jewel/Osco
Aurora, IL

Lincoln Park Place 01/97 1990 10,678 .25 60 140,250 1 Lechter's Housewares
Chicago, IL

Niles Shopping Center 04/97 1982 26,117 .61 60 363,453 5 Wolf Camera
Niles, IL Jennifer Convertibles
ACEL Cell Phones

Cobblers Crossing 05/97 1993 102,643 2.41 89 1,001,469 12 Jewel Foods
Elgin, IL

Mallard Crossing, 05/97 1993 82,949 1.95 95 1,074,062 10 Eagle Food Centers
Elk Grove Village, IL

</TABLE>
100

<TABLE>
<CAPTION>
Gross Percent Percent of 1998
Leasable of GLA leased Annualized Current
Date Year Area Total as of Base Rental No. of
Property Acq. Built (Sq.Ft.) GLA 3/31/98 Revenue(2) Tenants Major Tenants(1)
-------- ---- ----- -------- -------- ---------- ----------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Calumet Square 06/97 1967 39,936 .94% 100% $315,260 3 Super Trak Auto
Calumet City, IL Aronson Furniture

Sequoia Plaza 06/97 1988 35,407 .83 93 402,376 12 U.S. Post Office
Milwaukee, WI Kinko's Copy Center

River Square 06/97 1988 58,158 1.37 95 816,774 21 Harbour Contractors
Naperville, IL Salon Suites

Shorecrest Plaza 07/97 1977 91,176 2.14 96 669,855 14 Piggly Wiggly
Racine, WI

Countryside Shopping Center 12/97 1975 62,344 1.47 100 266,602 1 Dominick's Finer Foods
Countryside, IL

Terramere Plaza 12/97 1980 40,965 .96 80 469,430 16 No tenants lease more than
Arlington Heights, IL 10% of the GLA

Wilson Plaza 12/97 1986 11,160 .26 100 140,611 7 White Hen Pantry
Batavia, IL Dimples Donuts
Riverside Liquors

Iroquois Center 12/97 1983 140,981 3.31 81 1,281,613 26 Total Beverage
Naperville, IL Sears, Roebuck & Co.

Fashion Square 12/97 1984 83,959 1.97 80 883,982 12 Cost Plus
Skokie, IL Designer Shoe Outlet

Shops at Coopers Grove 1/98 1991 72,518 1.70 96 598,061 7 Eagle Food Centers
Country Club Hills, IL

Maple Plaza 1/98 1988 31,298 .74 100 387,337 13 Copy Center
Downers Grove, IL J.C. Licht Co.
Goodyear Tire & Rubber
Co.

</TABLE>

101

<TABLE>
<CAPTION>
Gross Percent Percent of 1998
Leasable of GLA leased Annualized Current
Date Year Area Total as of Base Rental No. of
Property Acq. Built (Sq.Ft.) GLA 3/31/98 Revenue(2) Tenants Major Tenants(1)
-------- ---- ----- -------- -------- ---------- ----------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Orland Park Retail 2/98 1997 8,500 .20% 84% $112,725 2 Video Update
Orland Park, IL All Cleaners

Wisner/Milwaukee Plaza 2/98 1994 14,677 .34 100 207,198 4 Blockbuster Video
Chicago, IL SpinCycle

Homewood Plaza 2/98 1993 19,000 .45 100 220,000 3 Blockbuster Video
Homewood, IL SuperTrak Auto

Elmhurst City Center 2/98 1994 39,117 .92 99 502,961 9 Walgreens
Elmhurst, IL Famous Footwear
Ruby's Apparel Shop

Mill Creek 3/98 1989 102,433 2.41 97 1,130,234 20 Jewel Foods
Palos Park, IL

Oak Forest Commons 3/98 1998 103,860 2.44 99 1,297,399 12 Dominick's Finer Foods
Oak Forest, IL

Prairie Square 3/98 1995 35,755 .84 94 345,860 16 Famous Footwear
Sun Prairie, WI Blockbuster Video

Downers Grove Plaza 3/98 1998 104,449 2.45 84 1,887,695 14 Dominick's Finer Foods
Downers Grove, IL

St. James Crossing 3/98 1990 46,769 1.17 88 752,341 21 Nevada Bob's
Westmont, IL Cucina Roma

COMMUNITY CENTERS

Lansing Square 12/96 1991 233,508 5.49 90 1,804,263 18 Sam's Club
Lansing, IL Baby Superstore
Office Max

</TABLE>

102

Gross Percent Percent of 1998
Leasable of GLA leased Annualized Current
Date Year Area Total as of Base Rental No. of
Property Acq. Built (Sq.Ft.) GLA 3/31/98 Revenue(2) Tenants Major Tenants(1)
-------- ---- ----- -------- -------- ---------- ----------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maple Park Place 01/97 1992 215,662 5.07% 98% 1,813,878 18 Kmart
Bolingbrook, IL Eagle Food Centers

Rivertree Court 07/97 1988 299,055 7.03 99 $3,657,911 42 Best Buy
Vernon Hills, IL Plitt Theaters

Naper West 12/97 1985 165,311 3.88 88 1,609,523 27 Douglas T.V.
Naperville, IL T.J. Maxx

Woodfield Plaza 1/98 1992 177,418 4.17 97 2,063,920 9 Kohl's
Schaumburg, IL Linen 'N Things
Barnes & Noble

Lake Park Plaza 2/98 1990 227,839 5.35 95 1,232,068 19 Wal-Mart
Michigan City, IN Roundy's

Chestnut Court 3/98 1987 170,027 4.00 85 1,554,431 21 Steinmart
Darien, IL
</TABLE>

(1) Major Tenants only include tenants leasing more than 10% of the gross
leasable area of a property.

(2) Annual Base Rental Revenue is the annualized contractual base rent as of
January 1, 1998 under existing leases.

103

TENANTS

The following table sets forth, at March 31, 1998, information
regarding space leased to retail tenants which, in each case, individually
account for more than 1.0% of the Company's 1998 total annualized base rental
revenues from the Properties.

<TABLE>
<CAPTION>
Percent of
Annualized Aggregate
Total Percent Base Annualized
Number of GLA of Rental Base Rental
Stores (Sq. Ft.) Total GLA Revenue (1) Revenue
------ --------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Walgreens 5 64,761 1.52% $ 584,410 1.32%
Blockbuster 10 67,415 1.58 861,933 1.95
Sears, Roebuck & Co. 4 109,824 2.58 989,355 2.24
Eagle Food Centers 5 258,165 6.07 2,371,257 5.37
Dominick's Finer Foods 8 579,952 13.63 6,954,909 15.74
Bally's 1 45,803 1.08 503,690 1.14
Wal-Mart/Sams 2 222,484 5.23 1,208,225 2.73
Kmart 1 104,231 2.45 589,157 1.33
Jewel Foods 3 194,841 4.58 1,639,847 3.71
TJ Maxx 4 146,976 3.45 940,953 2.13
Barnes & Noble 1 22,988 0.54 452,864 1.03
Famous Footwear 9 49,217 1.16 550,055 1.24
Plitt Theaters 1 40,000 0.94 786,666 1.78
Kohl's 1 83,000 1.95 726,250 1.64
</TABLE>

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

(1) Amounts shown reflect 1998 annualized base rental revenue. Annualized
rental revenue excludes: (a) percentage rents; (b) additional charges
paid for by tenants including common area maintenance, real estate
taxes and other expense requirements; and (c) future contractual rent
escalations. Annualized base rental revenue is the annualized
contractual base rent as of January 1, 1998 under existing leases.

104

TENANT LEASE EXPIRATIONS

The following table sets forth lease expirations for the next ten years
at the single-user retail properties, assuming that no renewal options are
exercised.

<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Approx. Base Rent Building Annual Base
GLA of Annual Base Per Square GLA Rent
Number Expiring Rent of Foot Under Represented Represented
Year Ending of Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31 Expiring (Sq. Ft.) Leases Base Rent (1) Leases Leases Leases
- ----------- -------- ---------- ---------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 -- -- -- $4,923,964 -- -- --
1999 -- -- -- 4,927,353 -- -- --
2000 1 62,344 $ 266,602 4,932,927 $ 4.28 16.78% 5.40%
2001 -- -- -- 4,692,821 -- -- --
2002 -- -- -- 4,705,275 -- -- --
2003 -- -- -- 4,804,248 -- -- --
2004 -- -- -- 4,861,527 -- -- --
2005 2 17,003 435,591 4,862,507 25.62 4.58 8.96
2006 -- -- -- 4,515,832 -- -- --
2007 1 10,000 215,004 4,569,215 21.50 2.69 4.71
</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. Annualized base rental revenue is the
annualized contractual base rent as of January 1, 1998 under existing
leases.

105

The following table sets forth lease expirations for the next ten years
at the Neighborhood Retail Center Properties, assuming that no renewal options
are exercised.

<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Approx. Base Rent Building Annual Base
GLA of Annual Base Per Square GLA Rent
Number Expiring Rent of Foot Under Represented Represented
Year Ending of Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31 Expiring (Sq. Ft.) Leases Base Rent (1) Leases Leases Leases
- ----------- -------- ---------- ----------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 74 163,212 $ 1,987,500 $25,521,553 $12.18 6.81% 7.79%
1999 93 248,404 3,194,720 23,899,148 12.86 10.37 13.37
2000 83 276,338 3,453,013 20,872,281 12.50 11.54 16.54
2001 50 149,611 1,964,777 17,570,578 13.13 6.25 11.18
2002 48 181,130 2,117,294 15,742,110 11.69 7.56 13.45
2003 42 172,964 1,979,909 13,725,584 11.45 7.22 14.42
2004 9 93,262 780,559 11,704,620 8.37 3.89 6.67
2005 13 82,275 988,734 10,970,127 12.02 3.44 9.01
2006 13 76,283 1,051,278 10,008,310 13.78 3.19 10.50
2007 9 66,454 915,098 8,976,055 13.77 2.77 10.19
</TABLE>

The following table sets forth lease expirations for the next ten years at the
Community Center Properties, assuming that no renewal options are exercised.

106

<TABLE>
<CAPTION>
Percent of
Total Percent of
Average Building Annual
Approx. Base Rent GLA Base Rent
GLA of Annual Base Per Square Represented Represented
Number Expiring Rent of Foot Under by by
Year Ending of Leases Leases Expiring Total Annual Expiring Expiring Expiring
December 31 Expiring (Sq. Ft.) Leases Base Rent (1) Leases Leases Leases
- ----------- --------- --------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 19 63,722 $ 762,657 $13,735,994 $11.97 4.28% 5.55%
1999 39 154,310 1,711,117 13,127,729 11.09 10.36 13.03
2000 24 69,796 822,121 11,503,579 11.78 4.69 7.15
2001 19 78,084 1,074,442 10,760,524 13.76 5.24 9.99
2002 20 77,692 974,379 9,764,404 12.54 5.22 9.98
2003 11 123,555 1,320,545 8,415,310 10.69 8.30 15.69
2004 3 7,342 125,838 7,145,304 17.14 0.49 1.76
2005 3 7,895 146,923 7,023,972 18.61 0.53 2.09
2006 3 68,046 631,134 6,906,635 9.28 4.57 9.14
2007 8 51,604 495,590 6,326,687 9.60 3.47 7.83
</TABLE>

THE FOLLOWING SETS FORTH INFORMATION REGARDING THE COMPANY'S PROPERTIES.

THE WALGREENS/DECATUR PROPERTY

On January 31, 1995, the Company acquired the entire fee simple
interest in a single-user retail property located at 1201 E. Wood Street in
Decatur, Illinois known as 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 leases 100% of the
free-standing building, which has 13,500 rentable square feet and was
constructed in 1988. IPS purchased the Walgreens/Decatur property in 1990 for a
purchase price

107

of $1,152,500, including a cash down payment 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.

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

<TABLE>
<S> <C>
IPS 1990 cash down payments 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 December 31, 1997, the balance of the assumed mortgage was
approximately $727,000. 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.

EAGLE CREST SHOPPING CENTER, NAPERVILLE, ILLINOIS

On March 1, 1995, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center known as "Eagle Crest Shopping Center" located
at 1260-90 E. Chicago Avenue in Naperville, Illinois, from IPS for approximately
$4,816,970. 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 rentable square feet. Its
major tenant is Eagle Food Centers ("Eagle"). IPS purchased Eagle Crest Shopping
Center 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. On March 1, 1994, IPS again refinanced Eagle Crest Shopping
Center, 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

108

to its store. In return for the reimbursement Eagle began paying an additional
$157,500 per annum in rent under its lease.

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.

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 and $17,340 was interest. 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.

MONTGOMERY-GOODYEAR SHOPPING CENTER, MONTGOMERY, ILLINOIS

On September 14, 1995, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at South Douglas Road in
Montgomery, Illinois known as "Montgomery-Goodyear Shopping Center" from an
unaffiliated third party for approximately $1,145,992. 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 and $4,260 was interest.
Montgomery-Goodyear Shopping Center was built in 1991 and contains 12,903
rentable square feet. The Center's major tenants are Goodyear Tire & Rubber Co.
which leases 6,000 square feet and Merlin Corp. which leases 3,560 square feet.

109

THE HARTFORD/NAPERVILLE PLAZA, NAPERVILLE, ILLINOIS

On September 14, 1995, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 1267-1275 Rickert Drive in
Naperville, Illinois known as "Hartford/Naperville Plaza" from an unaffiliated
third party for approximately $4,414,015. 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 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 and $5,102 was
interest. Hartford/Naperville Plaza was built in July 1995 and contains 43,862
rentable square feet. The Center's major tenants are Sears, Roebuck & Co. which
leases 21,000 square feet and Blockbuster Video which leases 6,500 square feet.

NANTUCKET SQUARE SHOPPING CENTER, SCHAUMBURG, ILLINOIS

On September 20, 1995, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at Wise Street and Roselle Road
known as "Nantucket Square Shopping Center" from an unaffiliated third party for
approximately $4,257,918. 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 and $62,011 was
interest. Nantucket Square Shopping Center was built in 1980 and consists of two
buildings, one of which is a one-story, multi-tenant shopping mall containing
53,720 rentable square feet and the other building is a one-story, free-standing
building aggregating 3,260 rentable square feet. The center's major tenants are
Hallmark which leases 7,156 square feet, Super Trak Auto which leases 11,743
square feet, Dental Store which leases 6,228 square feet, and Burger King which
leases 3,260 square feet.

ANTIOCH PLAZA, ANTIOCH, ILLINOIS

On December 28, 1995, the Company purchased the entire fee simple
interest in a Neighborhood Retail Center located at Highway 173, west of Route
59 in Antioch, Illinois known as "Antioch Plaza" from an unaffiliated third
party for approximately $1,750,365. 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 aggregate principal
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 including $1,163 in interest. Antioch Plaza
was built in 1995 and consists of a two-building, free-standing,
masonry-constructed strip center aggregating 19,810 rentable square feet. The
Center's major tenants are Blockbuster Video which leases 6,500 square feet and
Radio Shack which leases 2,135 square feet.

110

MUNDELEIN PLAZA, MUNDELEIN, ILLINOIS

On March 29, 1996, the Company purchased the entire fee simple interest
in a Neighborhood Retail Center located at 1400 Townline Road in Mundelein,
Illinois known as "Mundelein Plaza" from an unaffiliated third party for
approximately $5,658,230. The purchase was made on an all cash basis. Mundelein
Plaza was built in 1990 and consists of two one-story, multi-tenant brick and
block strip centers aggregating 68,056 rentable square feet. The center's major
tenant is Sears Roebuck & Co. which leases 47,000 square feet.

REGENCY POINT SHOPPING CENTER, LOCKPORT, ILLINOIS

On April 5, 1996, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at 1025-65 East 9th Street in Lockport,
Illinois known as "Regency Point Shopping Center" from an unaffiliated third
party for approximately $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. Regency Point Center 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 Shopping Center, was
built in 1993 and 1994 and consists of a one-story, multi-tenant brick and block
strip center aggregating 54,876 rentable square feet. The center's major tenants
include Walgreens which leases 13,000 square feet and Ace Hardware which leases
15,505 square feet.

PROSPECT HEIGHTS PLAZA, PROSPECT HEIGHTS, ILLINOIS

On June 17, 1996, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at Camp McDonald Road and Route 83 in
Prospect Heights, Illinois known as "Prospect Heights Plaza" from an
unaffiliated third party for approximately $2,165,000. The purchase was made on
an all cash basis. Prospect Heights Plaza was built in 1985 and consists of two
one-story, multi-tenant brick buildings aggregating 28,080 rentable square feet.
The center's major tenants are Walgreens which leases 12,600 square feet and
Blockbuster Video which leases 6,250 square feet.

MONTGOMERY-SEARS SHOPPING CENTER, MONTGOMERY, ILLINOIS

On June 17, 1996, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at South Douglas Road in Montgomery,
Illinois known as "Montgomery-Sears Shopping Center" from an unaffiliated third
party for approximately $3,419,000. The purchase was made on an all cash basis.
Montgomery-Sears Shopping Center was built in 1990 and consists of a one-story,
multi- tenant concrete masonry building aggregating 34,600 rentable square feet.
The center's major tenants are Sears, Roebuck & Co. which leases 20,000 square
feet and Blockbuster Video which leases 7,000 square feet.

111

THE ZANY BRAINY STORE, WHEATON, ILLINOIS

On July 1, 1996, the Company acquired the entire fee simple interest in
a single-user retail property located at Naperville Road and Blanchard Circle in
Wheaton, Illinois known as "Zany Brainy" from an unaffiliated third party for
approximately $2,455,000. The purchase was made on an all cash basis. The center
was built in 1995 and aggregates 12,499 rentable square feet. The center's only
tenant (leasing 100% of the leasable area) is Children's Concepts, Inc. which
does business as Zany Brainy and sells children's books, computer software,
toys, and related items.

SALEM SQUARE SHOPPING CENTER, COUNTRYSIDE, ILLINOIS

On August 2, 1996, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at the intersection of Plainfield Road
and Brainard Avenue in Countryside, Illinois known as "Salem Square Shopping
Center" 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 $6,200,000. The
purchase price was funded using cash and cash equivalents. Salem Square Shopping
Center 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. The center's major tenants are Marshall's which leases 29,827 square feet
and T.J. Maxx which leases 63,535 square feet.

HAWTHORN VILLAGE COMMONS, VERNON HILLS, ILLINOIS

On August 15, 1996, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at 220-290 Town Line Road in Vernon
Hills, Illinois known as "Hawthorn Village Commons" 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 $8,400,000. 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 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%. Hawthorn
Village Commons was built in 1978 and remodeled in 1993 and consists of two
single-story buildings comprising a multi-tenant retail facility aggregating
98,686 rentable square feet. The center's major tenants are Dominick's Finer
Foods which leases 46,984 square feet and Walgreens which leases 11,974 square
feet.

112

SIX CORNERS PLAZA, CHICAGO, ILLINOIS

On October 18, 1996, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 3920 North Cicero Avenue in
Chicago, Illinois known as "Six Corners Plaza" from MBL Life Assurance
Corporation, an unaffiliated third party, for approximately $6,000,000. The
purchase price was funded using cash and cash equivalents. Six Corners Plaza was
built in 1966 and consists of a two-story building aggregating 80,650 rentable
square feet. The center's major tenants are Bally's Chicago Health & Tennis Club
which leases 45,803 square feet and Illinois Masonic Health Center which leases
15,338 square feet.

SPRING HILL FASHION CORNER, WEST DUNDEE, ILLINOIS

On November 13, 1996, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 830-890 West Main Street in
West Dundee, Illinois known as "Spring Hill Fashion Corner" from JMB/Spring Hill
Associates, an unaffiliated third party, for approximately $9,200,000. 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. Spring Hill Fashion Corner was
built in 1985 and consists of a one-story building aggregating 125,198 rentable
square feet. The center's major tenants are Michael's Crafts which leases 30,000
square feet and T. J. Maxx which leases 25,161 square feet.

GRAND & HUNT CLUB OUTLOT CENTER, GURNEE, ILLINOIS

On December 24, 1996, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at Grand Avenue and Hunt Club
Road in Gurnee, Illinois known as "Grand & Hunt Club Outlot Center" from Butler
Real Estate, Inc., an unaffiliated third party, for approximately $3,600,000.
The purchase price was funded using cash and cash equivalents. Grand & Hunt Club
Outlot Center was built in 1996 and consists of a one-story building aggregating
21,222 rentable square feet. The center's main tenants are Super Crown Books
which leases 16,722 square feet and Helzberg's Diamond Shops which leases 4,500
square feet.

THE QUARRY OUTLOT, HODGKINS, ILLINOIS

On December 24, 1996, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at La Grange Road and Joliet
Road in Hodgkins, Illinois known as "The Quarry Outlot" from Butler Real Estate,
Inc., an unaffiliated third party, for approximately $1,800,000. The purchase
price was funded using cash and cash equivalents. The Quarry Outlot was built in
1996 and consists of a one-story building aggregating 9,650 rentable square
feet. The center's main tenants are Helzberg's Diamond Shops which leases 4,700
square feet, Casual Male Big and Tall which leases 3,150 square feet, and Dunkin
Donuts/Baskin Robbins which leases 1,800 square feet.

113

CRESTWOOD PLAZA SHOPPING CENTER, CRESTWOOD, ILLINOIS

On December 27, 1996, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 13335 South Cicero Avenue in
Crestwood, Illinois known as "Crestwood Plaza Shopping Center" from Inland
Property Sales, Inc., an affiliated third party, for approximately $1,810,000.
The purchase price was funded using cash and cash equivalents. Crestwood Plaza
Shopping Center was built in 1992 and consists of a one-story building
aggregating 20,044 rentable square feet. The center's major tenants are
Entenmann's Inc. which leases 13,644 square feet and Pet Supplies Plus which
leases 6,400 square feet.

LANSING SQUARE SHOPPING CENTER, LANSING, ILLINOIS

On December 31, 1996, the Company acquired a the entire fee simple
interest in a Community Center located at Torrence Avenue and Interstate 80/94
in Lansing, Illinois known as "Lansing Square Shopping Center" from Lansing
Square RPF II Limited Partnership, an unaffiliated third party, for
approximately $16,300,000. 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 Shopping
Center. 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.

Lansing Square Shopping Center was built in 1991 and consists of three
one-story buildings aggregating 233,508 rentable square feet. The center's major
tenants are Sam's Club which leases 107,927 square feet, Baby Superstore which
leases 43,596 square feet, and Office Max which leases 24,700 square feet.

PARK ST. CLAIR PLAZA, SCHAUMBURG, ILLINOIS

On December 31, 1996, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at the corner of Higgins and
Meacham Roads in Schaumburg, Illinois known as "Park St. Clair Plaza" from KHF
Land Partnership, an unaffiliated third party, for approximately $1,525,000. The
purchase price was funded using cash and cash equivalents. Park St. Clair Plaza
was built in 1994 and consists of a one-story building aggregating 11,859
rentable square feet. The center's main tenants are Hallmark which leases 7,669
square feet, and Ameritech Mobile Communications which leases 4,190 square feet.

THE SUMMIT OF PARK RIDGE, PARK RIDGE, ILLINOIS

On December 31, 1996, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 100-150 Euclid Avenue in
Park Ridge, Illinois known as "The Summit of Park Ridge" from WHPX-S Real Estate
Limited Partnership, an unaffiliated third party, for approximately $3,200,000.
The purchase price was funded using cash and cash

114

equivalents. The Summit of Park Ridge was built in 1986 and consists of a
one-story building aggregating 33,248 rentable square feet. The center's main
tenants are Giappo's Pizza which leases 3,683 square feet, and Le Peep
Restaurant which leases 3,621 square feet.

MAPLE PARK PLACE, BOLINGBROOK, ILLINOIS

On January 9, 1997, the Company acquired the entire fee simple interest
in a Community Center located at Naperville and Boughton Roads in Bolingbrook,
Illinois known as "Maple Park Place" from KBS Retail Limited Partnership, a
Delaware limited partnership, an unaffiliated third party, for approximately
$15,300,000. 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%.

Maple Park Place was built in 1992, with expansions made in 1994, and
consists of a one-story building aggregating 215,662 rentable square feet. The
center's main tenants are Kmart which leases 104,231 square feet and Eagle Food
Centers which leases 56,706 square feet.

AURORA COMMONS SHOPPING CENTER, AURORA, ILLINOIS

On January 24, 1997, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at Route 31 and Indian Trail
Road in Aurora, Illinois known as "Aurora Commons Shopping Center" from Aurora
Commons Limited Partnership and Northpoint Two Limited Partnership, unaffiliated
third parties, for approximately $11,500,000. 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. Aurora Commons Shopping Center was built in 1988 and consists of
a one-story building aggregating 127,292 rentable square feet. The center's
major tenant is Jewel Foods which leases 64,965 square feet.

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LINCOLN PARK PLACE SHOPPING CENTER, CHICAGO, ILLINOIS

On January 24, 1997, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 666-670 West Diversey
Parkway in Chicago, Illinois known as "Lincoln Park Place Shopping Center" from
Clark & Diversey Limited Partnership, an unaffiliated third party, for
approximately $2,100,000. 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%. Lincoln Park Place Shopping Center was built in 1990
consists of a one-story building aggregating 10,678 rentable square feet. The
center has one tenant which leases 60% of the leasable area, Lechter's
Housewares.

NILES SHOPPING CENTER, NILES, ILLINOIS

On April 11, 1997, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at 8351 West Golf Road in Niles,
Illinois known as "Niles Shopping Center" from American National Bank and Trust
Company as Trustee for Trust No. 77302, an unaffiliated third party, for
approximately $3,280,000. The purchase price was funded using cash and cash
equivalents. Niles Shopping Center was built in 1982 and consists of a one-story
building aggregating 26,117 rentable square feet. The center's major tenants are
Wolf Camera which leases 6,600 square feet, Jennifer Convertibles which leases
3,375 square feet, and ACEL Cell Phones which leases 3,275 square feet.

COBBLERS MALL, ELGIN, ILLINOIS

On May 6, 1997, the Company acquired the entire fee simple interest in
a Neighborhood Retail Center located at Summit Road and Route 58 in Elgin,
Illinois known as "Cobblers Mall" from Hamilton Partners, an unaffiliated third
party, for approximately $10,953,000. The purchase price was funded using cash
and cash equivalents. Cobblers Mall was built in 1993 and consists of a
one-story, multi-tenant retail facility aggregating 102,643 rentable square
feet. The center's major tenant is a Jewel Foods which leases 64,938 square
feet.

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MALLARD MALL, ELK GROVE VILLAGE, ILLINOIS

On May 6, 1997, the Company acquired the entire fee simple interest in
a Neighborhood Retail Center located at the northeast corner of Meacham Road and
Nerge Road in Elk Grove Village, Illinois known as "Mallard Mall" from Hamilton
Partners, an unaffiliated third party, for approximately $8,100,000. The
purchase price was funded using cash and cash equivalents. Mallard Mall was
built in 1993 and consists of a one-story, multi-tenant retail facility
aggregating 82,949 rentable square feet. The center's major tenant is Eagle Food
Centers which leases 56,668 square feet.

AMERITECH OUTLOT BUILDING, JOLIET, ILLINOIS

On May 9, 1997, the Company acquired the entire fee simple interest in
a single-user retail property located at 3330 West Mall Loop Drive in Joliet,
Illinois known as "Ameritech Outlot" from LJ Partners, an unaffiliated third
party, for approximately $1,050,000. The purchase price was funded using cash
and cash equivalents. Ameritech Outlot was built in 1995 and consists of a
one-story, single tenant retail outlot building aggregating 4,504 rentable
square feet. The center's only tenant (leasing 100% of the leasable area) is
Ameritech Cellular.

DOMINICK'S FINER FOODS, SCHAUMBURG, ILLINOIS

On May 29, 1997, the Company acquired the entire fee simple interest in
a single-user retail property located at 1293 East Higgins Road in Schaumburg,
Illinois known as "Schaumburg Dominick's" from Rybychi, L.P., an unaffiliated
third party, for approximately $10,691,000. The purchase price was funded using
cash and cash equivalents. Due to the nature of the property, the Property
Management Fee charged by one of the Advisor's Affiliates will be reduced from
4.5% of the property's gross income to 2.0% of the property's gross income. This
Property Management Fee will not be subordinated to Distributions. Schaumburg
Dominick's was built in 1996 and consists of a one-story, single-tenant retail
facility aggregating 71,400 rentable square feet. The center's only tenant
(leasing 100% of the leasable area) is Dominick's Finer Foods.

CALUMET SQUARE SHOPPING CENTER, CALUMET CITY, ILLINOIS

On June 2, 1997, the Company acquired the entire fee simple interest in
a Neighborhood Retail Center located at 777 River Oaks Drive in Calumet City,
Illinois known as "Calumet Square Shopping Center" from River Oaks Limited
Partnership, an unaffiliated third party, for approximately $2,108,000. The
purchase price was funded using cash and cash equivalents. Calumet Square
Shopping Center was built in 1967, with upgrades in 1987 and 1994, and consists
of a one-story two tenant retail facility and an outlot building aggregating
39,936 rentable square feet. The center's two tenants are Super Trak Auto which
leases 18,828 square feet and Aronson Furniture which leases 18,828 square feet.

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DOMINICK'S FINER FOODS, HIGHLAND PARK, ILLINOIS

On June 17, 1997, the Company acquired the entire fee simple interest
in a single-user retail property located at the southwest corner of West Park
Avenue and Skokie Road in Highland Park, Illinois known as "Highland Park
Dominick's" from Rybychi L.P., an unaffiliated third party, for approximately
$12,800,000. The purchase price was funded using cash and cash equivalents. Due
to the nature of the property, the Property Management Fee charged by one of the
Advisor's Affiliates will be reduced from 4.5% of the property's gross income to
2.0% of the property's gross income. This Property Management Fee will not be
subordinated to Distributions. Highland Park Dominick's was built in 1996 and
consists of a one-story, single tenant retail facility aggregating 71,838
rentable square feet. The center's only tenant (leasing 100% of the leasable
area) is Dominick's Finer Foods.

SEQUOIA PLAZA SHOPPING CENTER, MILWAUKEE, WISCONSIN

On June 17, 1997, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at 6807 West Brown Deer Road in
Milwaukee, Wisconsin known as "Sequoia Plaza Shopping Center" from Chicago Title
& Trust Company as a qualified intermediary for The Sequoia Company, an
unaffiliated third party, for approximately $3,010,000. The purchase price was
funded using cash and cash equivalents. Sequoia Plaza Shopping Center was built
in 1988 and consists of a one-story, multi-tenant retail facility aggregating
35,407 rentable square feet. The center's major tenants are the U.S. Post Office
which leases 5,580 square feet and Kinko's Copy Center which leases 4,960 square
feet.

RIVER SQUARE SHOPPING CENTER, NAPERVILLE, ILLINOIS

On June 20, 1997, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at Washington Street and Chicago Avenue
in Naperville, Illinois known as "River Square Shopping Center" from General
American Life Insurance Company, an unaffiliated third party, for approximately
$6,050,000. The purchase price was funded using cash and cash equivalents. River
Square Shopping Center was built in 1988 and consists of a two-story,
multi-tenant retail facility aggregating 58,158 rentable square feet. The
center's major tenants are Harbour Contractors which leases 11,730 square feet
and Salon Suites which leases 7,720 square feet.

RIVERTREE COURT SHOPPING CENTER, VERNON HILLS, ILLINOIS

On July 17, 1997, the Company acquired the entire fee simple interest
in a Community Center located at 701 N. Milwaukee Avenue in Vernon Hills,
Illinois known as "Rivertree Court Shopping Center" from JMB Income Properties,
LTD., - XIII, an unaffiliated third party, for approximately $31,750,000 which
included the Company assuming the existing first mortgage loan of $15,700,000.
The mortgage requires interest only payments at a rate of 10.03% per annum until
the maturity date of January 1, 1999. The balance of the purchase price was
funded using cash and cash equivalents. Rivertree Court Shopping Center was
built in 1988 and consists of three one-story, multi-tenant retail facilities
aggregating 299,055 rentable square feet. The center's major

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tenants are Best Buy which leases 44,384 square feet and Plitt Theatres which
leases 40,000 square feet.

SHORECREST PLAZA SHOPPING CENTER, RACINE, WISCONSIN

On July 25, 1997, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at 3900 Erie Street in Racine, Wisconsin
known as "Shorecrest Plaza Shopping Center" from Shorecrest Shopping Center,
L.L.C., an unaffiliated third party, for approximately $5,956,000. The purchase
price was funded using cash and cash equivalents. Shorecrest Plaza Shopping
Center was built in 1977 and consists of a one-story, multi-tenant retail
facility aggregating 91,176 rentable square feet. The center's major tenant is
Piggly Wiggly which leases 41,262 square feet.

DOMINICK'S FINER FOODS, GLENDALE HEIGHTS, ILLINOIS

On September 30, 1997, the Company acquired the entire fee simple
interest in a single-user retail property located at 23W127 Army Trail Road, in
Glendale Heights, Illinois known as "Glendale Heights Dominick's" from S-Prime
Partners, an unaffiliated third party, for approximately $8,196,000. The
purchase price was funded using cash and cash equivalents. Glendale Heights
Dominick's was built in 1997 and consists of a one-story, single-tenant retail
facility aggregating 68,923 rentable square feet. The center's only tenant
(leasing 100% of the leasable area) is Dominick's Finer Foods.

PARTY CITY, OAK BROOK TERRACE, ILLINOIS

On November 6, 1997, the Company acquired a single-user retail property
located on 17W700 22nd Street in Oak Brook Terrace, Illinois known as "Party
City" from D/M 22nd Street L.L.C., an unaffiliated third party, for
approximately $1,975,000. The purchase price was funded using cash and cash
equivalents. Party City was built in 1985 and consists of a one-story,
single-tenant retail facility aggregating 10,000 rentable square feet. The
center's only tenant (leasing 100% of the leasable area) is Party City.

ROSELLE EAGLE, ROSELLE, ILLINOIS

On November 26, 1997, the Company acquired a single-user retail center
located at 550 West Lake Street in Roselle, Illinois known as "Roselle Eagle"
from Capital Ventures, an unaffiliated third party, for approximately
$2,900,000. The purchase price was funded using cash and cash equivalents.
Roselle Eagle was built in 1990 and consists of a single-tenant retail facility
aggregating 42,283 rentable square feet. The center's only tenant (leasing 100%
of the leasable area) is Eagle Food Centers.

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COUNTRYSIDE SHOPPING CENTER, COUNTRYSIDE, ILLINOIS

On December 15, 1997, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at Joliet Road and Willow
Springs Road in Countryside, Illinois known as "Countryside Shopping Center"
from Arnold Lees Corporation, an unaffiliated third party, for approximately
$2,300,000. The purchase price was funded using cash and cash equivalents.
Countryside Shopping Center was built in 1975 and consists of a one story,
multi-tenant retail facility aggregating 62,344 rentable square feet. The
center's only tenant (leasing 100% of the leasable area) is Dominick's Finer
Foods, who in turn, sub-leases to three tenants.

TERRAMERE PLAZA, ARLINGTON HEIGHTS, ILLINOIS

On December 19, 1997, the Company acquired a Neighborhood Retail Center
located at Lake-Cook Road and Arlington Heights Road in Arlington Heights,
Illinois known as "Terramere Plaza" from C.B. Institution Fund VIII, an
unaffiliated third party, for approximately $4,405,000. The purchase price was
funded using cash and cash equivalents. Terramere Plaza was built in 1980 and
consists of two one-story, multi-tenant retail facilities aggregating 40,965
rentable square feet. No tenant leases more than 10% of the total rentable
square footage of the center.

WILSON PLAZA, BATAVIA, ILLINOIS

On December 22, 1997, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at Wilson Street and Prairie
Street in Batavia, Illinois known as "Wilson Plaza" from American National Bank
and Trust, as trustee under trust agreement dated June 18, 1986, Trust No.
67678, an unaffiliated third party, for approximately $1,300,000. The purchase
price was funded using cash and cash equivalents. Wilson Plaza was built in 1986
and consists of a one-story, multi-tenant retail facility aggregating 11,160
rentable square feet. The center's major tenants are White Hen Pantry which
leases 2,400 square feet, Dimples Donuts which leases 2,100 square feet, and
Riverside Liquors which leases 2,485 square feet.

IROQUOIS CENTER, NAPERVILLE, ILLINOIS

On December 29, 1997, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at Ogden Avenue and Iroquois
Avenue in Naperville, Illinois known as "Iroquois Center" from Graystone Realty
Corporation, an unaffiliated third party, for approximately $11,900,000. The
purchase price was funded using cash and cash equivalents. Iroquois Center was
built in 1983 and consists of two one-story, multi-tenant retail facilities
aggregating 140,981 rentable square feet. The center's major tenants are Total
Beverage which leases 20,000 square feet and Sears, Roebuck & Co. which leases
21,824 square feet.

FASHION SQUARE SHOPPING CENTER, SKOKIE, ILLINOIS

On December 30, 1997, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located on Skokie Boulevard in Skokie,
Illinois known as "Fashion

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Square Shopping Center" from I.D.S./JMB Balanced Growth, Ltd., an Illinois
Limited Partnership, an unaffiliated third party, for approximately $9,255,000.
The purchase price was funded using cash and cash equivalents of $3,055,000 and
assuming the existing bond financing, in the remaining principal balance of
$6,200,000. Monthly interest only payments are due on the financing through the
December 1, 2014 maturity date. The interest rate changes weekly and is
currently 4.1%. The bond financing is secured by a Letter of Credit issued by
LaSalle National Bank, who receives an annual fee of 1.25% of the outstanding
principal balance. Fashion Square Shopping Center was built in 1984 and consists
of a one-story, multi-tenant retail facility aggregating 83,959 rentable square
feet. The center's major tenants are Cost Plus which leases 17,190 square feet
and Designer Shoe Center which leases 15,000 square feet.

NAPER WEST SHOPPING CENTER, NAPERVILLE, ILLINOIS

On December 30, 1997, the Company acquired the entire fee simple
interest in a Community Center located at Route 59 in Naperville, Illinois known
as "Naper West Shopping Center" from Naper West, Ltd., an unaffiliated third
party, for approximately $14,850,000. The purchase price was funded using cash
and cash equivalents. Naper West Shopping Center was built in 1985 and consists
of a one-story, multi-tenant retail facility, a four-unit retail outlot and a
single-tenant outlot, aggregating 165,311 rentable square feet. The center's
major tenants are Douglas T.V. which leases 23,764 square feet and T.J. Maxx
which leases 33,260 square feet.

WOODFIELD PLAZA, SCHAUMBURG, ILLINOIS

On January 2, 1998, the Company acquired the entire fee simple interest
in a Community Center located at Golf Road and Basswood Road in Schaumburg,
Illinois known as "Woodfield Plaza" from System Realty Seven, Inc., an
unaffiliated third party, for approximately $19,200,000. The purchase price was
funded using cash and cash equivalents. Woodfield Plaza was built in 1992 and
consists of a one-story, multi-tenant retail facility, a free-standing building
and an outlot, aggregating 177,418 rentable square feet. The center's major
tenants are Kohl's which leases 83,258 square feet, Linen 'N Things which leases
32,800 square feet, and Barnes & Noble which leases 22,988 square feet.

SHOPS AT COOPERS GROVE, COUNTRY CLUB HILLS, ILLINOIS

On January 9, 1998, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at 183rd and Crawford in Country Club
Hills, Illinois known as the "Shops at Coopers Grove" from Midwest Property
Group, an unaffiliated third party, for approximately $5,800,000. The purchase
price was funded using cash and cash equivalents. The Shops at Coopers Grove was
built in 1991 and consists of a one-story, multi-tenant retail facility
aggregating 72,518 rentable square feet. The center's major tenant is Eagle Food
Centers which leases 56,118 square feet.

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DOMINICK'S FINER FOODS, WEST CHICAGO, ILLINOIS

On January 22, 1998, the Company acquired the entire fee simple
interest in a single-user retail center located at 1935 Neltor Boulevard in West
Chicago, Illinois known as "West Chicago Dominick's" from R.K. West Chicago,
L.L.C., an unaffiliated third party, for approximately $6,300,000. The purchase
price was funded using cash and cash equivalents. West Chicago Dominick's was
built in 1990 and consists of a one-story, single-tenant retail facility
aggregating 77,000 rentable square feet. The center's only tenant (leasing 100%
of the leasable area) is Dominick's Finer Foods.

MAPLE PLAZA, DOWNERS GROVE, ILLINOIS

On January 30, 1998, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 2241 Maple Avenue in Downers
Grove, Illinois known as "Maple Plaza" from Maple Plaza Partnership, an
unaffiliated third party, for approximately $3,165,000. The purchase price was
funded using cash and cash equivalents. Maple Plaza was built in 1988 and
consists of a one-story, multi-tenant retail facility aggregating 31,298
rentable square feet. The center's major tenants are Copy Center which leases
4,800 square feet, J. C. Licht Co. which leases 6,000 square feet, and Goodyear
Tire & Rubber Co. which leases 5,250 square feet.

ORLAND PARK RETAIL, ORLAND PARK, ILLINOIS

On February 2, 1998, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 159th and 80th in Orland
Park, Illinois known as "Orland Park Retail" from 159-80 L.L.C., an unaffiliated
third party, for approximately $1,250,000. The purchase price was funded using
cash and cash equivalents. Orland Park Retail was built in 1997 and consists of
a one-story, multi-tenant retail facility, aggregating 8,500 rentable square
feet. The center's major tenants are Video Update which leases 5,475 square feet
and All Cleaners which leases 1,700 square feet.

LAKE PARK PLAZA, MICHIGAN CITY, INDIANA

On February 10, 1998, the Company acquired the entire fee simple
interest in a Community Center located at 4301 Franklin Street in Michigan City,
Indiana known as "Lake Park Plaza" from Larsen-Cooper-Doren General Partnership,
an unaffiliated third party, for approximately $12,275,000. The purchase price
was funded using cash and cash equivalents. Lake Park Plaza was built in 1990
and consists of a one-story, multi-tenant retail facility aggregating 229,639
rentable square feet. The center's major tenants are Wal-Mart which leases
114,557 square feet and Roundy's which leases 52,882 square feet.

WISNER/MILWAUKEE PLAZA, CHICAGO, ILLINOIS

On February 23, 1998, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 2865 North Milwaukee Avenue
in Chicago, Illinois known

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as "Wisner/Milwaukee Plaza" from George Hanus, an unaffiliated third party, for
approximately $1,885,300. The purchase price was funded using cash and cash
equivalents. Wisner/Milwaukee Plaza was built in 1994 and consists of a
one-story multi-tenant retail facility aggregating 14,677 rentable square feet.
The center's major tenants are Blockbuster Video which leases 6,600 square feet,
SpinCycle which leases 5,139 square feet, and Giordano's which leases 1,500
square feet.

HOMEWOOD PLAZA, HOMEWOOD, ILLINOIS

On February 23, 1998, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at 175th Street and Halsted
Avenue in Homewood, Illinois known as "Homewood Plaza" from George Hanus, an
unaffiliated third party, for approximately $1,936,300. The purchase price was
funded using cash and cash equivalents. Homewood Plaza was built in 1993 and
consists of a one-story, multi-tenant, retail facility aggregating 19,000
rentable square feet. The center's major tenants are Blockbuster Video which
leases 7,500 square feet and Super Trak Auto which leases 10,000 square feet.

ELMHURST CITY CENTER, ELMHURST, ILLINOIS

On February 25, 1998, the Company acquired the entire fee simple
interest in a Neighborhood Retail Center located at York Road and Schiller
Street in Elmhurst, Illinois known as "Elmhurst City Center" from One City
Center, L.L.C. for approximately $4,775,000. The purchase price was funded using
cash and cash equivalents. Elmhurst City Center consists of three buildings, two
of which are single-tenant buildings occupied by Ruby's Apparel Shop and
Walgreens, and the third is a multi-tenant facility. Together the buildings
aggregate 39,117 rentable square feet. The Ruby's Apparel Shop building was
owned by Jerold Ruby and the other two buildings were owned by One City Center,
L.L.C. The Company took an assignment of the contract between Jerold Ruby and
One City Center, L.L.C. and purchased the entire property as one acquisition
from One City Center, L.LC. Heidi Lawton, Independent Director of the Company,
is the owner of Lawton Realty Group which controls One City Center, L.L.C., and
accordingly, Ms. Lawton did not vote on the acquisition of this property. The
action was approved by a majority of the remaining disinterested Independent
Directors. One City Center, L.L.C. purchased the two buildings in the fall of
1997. See "Certain Relationships and Related Transactions."

The Ruby's Apparel Shop has been in existence for approximately fifty
years, and the additional buildings were constructed in 1994. The center's major
tenants are Walgreens which leases 13,687 square feet, Famous Footwear which
leases 5,115 square feet, and Ruby's Apparel Shop which leases 13,250 square
feet.

MILL CREEK, PALOS PARK, ILLINOIS

On March 4, 1998, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at LaGrange Road and 131st Street in
Palos Park, Illinois known as "Mill Creek" from Jaeger Trust Properties, L.L.C.,
an unaffiliated third party, for approximately $11,360,000. As part of the
purchase, the Company assumed the existing mortgage with a principal

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balance of $9,500,000. The mortgage requires interest only payments at a rate of
8% per annum through September 1999. The Company paid a $92,000 loan assumption
fee to the lender. The balance of the purchase price was funded using cash and
cash equivalents. Mill Creek was built in 1989 and consists of a one-story,
multi-tenant retail facility aggregating 102,433 rentable square feet. The
center's major tenant is Jewel Foods which leases 64,938 square feet.

OAK FOREST COMMONS, OAK FOREST, ILLINOIS

On March 5, 1998, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at the northeast corner of 159th Street
and Central Avenue in Oak Forest, Illinois known as "Oak Forest Commons" from
T-L Oak Forest Commons, Inc., an unaffiliated third party, for approximately
$11,809,000. The purchase price was funded using cash and cash equivalents. Oak
Forest Commons was built in 1998 and consists of three one-story, multi-tenant
retail facilities aggregating 103,860 rentable square feet. The center's major
tenant is Dominick's Finer Foods which leases 72,385 square feet.

PRAIRIE SQUARE, SUN PRAIRIE, WISCONSIN

On March 6, 1998, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at 2015-2111 McCoy Road in Sun Prairie,
Wisconsin known as "Prairie Square" from Prairie Square, L.L.C., an unaffiliated
third party, for approximately $3,100,000. The purchase price was funded using
cash and cash equivalents. Prairie Square was built in 1995 and consists of two
one-story, multi-tenant retail facilities aggregating 35,755 rentable square
feet. The center's major tenants are Famous Footwear which leases 5,000 square
feet and Blockbuster Video which leases 6,500 square feet.

DOWNERS GROVE PLAZA, DOWNERS GROVE, ILLINOIS

On March 26, 1998, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at the northwest corner of Ogden Avenue
and Williams Street in Downers Grove, Illinois known as "Downers Grove Plaza"
from T-L Downers Grove Plaza, Inc., an unaffiliated third party, for
approximately $16,650,000 million. The purchase price was funded using cash and
cash equivalents. Downers Grove Plaza was built in 1998 and consists of
one-story building comprising a multi-tenant retail facility aggregating
approximately 102,385 rentable square feet. The center's major tenant is
Dominick's Finer Foods which leases approximately 72,000 square feet.

ST. JAMES CROSSING SHOPPING CENTER, WESTMONT, ILLINOIS

On March 31, 1998, the Company acquired the entire fee simple interest
in a Neighborhood Retail Center located at Route 83 and Ogden Avenue in
Westmont, Illinois known as "St. James Crossing" from H.P. St. James L.P., an
unaffiliated third party, for approximately $7,477,000. The purchase price was
funded using cash and cash equivalents. St. James Crossing was built in 1990 and
consists of a multi-tenant retail building and a multi-tenant outlot building
aggregating 46,769

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rentable square feet. Its major tenants are Nevada Bob's which leases 7,562
square feet and Cucina Roma which leases 5,954 square feet.

CHESTNUT COURT SHOPPING CENTER, DARIEN, ILLINOIS

On March 31, 1998, the Company acquired the entire fee simple interest
in a Community Center located at 75th Street and Lemont Road in Darien, Illinois
known as "Chestnut Court" from H.P. Chestnut Court L.P., an unaffiliated third
party, for approximately $16,144,000. The purchase price was funded using cash
and cash equivalents. Chestnut Court was built in 1987 and consists of a
multi-tenant retail building and a single-tenant outlot building aggregating
170,027 rentable square feet. Its major tenant is Steinmart which leases 36,266
square feet.

POTENTIAL PROPERTY ACQUISITIONS

STAPLES OFFICE SUPPLY STORE, FREEPORT, ILLINOIS. The Company
anticipates purchasing the entire fee simple interest in a single-user retail
property located at Route 26 and North Powell Road in Freeport, Illinois, known
as "Staples Office Supply" from an unaffiliated third party for a purchase price
of approximately $2,694,235. The Company anticipates construction on Staples
Office Supply to be completed by October 15, 1998. When completed, it is
anticipated that the single-user retail property will aggregate 24,049 rentable
square feet.

BERGEN PLAZA SHOPPING CENTER, OAKDALE, MINNESOTA. The Company
anticipates purchasing the entire fee simple interest in a Community Center
located at I-694 and 10th Street North in Oakdale, Minnesota known as "Bergen
Plaza" from an unaffiliated third party for a purchase price of approximately
$17,247,680. Bergen Square is a multi-tenant shopping center complex consisting
of five buildings aggregating 270,610 rentable square feet. Its major tenants
are K-Mart, Northwest Fabrics, Fashion Bug, Big Top Liquors, and Blockbuster
Video.

BERWYN PLAZA SHOPPING CENTER, BERWYN, ILLINOIS. The Company anticipates
purchasing the entire fee simple interest in a Neighborhood Retail Center
located in Berwyn, Illinois, known as "Berwyn Plaza" from an unaffiliated third
party for a purchase price of approximately $1,830,000. Berwyn Plaza was built
in 1983 and consists of a one-story, multi-tenant retail facility aggregating
32,900 rentable square feet. Its major tenant is Walgreens.

WAUCONDA SHOPPING CENTER, WAUCONDA, ILLINOIS. The Company anticipates
purchasing the entire fee simple interest in a Neighborhood Retail Center
located at 620 West Liberty Street in Wauconda, Illinois known as "Wauconda
Shopping Center" from an unaffiliated third party for the purchase price of
approximately $2,525,000. Wauconda Shopping Center was built in 1988 and
consists of a four-tenant shopping center aggregately 126,324 rentable square
feet. Its major tenant is Sears, Roebuck & Co.

WESTERN HOWARD PLAZA SHOPPING CENTER, CHICAGO, ILLINOIS. The Company
anticipates purchasing the entire fee simple interest in a Neighborhood Retail
Center located at 2341-57 W.

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Howard in Chicago, Illinois, known as "Western Howard Plaza" from an
unaffiliated third party for a purchase price of approximately $1,947,348.
Western Howard Plaza was built in 1985 and consists of a one-story multi-tenant
retail facility aggregating 12,784 leasable square feet. Its major tenant is
Super Gap.

HOLLYWOOD VIDEO, BRIDGEVIEW, ILLINOIS. The Company anticipates
purchasing the entire fee simple interest in a single-user retail property
located at the corner of 103rd Street and Harlem Avenue in Bridgeview, Illinois
known as "Hollywood Video" from an unaffiliated third party for a purchase price
of approximately $1,330,000. Hollywood Video was built in 1995 and consists of a
one-story single-tenant facility aggregating 8,000 leasable square feet. Its
only tenant (leasing 100% of the leasable area) is Hollywood Video.

126

CAPITALIZATION

The following table sets forth the historical capitalization of the
Company as of December 31, 1997 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 Offerings and in this Offering as if all 27,000,000 Shares, including
2,000,000 Shares to be issued pursuant to the DRP, 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."

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Mortgage notes payable ................................................... $ 106,590 $ 106,590

STOCKHOLDER'S EQUITY(2):
Preferred Stock, $.01 par value, 6,000,000 authorized,
none outstanding ..................................................... -- --
Common Stock, $.01 par value, 100,000,000 authorized,
25,026,140 shares issued and 24,973,340 shares outstanding historical;
64,659,425 shares issued and 64,606,625 outstanding pro forma (1) .... 249 651
Paid-in capital .......................................................... 220,641 577,334
Accumulated Distributions in Excess of Net Income ........................ (5,973) (5,973)
Total stockholders' equity ........................................... 214,917 572,012
--------- ---------
Total capitalization ................................................. 321,507 678,602
========= =========
</TABLE>

- ------------------------------------
(1) Does not include shares issuable upon the exercise of outstanding
options granted under the Company's Stock Option Plan for Independent
Directors, but does include shares issued pursuant to the Company's
Distribution Reinvestment Program.
(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.

127

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of shares 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; (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 beneficially owned by such person.

<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) ........................... 23,043.0499 * 23,043.0499 *
G. Joseph Cosenza (a)(b) ......................... 22,569.0610 * 22,569.0610 *
Roland W. Burris (c)(f) .......................... 2,032.3295 * 2,032.3295 *
Joel G. Herter (d)(f) ............................ -- * -- *
Heidi N. Lawton (e)(f) ........................... -- * -- *
Patricia A. Challenger (a) ....................... 1,988.95 * 1,988.95 *
Kelly Tucek(a) ................................... -- * -- *
Roberta S. Matlin (a) ............................ 198.9012 * 198.9012 *
Directors and Executive Officers as a Group ...... 49,832.2916 * 49,832.2916 *
(seven persons)
</TABLE>

- ---------------------------
(a) The business address of each of Messrs. Parks and Cosenza, Ms.
Challenger, Tucek and Matlin is c/o The Inland Group, Inc., 2901
Butterfield Road, Oak Brook, Illinois 60523.

(b) Includes 20,000 shares owned by the Advisor. The Advisor is a
wholly-owned subsidiary of Inland Real Estate Investment Corporation,
which is an affiliate of The Inland Group, Inc. Messrs. Parks and
Cosenza are control persons with respect to The Inland Group, Inc. and
disclaim beneficial ownership of Shares owned by the Advisor. 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 Joel G. Herter is Wolf & Company LLP, 2100
Clearwater Drive, Oak Brook, Illinois 60523.

(e) The business address of Ms. Lawton is c/o Lawton Realty Group, 2100
Clearwater Drive, Suite 106, Oak Brook, Illinois 60523.

(f) Does not include 4,000, 4,500 and 5,000 Shares issuable upon exercise
of options granted to Mr. Herter, Mr. Burris and Ms. Lawton,
respectively, pursuant to the Company's Independent Director Stock
Option Plan.

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

128

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE 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.

LIQUIDITY AND CAPITAL RESOURCES

As of July 24, 1996, the Company had received subscriptions for a total
of 5,000,000 Shares, offered on a best efforts basis, at $10.00 per Share,
thereby completing the Company's initial Offering. On July 24, 1996, the Company
commenced an offering of an additional 10,000,000 shares, the Second Offering,
at $10.00 per Share, on a best efforts basis. As of July 10, 1997, the Company
had received subscriptions for a total of 10,000,000 Shares, thereby completing
the Company's Second Offering. On July 14, 1997, the Company commenced an
offering of an additional 20,000,000 Shares, the Third Offering, at $10.00 per
Share, on a best efforts basis. As of December 31, 1997, the Company had
received subscriptions for a total of 9,326,186 Shares from the Third Offering.
In addition, as of December 31, 1997, the Company had issued 699,954 Shares
through the Company's Distribution Reinvestment Program. As of December 31,
1997, the Company has repurchased 52,800 Shares through the Company's Share
Repurchase Program.

The Company's capital needs and resources are expected to undergo
changes as a result of the completion of the Company's first follow-on public
offering of Shares, the commencement of the second follow-on Offerings 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 upon 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.

Cash and cash equivalents consists of cash and short-term investments.
Cash and cash equivalents, at December 31, 1997 and December 31, 1996, were
$51,145,587 and $8,491,735 respectively. The increase in cash and cash
equivalents since December 31, 1996 is due to the additional Offering proceeds
raised and additional loan proceeds from financing secured by the Company's
properties. Partially offsetting the increase in cash and cash equivalents was
the

129

purchase of additional properties since December 31, 1996 and the payment of
Offering Costs relating to the Second and Third Offerings. The Company intends
to use cash and cash equivalents to purchase additional properties, to pay
distributions and to pay Offering Costs.

As of December 31, 1997, the Company had acquired forty-four
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 on weighted average shares. Commencing with the fourth
quarter of 1996, the Company increased the monthly distributions from 8.0% to
8.3% per annum on weighted average shares. Beginning March 1, 1997, the Company
increased the monthly distribution paid to 8.5% per annum on weighted average
shares. Beginning August 1, 1997, the Company increased the monthly distribution
paid to 8.7% per annum on weighted average shares. Distributions declared for
the year ended December 31, 1997 were $13,127,597, of which $3,388,364
represents a return of capital for federal income tax purposes.

Management of the Company 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, 1997, the Company qualified as a REIT.

CASH FLOWS FROM OPERATING ACTIVITIES

Net cash provided by operating activities increased from $978,350 for
the year ended December 31, 1995 to $5,529,709 for the year ended December 31,
1996 to $15,923,839 for the year ended December 31, 1997. These increases are
due primarily to the purchase of additional properties. As of December 31, 1997
the Company had acquired forty-four properties, as compared to twenty-one
properties as of December 31, 1996, and six properties as of December 31, 1995.

CASH FLOWS FROM INVESTING ACTIVITIES

Cash flows used in investing activities were utilized primarily for the
purchase of and additions to properties. In addition, the Company made deposits
totaling $3,018,530 for two centers to be purchased in 1998.

130

CASH FLOWS FROM FINANCING ACTIVITIES

For the year ended December 31, 1997, the Company generated
$173,724,632 of cash flows from financing activities as compared to $71,199,936
of cash flows generated from financing activities for the year ended December
31, 1996 and $6,327,490 for the year ended December 31, 1995. These increases
are due primarily to the increase in proceeds raised from the Offering of
$168,559,450 for the year ended December 31, 1997, as compared to $61,147,146 of
Offering proceeds raised for the year ended December 31, 1996 and $19,803,163 of
Offering proceeds raised for the year ended December 31, 1995. These increases
are also due to $43,926,176 in financing secured by fifteen of the Company's
properties for the year ended December 31, 1997, as compared to $25,670,000 in
financing secured by twelve of the Company's properties for the year ended
December 31, 1996. These increases are partially offset by an increase in the
cash used for the payment of Offering costs for the years ended December 31,
1997 and 1996. These increases are also partially offset by an increase in the
amount of distributions paid for the year ended December 31, 1997 of $11,899,431
as compared to the distributions paid for the year ended December 31, 1996 of
$3,285,528 and distributions paid for the year ended December 31, 1995 of
$607,095.

In December 1997, the Company committed to additional financing secured
by Cobbler Crossing and Shorecrest Shopping Center properties totaling
$8,454,500 from an unaffiliated lender. The funding of these loans is to occur
in early 1998. The mortgage loan secured by Cobbler Crossing will have a term of
seven years and, prior to maturity date, will require payments of interest only,
fixed at 7.00%. The mortgage loan secured by Shorecrest Shopping Center will
have a term of five years and, prior to maturity date, will require payments of
interest only, fixed at 7.10%.

The Advisor has agreed to pay 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, 1997, organizational and offering costs
associated with the third offering did not exceed either of these limitations.

RESULTS OF OPERATIONS

As of December 31, 1997, subscriptions for a total of 25,026,140 Shares
had been received in the "best-efforts" offering resulting in $249,231,797 in
Gross Offering Proceeds, which includes the Advisor's capital contribution of
$200,000 and Shares purchased through the DRP. At December 31, 1997, the Company
owned thirty-six Neighborhood Retail Centers and eight single-user retail
properties.

Total income for the years ended December 31, 1997, 1996 and 1995 was
$29,421,585, $6,327,734 and $1,180,422 respectively. The year to year increases
were due to the purchase of additional properties. As of December 31, 1997, the
Company had acquired forty-four properties, as compared to twenty-one properties
as of December 31, 1996 and six properties as of

131

December 31, 1995. The purchase of additional properties also resulted in
increases in property operating expenses.

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

The increase in mortgage interest payable 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 as well as financing secured by previously acquired properties.

The increase in mortgage interest paid to Affiliates and non-affiliates
for the year ended December 31, 1997, as compared to the year ended December 31,
1996, is due to an increase in the total amount of the Company's indebtedness.
The mortgages payable totaled $106,589,710 as of December 31, 1997 as compared
to $30,838,233 as of December 31, 1996.

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

The increases in amounts paid for professional services and general and
administrative expenses for the year ended December 31, 1997, as compared to the
year ended December 31, 1996 and 1995, is due to an increase in the number of
real estate assets owned by the Company. The increase in acquisition cost
expenses is also due to an increase in the number of properties considered for
acquisition by the Company.

SUBSEQUENT EVENTS

In January 1998, the Company paid a distribution of $1,777,113 to the
Stockholders.

On January 2, 1998, the Company purchased the Woodfield Plaza Shopping
Center from an unaffiliated third party for approximately $19,200,000. The
property is located in Schaumburg, Illinois and contains approximately 177,418
square feet of leasable space. Its major tenants are Kohl's, Barnes & Noble and
Linens 'N Things.

On January 8, 1998, the Company purchased the Shops at Coopers Grove
from an unaffiliated third party for approximately $5,700,000. The property is
located in Country Club Hills, Illinois and contains approximately 72,518 square
feet of leasable space. Its major tenant is Eagle Food Center.

On January 15, 1998, the Company made a $600,000 paydown of the bonds
secured by the Fashion Square property.

132

On January 22, 1998, the Company purchased the West Chicago Dominick's
property from an unaffiliated third party for approximately $6,300,000. The
property is located in West Chicago, Illinois and contains approximately 77,000
square feet of leasable space. Its sole tenant is Dominick's Finer Foods.

In January 1998, the Company obtained additional financing secured by
the Dominick's Glendale Heights and Riversquare Shopping Center properties
totaling $7,150,000 from an unaffiliated lender. Loan fees totaling $53,625 were
paid in connection with these mortgage loans. The mortgage loans have a term of
seven years and, prior to maturity date, requires payment of interest only at a
rate equal to 7% per annum on the loan secured by the Dominick's Glendale
Heights and 7.15% on the loan secured by the Riversquare Shopping Center.

On January 30, 1998, the Company purchased Maple Plaza from an
unaffiliated third party for approximately $3,165,000. The property is located
in Downers Grove, Illinois and contains approximately 31,298 square feet of
leasable space. Its major tenants are J.C. Licht, Goodyear Tire & Rubber Co. and
Copy Center.

On February 2, 1998, the Company purchased Orland Park Retail from an
unaffiliated third party for approximately $1,250,000. The property is located
in Orland Park, Illinois and contains approximately 8,500 square feet of
leasable space. Its major tenants are Video Update and All Cleaners.

On February 10, 1998, the Company purchased the Lake Park Plaza from an
unaffiliated third party for approximately $12,275,000. The property is located
in Michigan City, Indiana and contains approximately 229,639 square feet of
leasable space. Its major tenants are Wal-Mart and Roundy's.

On February 23, 1998, the Company purchased the Homewood Plaza from an
unaffiliated third party for approximately $1,936,300. The property is located
in Homewood, Illinois and contains approximately 19,000 square feet of leasable
space. Its major tenants are Super Trak Auto and Blockbuster Video.

On February 23, 1998, the Company purchased the Wisner/Milwaukee Plaza
from an unaffiliated third party for approximately $1,885,300. The property is
located in Chicago, Illinois and contains approximately 14,677 square feet of
leasable space. Its major tenants are Blockbuster and SpinCycle.

On February 25, 1998, the Company purchased the Elmhurst City Center
(including the Ruby Apparel Shop) for approximately $4,775,000. See "Certain
Relationships and Related Transactions". The property is located in Elmhurst,
Illinois and contains approximately 13,687 square feet of leasable space. Its
major tenants are Ruby's Apparel Shop, Walgreens and Famous Footwear.

133

On March 4, 1998, the Company purchased the Mill Creek from an
unaffiliated third party for approximately $11,360,000. The property is located
in Palos Park, Illinois and contains approximately 102,433 square feet of
leasable space. Its major tenant is Jewel Foods.

On March 5, 1998, the Company purchased Oak Forest Commons from an
unaffiliated third party for approximately $11,809,000. The property is located
in Oak Forest, Illinois and contains approximately 103,860 square feet of
leasable space. Its major tenant is Dominick's Finer Foods.

On March 6, 1998, the Company purchased Prairie Square from an
unaffiliated third party for approximately $3,100,000. The property is located
in Sun Prairie, Wisconsin and contains approximately 35,755 square feet of
leasable space. Its major tenants are Famous Footwear and Blockbuster Video.

On March 26, 1998, the Company purchased Downers Grove Plaza from an
unaffiliated third party for approximately $16,650,000. The property is located
in Downers Grove, Illinois and contains approximately 102,385 square feet of
leasable space. Its major tenant is Dominick's Finer Foods.

On March 31, 1998, the Company purchased St. James Crossing Shopping
Center from an unaffiliated third party for approximately $7,477,000. The
property is located in Westmont, Illinois and contains approximately 46,769
square feet of leasable space. Its major tenants are Nevada Bob's and Cucina
Roma.

On March 31, 1998, the Company purchased Chestnut Court Shopping Center
from an unaffiliated third party for approximately $16,144,000. The property is
located in Darien, Illinois and contains approximately 170,047 square feet of
leasable space. Its major tenant is Steinmart.

On behalf of the Company, the Advisor is currently exploring the
purchase of additional shopping centers from unaffiliated third parties.

134

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 sets
forth the rules with which the Company must comply in order to qualify for
treatment as a REIT for tax purposes, the federal income tax consequences to the
Company and its Stockholders from the Company's status as a REIT 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 Ltd. has acted 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 to his particular tax
situation.

In general, a corporation that invests primarily in real estate can
qualify as a REIT, if it complies with the detailed REIT provisions in Code
Sections 856-860, and as a REIT can 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 to
which a corporation is generally subject. 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 a reduction in cash available for distribution to the Stockholders.
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 Ltd. is of the opinion that as of March 31, 1998,
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 and
conditioned on various assumptions and representations as to certain factual
matters made by the Company and the Advisor to Shefsky & Froelich Ltd. The
Company's qualification and

135

taxation as a REIT will depend upon the Company's ability to meet the REIT
Requirements, through the operation of its current properties and those
properties it acquires in the future. Shefsky & Froelich 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 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.

Additionally, under the Taxpayer Relief Act of 1997 ( the "1997 Act"),
various changes have been made to the treatment of REITs effective for taxable
years beginning after August 5, 1997. For the Company, these provisions are
effective for the tax year beginning January 1, 1998. See"-1997 Taxpayer Relief
Act of 1997-Significant REIT provisions."

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 the 95% Test or the 75% 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.

136

Any tax the Company pays due to any of the aforementioned provisions will reduce
the cash available to pay dividends.

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 asset in the Company's hands is determined by reference to the
basis of the asset (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.

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

137

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 at least 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). However, these
two requirements do not apply until after the first taxable year an entity seeks
REIT status. The Company represents that it: (i) has issued sufficient Capital
Stock pursuant to the Offering to allow the Company to satisfy these
requirements; (ii) did not admit investors as Stockholders until the admission
allowed there to be sufficient Stockholders to meet these requirements; and
(iii) 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 if it did not acquire any additional assets and the failure
is due solely to changes in the value of its existing assets. In addition, if
the failure to satisfy the Asset Tests results

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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 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 to reflect the fair market value of such non-real estate
assets. 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) 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 would cause the
Company to violate these limitation tests.

If a REIT owns a corporate subsidiary that is a "qualified REIT
subsidiary," within the meaning of Section 856(i) of the Code, that subsidiary
is disregarded for federal income tax purposes, and all assets, liabilities, and
items of income, deduction and credit of the subsidiary are treated as assets,
liabilities and such items of the REIT itself. A "qualified REIT subsidiary" is
a corporation all of the capital stock of which has been owned by the REIT from
the commencement of such corporation's existence. Pursuant to the 1997 Tax Act,
an existing corporation, all of the capital stock of which is owned by the REIT,
could be a "qualified REIT subsidiary" so long as the acquired corporation is
considered to have liquidated for federal income tax purposes and any
pre-acquisition earnings and profits are distributed before the end of the
REIT's taxable year. Any corporation formed directly by the Company to act as a
general partner in any partnership will be

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a qualified REIT subsidiary and thus all of its assets, liabilities, and items
of income, deduction and credit will be treated as assets, liabilities, and
items of income, deduction and credit of the Company.

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 constitute "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.

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(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
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) It 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.

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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 operations 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, 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.

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.
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 by a REIT
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.
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 the adjustment in tax basis will
result in increased gain or decreased loss upon the sale of the Shares.

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. 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

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adjusted tax 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
increase the gain or decrease the loss upon the sale of Shares.

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 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", Qualified Plans that hold 10% or more of the Shares could
recognize UBTI even without incurring debt to acquire 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 their own tax advisors to determine the impact of United States,
state, and local income tax laws on an investment in the Company, including any

144

reporting requirements, as well as the tax consequences in other countries in
which they are subject to tax.

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 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.

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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 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

Company - Purchase with Shares. If the Company acquires properties with
Shares, the Company, will not have any gain or loss on the issuance of its
Shares in return for such properties, regardless of the tax consequences for the
seller. If the transaction is structured as a tax-free transaction for the
seller, such as a merger, the Company will take a carry-over basis for tax
purposes in the assets. Such a carry-over basis will produce a lower basis for
purposes of depreciation then would arise if the Company acquired the real
estate in a taxable transaction, in which event, the Company's basis in the
acquired property would be the same as if the property was purchased outright.
This lower basis will result in lower depreciation deductions on an annual basis
which, all things equal, will increase the Company's income, and, therefore,
increase the amount of

146

distributions the Company must pay in order to maintain its status as a REIT as
compared to the effects on income and distributions had the property been
acquired in a taxable transaction. In addition, if the Company acquires the
property in a tax-free transaction, the rules described above regarding Section
1374 will apply, and, therefore, the Company will only acquire those properties
which it intends to hold for more than ten (10) years.

Distribution Reinvestment Program. Stockholders who purchased Shares
pursuant to the Company's Prior Offerings as well as Stockholders who purchase
shares in the Offering and participate in the Distribution Reinvestment Program
will recognize taxable dividend income on the value of the Shares received, 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.

TAXPAYER RELIEF ACT OF 1997 - SIGNIFICANT REIT PROVISIONS

The 1997 Tax Act including various changes to the tax treatment of
REITs effective for taxable years beginning after August 5, 1997. In the case of
the Company, these provisions will be effective beginning January 1, 1998. Set
forth below is a summary of these changes.

Alternative Penalties for Failure to Ascertain Ownership. Under the
1997 Tax Act, the rule that disqualifies a REIT for any year in which the REIT
failed to comply with regulations to ascertain its ownership has been replaced
with an intermediate penalty of $25,000 ($50,000 for intentional violations) for
any year in which the REIT did not comply with the ownership regulations. In
addition, a REIT that complied with the regulations for ascertaining its
ownership, and which did not know, or have reason to know, that it was so
closely held as to be classified as a personal holding company would not be
treated as a personal holding company.

De Minimis Rule for Tenant Service Income. Under the 1997 Tax Act, a
REIT is allowed to render a de minimis amount of impermissible services to
tenants, including managing or operating the property, and still treat amounts
received with respect to that property as rent, as long as the amount received
with respect to the impermissible services or management does not exceed one
percent of the REIT's gross income from the property. These services must not be
valued at less than 150 percent of the REIT's direct cost of the services.

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Attribution Rules. Under the 1997 Tax Act, for purposes of determining
(i) whether a tenant is a "Related Party Tenant" and (ii) whether a party is an
independent contractor, a partner's ownership only is attributed to a
partnership if the partner owns a 25% or greater interest in the capital or
profits of that partnership.

Election to Retain and Pay Tax on Retained Capital Gains. The 1997 Tax
Act permits a REIT to elect to retain and pay income tax on net long-term
capital gains it received during the tax year. If a REIT makes this election,
the REIT shareholders include in their income as long-term capital gains their
proportionate share of the long-term capital gains as designated by the REIT.
Also, the shareholder will be deemed to have paid a proportionate share of the
tax, which could be credited or refunded to the shareholder. The shareholder's
basis in its shares is increased by the amount of the undistributed long-term
capital gains (less the proportionate amount of capital gains tax paid by the
REIT) included in the shareholder's long-term capital gains.

Repeal of 30-Percent Gross Income Requirement. The 1997 Tax Act repeals
the 30 percent gross income requirement ("30% test"). The 30% test required the
Company to derive less than 30% of its gross income for each taxable year from
the sale or other disposition of: (i) real property held less than four years
(other than foreclosure property and property disposed of through involuntary
conversions); (ii) stock or securities held for less than one year; and (iii)
property in a prohibited transaction. With the repeal of the 30% test, the
Company is no longer subject to the above restraints.

Non-REIT Earnings and Profits. The 1997 Tax Act changes the ordering
rule for purposes of the requirement that newly-electing REITs distribute
earnings and profits that were accumulated in non-REIT years such that
distributions of accumulated earnings and profits generally would be treated as
made from the entity's earliest accumulated earnings and profits.

Treatment of Foreclosure Property. The 1997 Tax Act lengthens the grace
period for foreclosure property to three taxable years following the election
and allows for the possibility of an additional three year extension by filing a
request with the Service. Additionally, a REIT may revoke an election to treat
property as foreclosure property for any taxable year.

Payments Received under Hedging Instruments. The 1997 Tax Act treats
income and gain from all hedges that reduce the interest rate risk associated
with REIT liabilities as qualifying income under the 95% gross income test.

Excess Non-Cash Income. The 1997 Tax Act (i) expands the class of
excess noncash items that are not subject to the 95% distribution requirement to
include income from the cancellation of indebtedness, and (ii) extends the
treatment of original issue discount and coupon interest as excess noncash items
to REITs using the accrual method.

Prohibited Transaction Safe Harbor. The 1997 Tax Act excludes from the
prohibited sales rules any property that was involuntarily converted.

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Shared Appreciation Mortgages. The 1997 Tax Act provides that interest
received on a shares appreciation mortgage is not subject to the tax on
prohibited transactions where the property subject to the mortgage is sold
within four years of the REIT's acquisition of the mortgage pursuant to a
bankruptcy plan of the mortgagor unless the REIT, when it acquired the mortgage,
knew or had reason to know that the property subject to the mortgage would be
sold in a bankruptcy proceeding.

Qualified REIT Subsidiaries. The 1997 Tax Act permits any corporation
wholly-owned by a REIT to be treated as a qualified REIT subsidiary, regardless
of whether the corporation has always been owned by the REIT. However, if the
REIT acquires an existing corporation, such corporation is treated as if it had
been liquidated at the time of acquisition by the REIT and then reincorporated,
so that any pre-REIT built-in gains will be taxed. In addition, any pre-REIT
earnings and profits of the subsidiary must be distributed before the end of the
REIT's taxable year.

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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.

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).

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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. The DOL Regulations provide that 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 will
not affect whether securities are freely transferable. 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.

DESCRIPTION OF SECURITIES

GENERAL

The Company is authorized to issue 106,000,000 shares of capital stock
comprised of 100,000,000 shares of common stock, $.01 par value per share (the
"Common Stock"), and 6,000,000 shares of preferred stock, $.01 par value per
share (the "Preferred Stock"). The Common Stock offered hereby are duly
authorized, fully-paid and nonassessable when issued for the consideration
contemplated herein. As of the date of this Prospectus, the Company has issued
35,855,795 shares of Common Stock, reserved 625,000 shares of Common
Stock for issuance pursuant to the exercise of options for warrants granted or
issued by the Company; reserved 433,370 shares of Common Stock for issuance
pursuant to the exercise of options for warrants granted or issued by the
Company in Prior Offerings; and reserved an additional 2,000,000 shares of
Common Stock for issuance pursuant to the Company's Distribution Reinvestment
Program.

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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
of the Common Stock on a national securities exchange or market. The Company
does not intend to list the Common Stock prior to the termination of this
Offering. However, the Company anticipates that by 1999 it will apply to have
the Common Stock listed, or included on the Nasdaq National Market subject to
the Company meeting the applicable listing requirements and the Board
determining that such action is in the best interest of the Company.

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.

The Company intends to issue the shares and Soliciting Dealer Warrants
(including the shares issuable on exercise of the 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 will be fully transferable upon payment of consideration set
forth herein, 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 or
her 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 to the Dealer Manager, one
warrant to purchase one Share for every 40 Shares sold by the Dealer Manager
(the "Soliciting Dealer Warrants") up to a maximum of 625,000 warrants to
purchase an equivalent number of Shares. The Dealer Manager has agreed to pay
the Company $0.0008 for each Soliciting Dealer Warrant. These 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 Soliciting Dealer Warrants to Soliciting Dealers except where
prohibited by either federal or state securities laws. The Company will not
issue Soliciting Dealer Warrants to the Dealer Manager, and the Dealer Manager
will not transfer Soliciting Dealer Warrants, in connection with the sale of
Shares to residents of the States of Minnesota, Nebraska, South Carolina,
Tennessee or Texas.

The holder of a Soliciting Dealer Warrant will be entitled to purchase
one Share from the Company at a price of $13.20 (120% of the public offering
price per Share) during the time period beginning from the date the Soliciting
Dealer Warrants are issued and ending on April 6, 2003 (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 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. A copy of the Warrant Purchase Agreement is included as an
exhibit to this Registration Statement.

Holders of Soliciting Dealer Warrants do not have the rights of
Stockholders and 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 into 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.

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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 (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 is 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 the Board. 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.

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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 to
transact such other business as may come 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 must be called by
an officer of the Company upon written request of the Stockholders holding in
the aggregate not less than 10% of the outstanding shares of common stock. Upon
receipt of a written request, either in person or by mail, stating the
purpose(s) of the meeting, the Company must provide all Stockholders, within ten
days after receipt of the request, written notice, either in person or by mail,
of a meeting and the purpose of such meeting to be held on a date not less than
fifteen nor more than 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 constitutes a quorum, and the requisite vote
of the Stockholders on any particular issue submitted to Stockholders will be
binding on all Stockholders even if all Stockholders do not approve or
disapprove the proposal.

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 must
nominate a replacement. Vacancies occurring as a result of the removal of a
Director by Stockholders must 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.

Individuals nominated to serve as Directors must have at least three
years of relevant experience and demonstrate the knowledge required to
successfully acquire and manage the type

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of assets being acquired by the Company. At least one of the individuals
nominated to serve as an Independent Director must have at least three years of
relevant real estate experience.

STOCKHOLDER VOTING RIGHTS

Except as otherwise provided, all shares 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 may 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.

Directors are elected by the nominees receiving the highest number of
total 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
must 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 approval of holders 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 qualification, fiduciary
duties, 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 or
in connection with liquidation and dissolution; (c) cause a merger or other
reorganization of the Company; or (d) dissolve or liquidate the Company. For
purposes of (b) above, a sale of all or substantially all of the Company's
assets means 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 in the denominator.

Each Stockholder entitled to vote may do so: (i) at a meeting in person
or by written proxy received by the Board prior to the meeting signed by the
Stockholder directing the manner in which he or she desires that his or her vote
be cast; or (ii) without a meeting by a consent in writing signed by the
Stockholder directing the manner in which he or she desires that his or her vote
be cast. The

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written consent 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, is
maintained as part of the books and records of the Company at the Company's
principal office. This list is updated at least quarterly and is open for
inspection by a Stockholder or his designated agent upon such Stockholder's
request. The purpose for which a Stockholder may request a copy of the
Stockholder list include: matters relating to the Stockholder's voting rights
and the exercise of the Stockholders' rights under federal proxy laws. This list
will 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 the list.

If the Advisor or the Directors of the Company neglect or refuse to
exhibit, produce or mail a copy of the Stockholder List as requested in
accordance with and as required by applicable law and these Articles, the
Advisor and the Directors shall be liable to any Stockholder requesting the
Stockholder List, for the costs, including reasonable attorneys' fees, incurred
by that Stockholder for compelling the production of the Stockholder List, and
for actual damages suffered by any Stockholder by reason of such refusal or
neglect. It shall be a defense to such liability that the actual purpose and
reason for the requests for inspection or for a copy of the Stockholder List is
to secure such list of Stockholders or other information for the purpose of
selling such Stockholder List or copies thereof, or of using the same for a
commercial purpose or other purpose not in the interest of the applicant as a
Stockholder relative to the affairs of the Company. The Company may require the
Stockholder requesting the Stockholder List to represent that the Stockholder
List is not requested for a commercial purpose unrelated to the Stockholder's
interest in the Company. The remedies provided hereunder to Stockholders
requesting copies of the Stockholder List are in addition to, and shall not in
any way limit, other remedies available to Stockholders under federal law, or
the laws of any state.

Any Stockholder and any designated representative thereof is 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 are 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 holders of a
majority of the then outstanding shares, without the concurrence of 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 any amendment 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

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be amended by the Directors if the provision of such Bylaw provides that it may
not be amended without a Stockholder vote.

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 shares. 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
subsequent offerings after completion of this Offering. If listing of the shares
is not feasible by 1999, the Board may decide to: (a) sell the Company's assets
individually; (b) 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 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 be approved by all of the Independent Directors
and by the holders of 662/3 of the shares, 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 must be obtained from a person with no current or
prior business or personal relationship with the Advisor or the Directors.
Further, the person must be engaged, to a substantial

159

extent, in the business of rendering valuation opinions of assets 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 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 will 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 must be appraised
in a consistent manner and the appraisal must be based on an evaluation of all
relevant information indicating the value of the Company's assets as of a date
immediately prior to the announcement of the proposed Roll-Up transaction. The
appraisal must assume an orderly liquidation of the Company's assets over a
12-month period. The terms of the engagement of the Independent Expert must
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, must 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 listed on a national
securities exchange or traded through the Nasdaq National Market for at least
twelve months; or (ii) a transaction involving the conversion of the Company to
corporate, trust or association form 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) reduce in the Stockholders' voting rights below 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

160

(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;

provided, however, that the Company may participate in a proposed Roll-Up if the
Stockholders would have rights and be subject to 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 must 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 may 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 these limitations. The Independent Directors may,
however, determine that a higher level of Total Operating Expenses is justified
for a particular period because of unusual and non-recurring expenses. Any such
finding by the Independent Directors and the reasons in support thereof must be
recorded in the minutes of the meeting of Directors. If Total

161

Operating Expenses exceed these limitations during any fiscal quarter on a
rolling twelve-month basis, then within 60 days after the end of the fiscal
quarter in question, the Company must send a written report to the Stockholders,
together with an explanation of the facts the Independent Directors considered
in arriving at the conclusion that the higher operating expenses were justified.
If the Total Operating Expenses exceed the limitations described above and if
the Independent Directors are unable to conclude that the excess was justified
then, within 60 days after the end of the Company's fiscal year, the Advisor
must 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 on transactions 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 the transaction determines that the
terms and conditions are fair and reasonable and no less
favorable to the Company than those offered by 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 the 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. A majority of the Directors
have approved the acquisition of two properties, the Eagle
Crest Shopping Center and the Walgreens/Decatur property, from
IPS, an Affiliate, and the acquisition of Elmhurst City Center
from an Independent Director. See "Conflicts of
Interest--Acquisitions from Affiliates" and
"--Non-Arm's-Length Agreements" and "Real Property
Investments"; or

(iv) sell property, 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 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 borrowings of the Company, secured and unsecured,

162

must be reasonable in relation to the Net Assets of the Company and are reviewed
by the Board at least quarterly. The Company anticipates that aggregate
borrowings secured by all of the Company's properties will not exceed 50% of
their combined fair market value. The maximum amount of indebtedness as a
percentage of Net Assets may not, in the absence of a satisfactory showing that
a higher level of borrowing is appropriate, exceed 300% of Net Assets. Any
borrowings in excess of 300% of net assets may only be incurred with the consent
of a majority of the Stockholders. See "Investment Objectives and
Policies--Borrowing." As of the date of this Prospectus, the Company's total
indebtedness is $154,000,000. The Company may 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 the transaction, determines that such transaction is fair and
reasonable and on terms and conditions 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 have been 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 observes the following restrictions on its investments set forth in
its Articles:

(i) Not more than 10% of the Company's total assets may 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. This limitation does not apply to interest rate
futures when used solely for hedging purposes;

(iii) The Company may not invest in or make mortgage loans unless an
appraisal of the underlying property is obtained. Mortgage
indebtedness on any property may not exceed the 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, the appraisal must be obtained from an Independent
Expert. The appraisal must be maintained in the Company's
records for at least five years, and must 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

163

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 secured by
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 may not invest in equity securities unless a
majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in the
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 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 may 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
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) 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) must determine that the
consideration paid for the real property is equal to fair
market

164

value as determined by a qualified independent real estate
appraiser selected by the Independent Directors;

(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 the Junior Debt,
plus the outstanding amount of the Senior Debt, does not
exceed 90% of the appraised value of the property and, 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 these requirements is
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.

The Company's investment objectives and policies may only be changed by amending
the Articles, which requires the affirmative vote of the Stockholders holding a
majority of the outstanding shares.

PLAN OF DISTRIBUTION

GENERAL

Of the 28,058,370 Shares offered hereby, the Company is offering
25,000,000 Shares on a "best efforts" basis at a purchase price of $11.00 per
Share with a minimum initial investment of $3,300 ($1,100 in the case of
Tax-Exempt Entities, except for Iowa where the minimum investment for IRAs will
be $3,300 and for Minnesota where the minimum investment for IRAs and qualified
plan accounts will be $2,200); 2,000,000 Shares at a purchase price of $10.45
per Share are being offered for issuance through the Distribution Reinvestment
Program; 625,000 Soliciting Dealer Warrants to purchase 625,000 Shares and the
Shares underlying the Soliciting Dealer Warrants are being offered; and 433,370
Shares to be issued at an exercise price of $12.00 issuable upon the exercise of
warrants issued in Prior Offerings. See "Description of Securities - -
Soliciting Dealer Warrants." "Best efforts" means that the Dealer Manager is not
guaranteeing that any specified amount of capital will be raised. The Offering
will commence as of the date of this Prospectus and will terminate not later
than April 6, 2000. The Company reserves the right to terminate the Offering at
any time.

165

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 not be commingled with the accounts
of the Advisor and its Affiliates. The subscription proceeds will be held in
trust for the benefit of the subscribers until released from the escrow account
and utilized for the purpose set forth in "Estimated Use of Proceeds of
Offering." 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 twenty-four 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 an offering of shares by the Company which commenced on
October 14, 1994 and terminated on July 22, 1996. The Advisor received 20,000
shares in consideration of this capital contribution. The Advisor may not sell
or otherwise transfer these shares while it remains the Advisor except to an
Affiliate. The Advisor and its Affiliates may purchase additional shares for
their own accounts. However, at no time will the Advisor or its Affiliates own
more than 9.8% of the total number of the Company's outstanding shares. Any
purchases of Shares by the Advisor during the Offering will be for investment
purposes only and not with a view toward distribution.

SUBSCRIPTION PROCESS

The Shares are being offered to the public by the Dealer Manager and
the Soliciting Dealers. The form of Soliciting Dealers Agreement between the
Dealer Manager and the Soliciting Dealers requires the Soliciting 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 the 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 three business days after acceptance by the Company. A
sale of the Shares may not be completed until at least three 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.

166

Shares will only be sold to persons who initially purchase a minimum
of 300 Shares ($3,300) or Tax-Exempt Entities which purchase a minimum of 100
Shares ($1,100), except for investors in the State of Iowa where the minimum
investment for IRAs will be 300 Shares ($3,300) and investors in the State of
Minnesota where the minimum investment for IRAs and qualified plan accounts
will be 200 Shares ($2,200). Subscriptions will be accepted for fractional
Shares only in the discretion of the Company.

DETERMINATION OF INVESTOR SUITABILITY

The Company, the Dealer Manager and each Soliciting Dealer will make
every reasonable effort to determine that those persons being offered or sold
the Shares satisfy the suitability standards set forth herein and that an
investment in the Shares is an appropriate investment for the investor. The
Soliciting Dealers must ascertain that the investors can reasonably benefit
from an investment in the Company. In making the determination, the Soliciting
Dealers will consider whether: (i) the investor has the capability of
understanding the fundamental aspects of the Company based on the investor's
employment experience, education, access to advice from qualified sources such
as attorneys, accountants and tax advisors and 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 its determination that the Shares are a suitable investment for
the investor. Each Soliciting Dealer is required to represent and warrant that
it has complied with all applicable laws in determining the suitability of the
Shares as an investment for the subscriber. The Company and its Affiliates
will 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
must maintain a record of the information obtained to determine that an
investor meets the suitability standards 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 for at least six years.

COMPENSATION

The Company will pay the Dealer Manager selling commissions equal to
up to seven percent (7%) on all Shares sold for serving as the dealer manager
of the Offering and for the sale of Shares through its efforts. A portion of
these selling commissions may be retained or reallowed to Soliciting Dealers,
as compensation for their services in soliciting and obtaining subscribers for
the purchase of Shares. Up to an additional 2.0% of the Gross Offering
Proceeds, a portion of which may be reallowed to Soliciting Dealers, may be
paid to the Dealer Manager 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

167

may be reimbursed by the Company 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 may also
reallow commissions to Soliciting Dealers on an incentive basis. Any incentive
compensation will be paid quarterly and will not exceed 1% of the price of the
Shares. Marketing and due diligence costs paid by the Dealer Manager on behalf
of, or to, the Soliciting Dealers will be deducted from any incentive
compensation.

Soliciting Dealers will receive one Soliciting Dealer Warrant for each
forty (40) Shares sold by such Soliciting Dealer during the Offering, subject
to federal and state securities laws subject to a maximum of 625,000 warrants,
except in the case of Shares sold to residents of the States of Minnesota,
Nebraska, South Carolina, Tennessee or Texas where the Company will not issue
and the Dealer Manager will not transfer Soliciting Dealer Warrants. The
holder of a Soliciting Dealer Warrant will be entitled to purchase one Share
from the Company at a price of $13.20 during the period commencing with the
first date upon which the Soliciting Dealer Warrants are issued and ending on
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
Warrant will be exercisable until one year from the date of issuance. Holders
of the Soliciting Dealer Warrants, therefore, have, at nominal cost, the
opportunity to profit from a rise in the market price for the Common Stock
without assuming the risk of ownership. Exercise of these warrants will dilute
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 by the Company 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 may 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 that nothing herein shall prohibit the registered
broker-dealer or other properly licensed person from earning a sales commission
in connection with sale of the Shares.

168

VOLUME DISCOUNTS

Investors purchasing at least $220,000 worth of Shares (20,000 Shares)
will be entitled to a reduction in the selling commission payable in connection
with the sale of these Shares in accordance with the following schedule:

<TABLE>
<CAPTION>
Amount of
Purchaser's Investment Maximum Commission
------------------------------ -------------------
From To per Share
---- -- ---------
<S> <C> <C>
$220,000 499,999 5.5%
500,000 999,999 4.0%
1,000,000 1,999,999 2.5%
2,000,000 and over 1.0%
</TABLE>

Any reduction in the selling commission in respect of volume discounts will be
credited to the investor in the form of additional whole Shares or fractional
Shares purchased net of commissions.

Subscriptions for shares in the Company may be combined: (i) with
subscriptions in this Offering or (ii) with subscriptions from any of the
Company's Prior Offerings for the purpose of crediting an investor with
additional Shares and for determining commissions payable to the Dealer Manager
and reallowable to Soliciting Dealers so long as all combined purchases are
made through the same Soliciting Dealer. Additionally, subscriptions of
persons holding as joint tenants or tenants in common may be combined for
purposes of computing amounts invested. Subscriptions from Tax-Exempt Entities
may be combined for purposes of computing amounts invested if investment
decisions are made by the same person. The investor must mark the "Additional
Purchase" space on the Subscription Agreement Signature Page in order for
subscriptions to be combined. The Company is not responsible for failing to
combine subscriptions, where the investor fails to mark the "Additional
Purchase" space.

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 ($9.95 per Share).

TRANSFER OF SHARES

A Stockholder may assign all or some of his or her Shares, subject to
the Ownership Limit contained in the Articles. An assignment will 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 delivered to the Company; (ii)
reimbursement of the Company for reasonable expenses and filing costs incurred
in connection with such transfer not to exceed $100; (iii) no assignment will
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 will be effective if
such assignment would, in the opinion

169

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 it 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 will 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 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.

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 will 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) the
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 approves indemnification of the settlement and related costs
after being 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 Dealer Manager and 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 will be deemed to be an "underwriter" as
that term is defined in the Act.

HOW TO SUBSCRIBE

Shares may be purchased by investors who meet 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.

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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 or
she meets the suitability standards as stated in the Subscription Agreement and
agrees to be bound by all of the terms of the Subscription Agreement.

Within ten days (and generally within twenty-four 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 three 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.

Subscriptions made through 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 and may also
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 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.

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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.

DISTRIBUTION REINVESTMENT AND SHARE REPURCHASE PROGRAMS

DISTRIBUTION REINVESTMENT PROGRAM

The Distribution Reinvestment Program (the "DRP") provides the
Company's Stockholders with an opportunity to purchase additional Shares by
reinvesting Distributions. Stockholders who elect to take part in the DRP
("Participants") authorize the Company to use Distributions payable to them to
purchase additional Shares; provided that Participants are not permitted to
acquire Shares under the DRP if the purchase would cause the Purchaser to
exceed the Ownership Limit.

Purchases under the DRP are made at a price equal to $10.45 per Share,
a reduction from the $11.00 offering price which price reflects a decrease in
costs associated with these issuances. Participants in the DRP may also
purchase fractional Shares, 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 or she
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 or she will promptly so notify the Company in
writing.

Commencing with the first Distribution paid after the effective date
of the Offering, Participants will acquire Shares from the Company at a fixed
price of $10.45 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 price at which shares may be purchased
through 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.
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 these 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 amount of Distributions received during the prior fiscal year.
The individualized statement to Participants include receipts and purchases
relating to each

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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.

Stockholders who participate in the DRP will recognize dividend
income, taxable to the extent of the Company's current or accumulated earnings
and profits, in the amount of the value of the Shares and as though they had
received the cash rather than purchased shares through the DRP. 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, for tax purposes, beginning with the day after purchase, and a
tax basis equal to their value, 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 and the DRP is continued,
Shares purchased by the Company for the DRP may be purchased on such exchange
or market, at the prevailing market price, and will be sold to Stockholders at
such price.

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.

Repurchases under the SRP are made quarterly by the Company on a
first-come, first-served basis, and are limited in the following manner: (i)
not more than $500,000 worth of the outstanding shares may be repurchased in
any given year; and (ii) the funds available for repurchase are 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 is made at
the sole discretion of the Board. In making this determination, the Board
considers 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 are given 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 owned 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 or her request for
repurchase; or (ii) ask that the Company honor the request at such time, if
any, when funds are available. 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

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period and will be terminated following the close of the Offering period if:
(i) 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 canceled, 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.

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 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.

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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 for the property; (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.

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.

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LEGAL MATTERS

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 Ltd. (counsel to the Company). Shefsky & Froelich 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 legality of the Shares offered
hereby has been passed upon for the Company by Shapiro and Olander, Baltimore,
Maryland.

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 Ltd.

EXPERTS

The balance sheets of Inland Real Estate Corporation as of December
31, 1997 and 1996 and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, the historical summary of gross income and direct operating
expenses of Woodfield Plaza for the year ended December 31, 1997, the
historical summary of gross income and direct operating expenses of the Shops
at Coopers Grove for the year ended December 31, 1997, the historical summary
of gross income and direct operating expenses of Maple Plaza for the year ended
December 31, 1997, the historical summary of gross income and direct operating
expenses of Lake Park Plaza for the year ended December 31, 1997, the
historical summary of gross income and direct operating expenses of St. James
Crossing Shopping Center for the year ended December 31, 1997, the historical
summary of gross income and direct operating expenses of Chestnut Cort Shopping
Center for the year ended December 31, 1997, the historical summary of gross
income and direct operating expenses of Bergen Plaza for the year ended
December 31, 1997, the historical summary of gross income and direct operating
expenses of Berwyn Plaza for the year ended December 31, 1997, the historical
summary of gross income and direct operating expenses of Wauconda Shopping
Center for the year ended December 31, 1997, and the historical summary of
gross income and direct operating expenses of Mill Creek for the year ended
December 31, 1997, 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.

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, 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.

The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.

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GLOSSARY

The definitions used in the Prospectus are set forth below:

"ADMINISTRATOR" means the official or agency administering the Securities laws
of a jurisdiction.

"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.

"ACQUISITION FEES" means the total of all fees and commissions paid by any
party to any party in connection with making or investing in mortgage loans or
the purchase, development or construction of property by the Company. Included
in the computation of such fees or commissions shall be any real estate
commission, selection fee, Development Fee, Construction Fee, nonrecurring
management fee, loan fees or points or any fee of a similar nature, however
designated. Excluded shall be Development Fees and Construction Fees paid to
Persons not affiliated with the Sponsor in connection with the actual
development and construction of a project.

"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.

177

"ANCHOR TENANT" means tenants generally occupying approximately 30% or more of
the GLA of a Neighborhood Retail Center, Community Center or the tenant of any
single-user property.

"ARTICLES" means the Company's Second Articles of Amendment and Restatement, as
amended 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, as amended.

"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.

"COMMUNITY CENTER" means any property leased primarily to one or more retail
tenants with gross leasable area ranging from 150,000 square feet to 300,000
square feet.

"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.

"CONSTRUCTION FEE" means a fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements, supervise and
coordinate projects or to provide major repairs or rehabilitation on the
Company's property.

178

"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 Ltd.

"CROSS REFERENCE SHEET" means a compilation of the statements of policy
sections, referenced to the page of the Prospectus and declaration of trust, or
other exhibits, and justification for any deviation from the statement of
policy. Such compilation shall comply with the provisions set forth on the
Cross Reference Sheet.

"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).

"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.

179

"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 April 6, 2003.

"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 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 $11.00 per Share, except for Shares purchased
under the Distribution Reinvestment Program in which case the purchase price
for such Shares shall be $10.45 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.

"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

180

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 2.32% 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 28,058,370 Shares (which includes 2,000,000 Shares
available for distribution under the Distribution Reinvestment Program; 433,370
Shares which may be issued upon the exercise of warrants granted to the Deal
Manager in Prior Offerings; and 625,000 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.

"NEIGHBORHOOD RETAIL CENTER" shall mean any property located primarily within
an approximate 400-mile radius of the Oak Brook, Illinois headquarters of the
Advisor leased primarily to one or

181

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 27,000,000 Shares of the Company (including
2,000,000 Shares available for distribution under the Distribution Reinvestment
Program) pursuant to this Prospectus plus the 625,000 Soliciting Dealer
Warrants and 625,000 Shares which are issuable on exercise of Soliciting Dealer
Warrants and 433,370 Shares which are issuable on the exercise of warrants
issued in Prior Offerings.

"ORGANIZATION DOCUMENTS" means the Second Articles of Amendment and
Restatement, as amended, and the Amended and Restated Bylaws, as amended.

"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 elects to participate in the DRP.

182

"PERSON" means any natural person, partnership, corporation, association,
trust, limited liability company or other legal entity.

"PRIOR OFFERING" means the: (i) Company's public offering of 6,000,000 Shares
(including 1,000,000 Shares available under the DRP) at $10 per Share which
commenced October 14, 1994 and was completed July 22, 1996; (ii) the Company's
public offering of 11,375,000 Shares (including 1,000,000 Shares available for
distribution under the DRP and 375,000 Shares issuable on the exercise of
warrants granted to soliciting dealers) which commenced July 24, 1996 and was
completed on July 10, 1997 also at $10 per Share; and (iii) the Company's
public offering of 21,875,000 Shares (including 1,000 Shares available under
the DRP and 875,000 Shares issuable on the exercise of warrants granted to
soliciting dealers) at $10 per Share which commenced on July 14, 1997 and was
completed on March 31, 1998.

"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: (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 income 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 prospectus of the Company dated April 7, 1998 as may
be supplemented in connection with the registration of Shares offered hereby.

"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 registration of the Shares and warrants
offered hereby on Form S-11 and related exhibits, as amended, filed with the
Commission by the Company on January 29, 1998, as amended

"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.

183

"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:

(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.

184

"SHARES" means the 28,058,370 shares of common stock, par value $.01 per share,
of the Company hereby offered.

"SOLICITING DEALERS" means the dealer members of the National Association of
Securities Dealers, Inc. designated by the Dealer Manager.

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

"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.

"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 April 6, 2000.

185

"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.

"UNIMPROVED PROPERTY" means the real property of the Company which has the
following characteristics:

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

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

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

186

INDEX TO FINANCIAL STATEMENTS

INLAND REAL ESTATE CORPORATION PAGE
- ------------------------------ ----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

Balance Sheets at December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Statements of Operations for the years ended December 31, 1997, 1996, and 1995 . . . . . . . . F-4

Statements of Stockholders' Equity for the years ended December 31,
1997, 1996, and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 . . . . . . . . . F-6

Notes to Financial Statements for the years ended December 31, 1997,
1996, and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

Pro Forma Balance Sheet for the year ended December 31, 1997 (unaudited) . . . . . . . . . . . . F-26

Notes to Pro Forma Balance Sheet for the year ended
December 31, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28

Pro Forma Statement of Operations for the year ended
December 31, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-34

Notes to Pro Forma Statement of Operations for the year ended
December 31, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-36

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-50

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Woodfield Plaza . . . . . . . . . . . . . . . . . . . . . . . . F-51

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Woodfield Plaza . . . . . . . . . . . . . . . . F-52

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-54

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of the Shops at Coopers Grove . . . . . . . . . . . . . . . . . . . F-55
</TABLE>

F-i

<TABLE>
<S> <C>
Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of the Shops at Coopers Grove . . . . . . . . . . F-56

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-58

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Maple Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . F-59

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Maple Plaza . . . . . . . . . . . . . . . . . . F-60

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-62

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Lake Park Plaza . . . . . . . . . . . . . . . . . . . . . . . . F-63

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Lake Park Plaza . . . . . . . . . . . . . . . . F-64

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-66

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of St. James Crossing Shopping Center . . . . . . . . . . . . . . . F-67

Notes to the Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1997 of St. James Crossing Shopping Center . . . . . . . . . . . F-68

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-70

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Chestnut Court Shopping Center . . . . . . . . . . . . . . . . . F-71

Notes to the Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1997 of Chestnut Court Shopping Center . . . . . . . . . . . . . F-72

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F.74

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Bergen Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . F-75

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Bergen Plaza . . . . . . . . . . . . . . . . . F-76

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-78
</TABLE>

F-ii

<TABLE>
<S> <C>
Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Berwyn Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . F-79

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Berwyn Plaza . . . . . . . . . . . . . . . . . F-80

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-82

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Wauconda Shopping Center . . . . . . . . . . . . . . . . . . . . F-83

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Wauconda Shopping Center . . . . . . . . . . . F-84

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-86

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Mill Creek . . . . . . . . . . . . . . . . . . . . . . . . . . . F-87

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Mill Creek . . . . . . . . . . . . . . . . . . F-88
</TABLE>

F-iii

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, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997, 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 LLP

Chicago, Illinois
January 23, 1998

F-1

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets

December 31, 1997 and 1996

Assets
------

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Investment properties (Notes 1 and 4):
Land ............................................. $ 75,801,319 24,705,743
Building and improvements ...................... 200,509,519 69,927,238
------------ ------------
276,310,838 94,632,981
Less accumulated depreciation .................. 5,665,483 1,109,038
------------ ------------
Net investment properties ...................... 270,645,355 93,523,943
------------ ------------
Cash and cash equivalents including amount
held by property manager (Note 1) .............. 51,145,587 8,491,735
Restricted cash (Note 1) ......................... 2,073,799 122,043
Accounts and rents receivable (Note 5) ........... 4,926,643 1,914,756
Deposits and other assets (Note 7) ............... 3,924,431 95,828
Deferred organization costs (net of
accumulated amortization of $10,985 and $5,492
at December 31, 1997 and 1996, respectively)
(Note 1) ....................................... 16,477 21,970
Loan fees (net of accumulated amortization
of $131,266 and $11,875 at December 31, 1997
and 1996, respectively,) (Note 1) .............. 857,839 338,411
------------ ------------

Total assets ................................. $333,590,131 104,508,686
============ ============

</TABLE>

See accompanying notes to financial statements.

F-2

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Balance Sheets
(continued)

December 31, 1997 and 1996

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

1997 1996
Liabilities: ---- ----
<S> <C> <C>
Accounts payable ................................. $ 47,550 289,912
Accrued offering costs to Affiliates (Note 2) .... 544,288 298,341
Accrued offering costs to non-affiliates ......... 36,574 4,236
Accrued interest payable to Affiliates ........... 4,641 4,718
Accrued interest payable to non-affiliates ....... 560,821 52,402
Accrued real estate taxes ........................ 7,031,732 2,770,889
Distributions payable (Note 9) ................... 1,777,113 548,947
Security deposits ................................ 754,359 247,769
Mortgages payable (Note 6) ....................... 106,589,710 30,838,233
Unearned income .................................. 495,535 64,590
Other liabilities ................................ 493,116 32,820
Due to Affiliates (Note 2) ....................... 337,825 255,591
------------- -------------
Total liabilities .............................. 118,673,264 35,408,448
------------- -------------

Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 106,000,000 Shares
authorized; 25,026,140 and 24,973,340 issued and
outstanding at December 31, 1997 and 8,144,116
and 8,137,766 Shares issued and outstanding
at December 31, 1996, respectively ............. 249,470 81,000
Additional paid-in capital (net of offering
costs of $28,341,719 and $10,500,108 at
December 31, 1997 and 1996, respectively, of
which $24,172,634 and $8,096,213 was paid
to Affiliates, respectively) ................... 220,640,608 70,512,073
Accumulated distributions in excess
of net income .................................. (5,973,211) (1,492,835)
------------- -------------
Total stockholders' equity ..................... 214,916,867 69,100,238
------------- -------------
Commitments and contingencies (Note 8)

Total liabilities and stockholders' equity ......... $ 333,590,131 104,508,686
============= =============
</TABLE>

See accompanying notes to financial statements.

F-3

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Operations

For the years ended December 31, 1997, 1996 and 1995

1997 1996 1995
Income: ---- ---- ----
<S> <C> <C> <C>
Rental income (Notes 1 and 5) ...... $21,112,365 4,467,903 869,485
Additional rental income ........... 6,592,983 1,336,809 228,024
Interest income .................... 1,615,520 438,188 82,913
Other income ....................... 100,717 84,834 --
----------- ----------- -----------
29,421,585 6,327,734 1,180,422
----------- ----------- -----------
Expenses:
Professional services to
Affiliates ....................... 29,304 16,476 7,277
Professional services to
non-affiliates ................... 96,681 46,790 1,615
General and administrative
expenses to Affiliates ........... 115,468 42,904 --
General and administrative
expenses to non-affiliates ....... 241,501 77,389 13,880
Advisor asset management fee ....... 843,000 238,108 --
Property operating expenses to
Affiliates ....................... 1,120,429 229,307 46,791
Property operating expenses to
non-affiliates ................... 7,742,595 1,643,867 279,930
Mortgage interest to Affiliates .... 86,455 64,165 146,821
Mortgage interest to
non-affiliates ................... 5,568,109 533,320 17,340
Depreciation ....................... 4,556,445 939,144 169,894
Amortization ....................... 124,884 17,367 --
Acquisition cost expenses to
Affiliates ....................... 194,187 -- --
Acquisition cost expenses to
non-affiliates ................... 55,306 26,676 360
----------- ----------- -----------
20,774,364 3,875,513 683,908
----------- ----------- -----------
Net income ....................... $ 8,647,221 2,452,221 496,514
=========== =========== ===========

Net income per weighted average
common stock shares outstanding
(15,225,983, 4,494,620 and 943,156
for the years ended December 31,
1997, 1996 and 1995, respectively) $ .57 .55 .53
=========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-4

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Stockholders' Equity

For the years ended December 31, 1997, 1996 and 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 ................. -- -- 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
$7,378,933) .............. 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

Net income ................. -- -- 8,647,221 8,647,221
Distributions declared
($.86 per weighted average
common stock shares
outstanding) ............. -- -- (13,127,597) (13,127,597)
Proceeds from Offering (net
of Offering costs of
$17,841,611) ............. 168,935 150,548,904 -- 150,717,839
Repurchases of Shares ...... (465) (420,369) -- (420,834)
------------ ------------ ------------ ------------
Balance December 31, 1997. $ 249,470 220,640,608 (5,973,211) 214,916,867
============ ============ ============ ============

</TABLE>

See accompanying notes to financial statements.

F-5

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Cash Flows

For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
1997 1996 1995
Cash flows from operating activities: ---- ---- ----
<S> <C> <C> <C>
Net income ......................... $ 8,647,221 2,452,221 496,514
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation ..................... 4,556,445 939,144 169,894
Amortization ..................... 124,884 17,367 --
Rental income under master
lease agreements ............... 410,361 437,678 133,016
Straight line rental income ...... (654,978) (119,225) (12,413)
Changes in assets and liabilities:
Accounts and rents receivable .. (2,356,909) (1,461,708) (321,410)
Other assets ................... (810,073) 62,295 (4,006)
Accounts payable ............... (242,362) 283,038 6,875
Accrued interest payable ....... 508,342 51,878 5,242
Accrued real estate taxes ...... 4,260,843 2,396,709 374,180
Security deposits .............. 506,590 193,286 54,483
Other liabilities .............. 460,296 3,968 28,852
Due to Affiliates .............. 82,234 248,314 7,277
Unearned income ................ 430,945 24,744 39,846
------------- ------------- -------------
Net cash provided by operating
activities ......................... 15,923,839 5,529,709 978,350
------------- ------------- -------------
Cash flows from investing activities:
Restricted cash .................... (1,951,756) -- --
Additions to investment properties . (836,962) (136,819) (51,135)
Purchase of investment properties .. (141,187,371) (68,717,979) (6,376,708)
Deposit for tenant improvements .... -- (122,043) (150,000)
Deposits on investment properties .. (3,018,530) -- --
------------- ------------- -------------
Net cash used in investing
activities ......................... (146,994,619) (68,976,841) (6,577,843)
------------- ------------- -------------
Cash flows from financing activities:
Repayment of loan from Advisor ..... -- -- (193,300)
Proceeds from offering ............. 168,559,450 61,147,147 19,803,163
Repurchase of Shares ............... (420,834) (30,321) (26,809)
Payments of offering costs ......... (17,563,326) (7,305,153) (2,514,129)
Loan proceeds ...................... 43,926,176 25,670,000 --
Loan fees .......................... (638,819) (350,286) --

</TABLE>

See accompanying notes to financial statements.

F-6

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Statements of Cash Flows
(continued)

For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Distributions paid ................. $ (11,899,431) (3,285,528) (607,095)
Repayment of notes from Affiliate .. (8,000,000) (3,271,185) --
Principal payments of debt ......... (238,584) (1,374,738) (10,106,878)
Payment of deferred organization
costs ............................ -- -- (27,462)
------------- ------------- -------------
Net cash provided by financing
activities ......................... 173,724,632 71,199,936 6,327,490
------------- ------------- -------------
Net increase in cash and
cash equivalents ................... 42,653,852 7,752,804 727,997
Cash and cash equivalents at
beginning of year .................. 8,491,735 738,931 10,934
------------- ------------- -------------
Cash and cash equivalents at
end of year ........................ $ 51,145,587 8,491,735 738,931
============= ============= =============
</TABLE>

Supplemental schedule of noncash investing and financing activities:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Purchase of investment properties .. $(181,251,256) (77,421,408) (17,594,313)
Assumption of mortgage debt ...... 32,063,885 5,803,429 4,595,178
Note payable to Affiliate ........ 8,000,000 2,900,000 6,622,427
------------- ------------- -------------
$(141,187,371) (68,717,979) (6,376,708)
============= ============= =============

Distributions payable .............. $ 1,777,113 548,947 129,532
============= ============= =============

Cash paid for interest ............. $ 5,146,222 545,607 158,919
============= ============= =============
</TABLE>

See accompanying notes to financial statements.

F-7

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements

For the years ended December 31, 1997, 1996, and 1995

(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,
("Initial Offering") of 5,000,000 shares of common stock ("Shares") at $10.00
per Share. 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 at
$10.00 per Share, on a best efforts basis, (the "Second Offering"). As of July
10, 1997, the Company had received subscriptions for a total of 10,000,000
Shares, thereby completing the Second Offering. On July 14, 1997, the Company
commenced an offering of an additional 20,000,000 Shares at $10.00 per Share, on
a best efforts basis, (the "Third Offering"). As of December 31, 1997, the
Company had received subscriptions for a total of 9,326,186 Shares from the
Third Offering. In addition, as of December 31, 1997, the Company has
distributed 699,954 shares through the Company's Distribution Reinvestment
Program ("DRP"). As of December 31, 1997, the Company has repurchased a total of
52,800 Shares through the Share Repurchase Program. As a result, as of December
31, 1997, Gross Offering Proceeds total $249,231,797, net of Shares repurchased
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

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.

Restricted cash at December 31, 1997 includes $861,716 held in escrow for the
principal payments payable on the Aurora Commons mortgage and $87,496 held in
escrow by the mortgagee for the payment of real estate taxes at Aurora Commons.
Restricted cash at December 31, 1997 also includes amounts held as vacancy
escrows on Cobbler Crossing, Mallard Crossing and Shorecrest Shopping Center.
The monthly amounts drawn for rent under the master lease escrows decrease the
basis of the respective properties. Restricted cash at December 31, 1997 also
includes $325,000 held in escrow for tenant improvement costs at Fashion Square
and $600,000 held at Cole Taylor bank to redeem a portion of the bonds at
Fashion Square (Note 9).

Statement of Financial Accounting Standards No. 121 requires the Company to
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 operations and sale of properties. 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. As of December 31, 1997, the
Company does not believe any such impairments of its properties exists.

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 on a straight-line basis and
the cash rent due under the provisions of the lease agreements is recorded as
deferred rent receivable.

F-9

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

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.

In 1997, the Company adopted FASB No. 123, "Accounting for Stock Based
Compensation". As allowed by FASB No. 123, 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.

In 1997, the FASB issued Statement No. 128, Earnings per Share, which the
company will adopt in fiscal year 1998. This Statement will have no material
effect on the Company's primary or diluted net income per share.

(2) Transactions with Affiliates

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to each of the
Offerings. Such expenses include postage, data processing and marketing and are
reimbursed at cost. The collective costs to Affiliates incurred relating to the
Offerings were $1,047,694 and $692,248 as of December 31, 1997 and 1996,
respectively, of which $24,374 and $27,976 were unpaid as of December 31, 1997
and 1996, respectively. In addition, an Affiliate of the Advisor serves as
dealer manager of each of the Offerings and is entitled to receive selling
commissions, a marketing contribution and a due diligence expense allowance fee
from the Company in connection with each of the Offerings. Such amounts incurred
were $23,124,939 and $7,403,965 for the years ended December 31, 1997 and 1996,
respectively, of which $519,914 and $270,365 was unpaid as of December 31, 1997
and 1996, respectively. As of December 31, 1997, approximately $19,581,000 of
these commissions had been passed through from the Affiliate to unaffiliated
soliciting broker/dealers.

F-10

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

As of December 31, 1997, the Company had incurred $28,369,181 of total
organization and offering costs to Affiliates and non-affiliates. Pursuant to
the terms of each of the Offerings, 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 Offerings (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 and second Offerings, organizational and offering did not exceed the
5.5% or 15% limitations. As of December 31, 1997, organizational and offering
costs of the Third Offering did not exceed the 5.5% and 15% limitations. The
Company anticipates that these costs will not exceed either of 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
administration of the Company. Such costs are included in professional services
to Affiliates, general and administrative expenses to Affiliates and acquisition
costs expensed.

As of December 31, 1997, the Advisor has contributed $200,000 to the capital of
the Company for which it received 20,000 Shares.

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. The Advisor
Asset Management Fee plus other operating expenses paid during the previous
calendar year did not 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
Stockholder's received an annual Distribution greater than an 8% return.
Accordingly, for the year ended December 31, 1997, the Company has incurred
$843,000 of Advisor Asset Management Fees, of which $320,000 remained unpaid at
December 31, 1997.

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 $1,120,429 and $229,307 for the years ended December 31, 1997
and 1996, respectively, all of which has been paid.

The Advisor and its Affiliates are entitled to reimbursement for salaries and
expense of employees of the Advisor and its Affiliates relating to selecting,
evaluating and acquiring of properties. Such amounts are included in building
and improvements for those costs relating to properties purchased. Such amounts
are included in acquisition cost expenses to Affiliates for costs relating to
properties not acquired.

F-11

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(3) Stock Option Plan and Soliciting 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 the date they
become a Director 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 for $9.05 per Share.

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, 1997, none of these warrants were exercised.

F-12

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties
<TABLE>
<CAPTION>
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>
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 1,626,033 664 838,000 1,626,697 2,464,697

Ameritech
Joliet, IL ................... 05/97 170,000 883,293 2,544 170,000 885,837 1,055,837

Dominicks-Schaumburg
Schaumburg, IL ............... 05/97 2,294,437 8,388,263 2,679 2,294,437 8,390,942 10,685,379

Dominicks-Highland Park
Highland Park, IL ............ 06/97 3,200,000 9,593,565 2,200 3,200,000 9,595,765 12,795,765

Dominicks-Glendale Heights
Glendale Heights, IL ......... 09/97 1,265,000 6,934,230 9,194 1,265,000 6,943,424 8,208,424

Party City
Oakbrook Terrace, IL ......... 11/97 750,000 1,230,030 -- 750,000 1,230,030 1,980,030

Eagle Country Market
Roselle, IL .................. 11/97 966,667 1,935,350 -- 966,667 1,935,350 2,902,017

Neighborhood Retail Centers
Eagle Crest Shopping Center
Naperville, IL ............... 03/95 1,878,618 2,938,352 115,828 1,878,618 3,054,180 4,932,798

Montgomery-Goodyear
Montgomery, IL ............... 09/95 315,000 834,659 (11,158) 315,000 823,501 1,138,501

Hartford/Naperville Plaza
Naperville, IL ............... 09/95 990,000 3,427,961 13,002 990,000 3,440,963 4,430,963

Nantucket Square
Schaumburg, IL ............... 09/95 1,908,000 2,349,918 (69,881) 1,908,000 2,280,037 4,188,037

Antioch Plaza
Antioch, IL .................. 12/95 268,000 1,360,445 (120,629) 268,000 1,239,816 1,507,816

Mundelein Plaza
Mundelein, IL ................ 03/96 1,695,000 3,965,560 (53,429) 1,695,000 3,912,131 5,607,131
----------- ----------- ----------- ----------- ----------- -----------
Subtotal ..................... $16,617,052 46,598,382 (108,986) 16,617,052 46,489,396 63,106,448

</TABLE>

F-13

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties (continued)
<TABLE>
<CAPTION>

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 $16,617,052 46,598,382 (108,986) 16,617,052 46,489,396 63,106,448

Regency Point
Lockport, IL............ 04/96 1,000,000 4,720,800 (19,377) 1,000,000 4,701,423 5,701,423

Prospect Heights
Prospect Heights, IL.... 06/96 494,300 1,683,755 (9,724) 494,300 1,674,031 2,168,331

Montgomery-Sears
Montgomery, IL.......... 06/96 768,000 2,714,173 (48,504) 768,000 2,665,669 3,433,669

Salem Square
Countryside, IL......... 08/96 1,735,000 4,449,217 (16,960) 1,735,000 4,432,257 6,167,257

Hawthorn Village
Vernon Hills, IL........ 08/96 2,619,500 5,887,640 46,891 2,619,500 5,934,531 8,554,031

Six Corners
Chicago, IL............. 10/96 1,440,000 4,538,152 3,638 1,440,000 4,541,790 5,981,790

Spring Hill Fashion Corner
West Dundee, IL......... 11/96 1,794,000 7,415,396 3,955 1,794,000 7,419,351 9,213,351

Crestwood Plaza
Crestwood, IL........... 12/96 325,577 1,483,183 4,750 325,577 1,487,933 1,813,510

Park St. Claire
Schaumburg, IL.......... 12/96 319,578 986,920 226,674 319,578 1,213,594 1,533,172

Lansing Square
Lansing, IL............. 12/96 4,075,000 12,179,383 18,087 4,075,000 12,197,470 16,272,470

Summit of Park Ridge
Park Ridge, IL.......... 12/96 672,000 2,497,950 5,886 672,000 2,503,836 3,175,836

Grand and Hunt Club
Gurnee, IL.............. 12/96 969,840 2,622,575 (52,811) 969,840 2,569,764 3,539,604

Quarry Outlot
Hodgkins, IL............ 12/96 522,000 1,278,431 8,872 522,000 1,287,303 1,809,303

Maple Park Place
Bolingbrook, IL......... 01/97 3,665,909 11,669,428 10,603 3,665,909 11,680,031 15,345,940

Aurora Commons
Aurora, IL.............. 01/97 3,220,000 8,318,661 3,901 3,220,000 8,322,562 11,542,562
----------- ------------ ----------- ---------- ----------- -----------
Subtotal $40,237,756 119,044,046 76,895 40,237,756 119,120,941 159,358,697
</TABLE>

F-14

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(4) Investment Properties (continued)
<TABLE>
<CAPTION>
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 $40,237,756 119,044,046 76,895 40,237,756 119,120,941 159,358,697

Lincoln Park Place
Chicago, IL............. 01/97 819,000 1,299,902 (11,788) 819,000 1,288,114 2,107,114

Niles Shopping Center
Niles, IL............... 04/97 850,000 2,408,467 (22,157) 850,000 2,386,310 3,236,310

Mallard Crossing
Elk Grove Village, IL... 05/97 1,778,667 6,331,943 (22,929) 1,778,667 6,309,014 8,087,681

Cobblers Crossing
Elgin, IL............... 05/97 3,200,000 7,763,940 (67,400) 3,200,000 7,696,540 10,896,540

Calumet Square
Calumet City, IL........ 06/97 527,000 1,537,316 6,664 527,000 1,543,980 2,070,980

Sequoia Shopping Center
Milwaukee, WI........... 06/97 1,216,914 1,802,336 (8,060) 1,216,914 1,794,276 3,011,190

Riversquare Shopping Center
Naperville, IL.......... 06/97 2,853,226 3,124,732 103,872 2,853,226 3,228,604 6,081,830

Rivertree Court
Vernon Hills, IL........ 07/97 8,651,875 22,861,547 6,233 8,651,875 22,867,780 31,519,655

Shorecrest Plaza
Racine, WI.............. 07/97 1,150,000 4,749,758 (17,469) 1,150,000 4,732,289 5,882,289

Dominicks-Countryside
Countryside, IL......... 12/97 1,375,000 925,106 - 1,375,000 925,106 2,300,106

Terramere Plaza
Arlington Heights, IL... 12/97 1,435,000 2,966,411 - 1,435,000 2,966,411 4,401,411

Wilson Plaza
Batavia, IL............. 12/97 310,000 984,720 - 310,000 984,720 1,294,720

Iroquois Center
Naperville, IL.......... 12/97 3,668,347 8,258,584 - 3,668,347 8,258,584 11,926,931

Fashion Square
Skokie, IL.............. 12/97 2,393,534 6,822,071 - 2,393,534 6,822,071 9,215,605

Naper West
Naperville, IL.......... 12/97 5,335,000 9,584,779 - 5,335,000 9,584,779 14,919,779
----------- ------------ ---------- ----------- ----------- ------------
Total $75,801,319 200,465,658 43,861 75,801,319 200,509,519 276,310,838
=========== ============ ========== =========== =========== ============
</TABLE>

F-15

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

December 31, 1997

(4) Investment Properties (continued)

(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. The cumulative amount of such payments was $981,055 and $570,694 as
of December 31, 1997 and 1996, respectively (Note 5).

Cost and accumulated depreciation of the above properties are summarized as
follows:
1997 1996
Single User Retail Properties: ---- ----
Cost.................................... $ 41,301,202 3,673,086
Less accumulated depreciation........... 674,772 112,871
------------- ------------
40,626,430 3,560,215
Neighborhood Retail Centers: ------------- ------------
Cost.................................... 235,009,636 90,959,895
Less accumulated depreciation........... 4,990,711 996,167
------------- ------------
230,018,925 89,963,728
------------- ------------
Total................................... $270,645,355 93,523,943
============= ============

Pro Forma Information (unaudited)

The Company acquired its investment properties at various times over the three
year period ended December 31, 1997 as described in Note 4. The following table
sets forth certain summary unaudited pro forma operating data as if the
acquisitions had been consummated as of the beginning of the previous respective
period.
For the years ending
December 31,
1997 1996
---- ----
Total revenues.......................... $ 43,073,222 38,856,382
Total depreciation...................... 6,947,224 6,693,622
Total expenses.......................... 30,975,575 27,294,953
Net income.............................. 12,097,647 11,561,429

The unaudited pro forma operating data are presented for comparative purposes
only and are not necessarily indicative of what the actual results of operations
would have been for each of the periods presented, nor does such data purport to
represent the results to be achieved in future periods.

F-16

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(5) Operating Leases

Master Lease Agreements

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:

Number of
Minimum Lease Leases
Payments Expiring
------------- -----------
1998...................................... $ 30,852,420 66
1999...................................... 27,815,045 101
2000...................................... 24,678,197 73
2001...................................... 21,377,331 49
2002...................................... 18,920,519 55
Thereafter................................ 137,903,729 82
------------
Total..................................... $261,547,241
============

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 $654,978, $119,225 and $12,413 in
1997, 1996 and 1995, of rental income for the period of occupancy for which
stepped rent increases apply and $786,616 and $131,638 in related accounts
receivable as of December 31, 1997 and 1996, respectively. The Company
anticipates collecting these amounts over the terms of the related leases as
scheduled rent payments are made.

F-17

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, 1997 and 1996:

Current Current Balance at
Property as Interest Maturity Monthly Dec. 31, Dec. 31,
Collateral Rate Date Payment(a) 1997 1996
- ------------ ---------- --------- --------- ------------ ------------
Mortgage payable to Affiliate:
Walgreens 7.655% 05/2004 $ 5,689 $ 727,472 739,543

Mortgages payable to non-affiliates:
Regency Point 7.4875% 08/2000 (b) 4,373,461 4,428,690
Eagle Crest 7.850% 10/2003 15,373 2,350,000 2,350,000
Nantucket Square 7.850% 10/2003 14,392 2,200,000 2,200,000
Antioch Plaza 7.850% 10/2003 5,724 875,000 875,000
Mundelein Plaza 7.850% 10/2003 18,382 2,810,000 2,810,000
Montgomery-Goodyear 7.850% 10/2003 4,121 630,000 630,000
Montgomery-Sears 7.850% 08/2003 10,761 1,645,000 1,645,000
Hartford/Naperville 7.850% 08/2003 15,111 2,310,000 2,310,000
Zany Brainy 7.590% 01/2004 7,875 1,245,000 1,245,000
Prospect Heights
Plaza 7.590% 01/2004 6,926 1,095,000 1,095,000
Hawthorn Village
Commons 7.590% 01/2004 27,071 4,280,000 4,280,000
Six Corners Plaza 7.590% 01/2004 19,608 3,100,000 3,100,000
Salem Square
Shopping Center 7.590% 01/2004 19,797 3,130,000 3,130,000
Lansing Square 7.800% 01/2004 52,975 8,150,000 -
Spring Hill Fashion
Mall 7.800% 01/2004 30,485 4,690,000 -
Aurora Commons (c) 9.000% 10/2001 70,556 9,392,602 -
Maple Park Place 7.650% 06/2004 48,769 7,650,000 -
Dominicks-Schaumburg 7.49% 06/2004 33,365 5,345,500 -
Summit Park Ridge 7.49% 06/2004 9,987 1,600,000 -
Lincoln Park Place 7.49% 06/2004 6,554 1,050,000 -
Crestwood Plaza 7.650% 06/2004 5,765 904,380 -
Park St. Claire 7.650% 06/2004 4,861 762,500 -
Quarry 7.650% 06/2004 5,738 900,000 -
Grand/Hunt Club 7.49% 06/2004 11,210 1,796,000 -
Rivertree Court (d) 10.030% 11/1998 131,226 15,700,000 -
Niles Shopping Center 7.23% 01/2005 9,745 1,617,500 -
Ameritech 7.23% 01/2005 3,147 522,375 -
Calumet Square 7.23% 01/2005 6,223 1,032,920 -

F-18

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

Current Current Balance at
Property as Interest Maturity Monthly Dec. 31, Dec. 31,
Collateral Rate Date Payment(a) 1997 1996
- ------------ ---------- --------- --------- ------------ ----------

Sequoia Shopping
Center 7.23% 01/2005 9,068 1,505,000 -
Dominick's Highland
Park 7.21% 12/2004 38,453 6,400,000 -
Fashion Square (e) 4.10% 12/2014 27,642 6,800,000 -
------------ -----------
Mortgages Payable.................................... $106,589,710 30,838,233
============ ===========

(a) All payments are interest only, with the exception of the loans secured by
the Walgreens, Regency Point and Aurora Commons 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.

(d) The Company received a credit for interest expense on the debt at closing.

As of December 31, 1997, the required future principal payments on the Company's
long-term debt over the next five years are as follows:

1998.................................... $ 845,541
1999.................................... 288,310
2000.................................... 4,474,649
2001.................................... 8,812,017
2002.................................... 17,679

F-19

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

(7) Deposits on Investment Properties

On February 7, 1997, the Company made an initial deposit of $1,228,510 for the
purchase of Oak Forest Commons. On July 31, 1997, the Company made an additional
deposit of $524,390. The balance of the purchase price, approximately
$10,083,000, will be paid upon completion of the redevelopement 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 redevelopement of
the center and when the anticipated main tenant, Dominick's Finer Foods, Inc.
begins paying rent under a lease agreement.

The Company earns interest on these deposits at the rate of 9.3% per annum.

(8) Loan Commitments

In December 1997, the Company committed to additional financing secured by
Cobbler Crossing and Shorecrest Shopping Center properties totaling $8,454,500
from an unaffiliated lender. The funding of these loans is to occur in early
1998. The mortgage loan secured by Cobbler Crossing will have a term of seven
years and, prior to maturity date, will require payments of interest only, fixed
at 7.00%. The mortgage loan secured by Shorecrest Shopping Center will have a
term of five years and, prior to maturity date, will require payments of
interest only, fixed at 7.10%.

(9) Subsequent Events, unaudited

As of February 3, 1998, subscriptions for a total of 27,259,012 Shares were
received, bringing total gross offering proceeds to approximately $272,544,000.

In January 1998, the Company paid a distribution of $1,777,113 to the
Stockholders.

On January 2, 1998, the Company purchased the Woodfield Plaza Shopping Center
from an unaffiliated third party for approximately $19,200,000. The property is
located in Schaumburg, Illinois and contains approximately 177,418 square feet
of leasable space. Its anchor tenants include Kohl's, Barnes and Noble and
Linens N' Things.

On January 8, 1998, the Company purchased The Shops of Coopers Grove from an
unaffiliated third party for approximately $5,700,000. The property is located
in Country Club Hills, Illinois and contains approximately 72,518 square feet of
leasable space. Its anchor tenant is Eagle Food Center.

On January 15, 1998, the Company made a $600,000 paydown of the bond secured by
the Fashion Square property.

F-20

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Notes to Financial Statements
(continued)

On January 22, 1998, the Company purchased the West Chicago Dominick's property
from an unaffiliated third party for approximately $6,300,000. The property is
located in West Chicago, Illinois and contains approximately 77,000 square feet
of leasable space. It's sole tenant is Dominick's.

In January 1998, the Company obtained additional financing secured by the
Dominick's Glendale Heights and Riversquare Shopping Center properties totaling
$7,150,000 from an unaffiliated lender. Loan fees total $53,625 in connection
with these mortgage loans. The mortgage loans have a term of seven years and,
prior to maturity date, requires payment of interest only. Interest is at 7.0%
on the Dominick's Glendale Heights loan and 7.15% on the Riversquare Shopping
Center loan.

On January 30, 1998, the Company purchased Maple and Belmont property from an
unaffiliated third party for approximately $3,165,000. The property is located
in Downers Grove, Illinois and contains approximately 31,298 square feet of
leasable space. Anchor tenants include J.C. Licht, Goodyear Tire and Copy
Center.

On February 2, 1998, the Company purchased Orland Park Retail from an
unaffiliated third party for approximately $1,250,000. The property is located
in Orland Park, Illinois and contains approximately 8,500 square feet of
leasable space. anchor tenants include Video Update and All Cleaners.

At the completion of the Third Offering, the Company contemplates an additional
offering (the "Fourth Offering") for 25,000,000 shares at $11.00 per Share, on a
best efforts basis, plus 2,000,000 Shares to be issued through the Company's DRP
at $10.45 per Share. The Company filed a registration statement with the
Securities and Exchange Commission on January 30, 1998.

On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.

F-21

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Schedule III
Real Estate and Accumulated Depreciation

December 31, 1997

Initial Cost Gross amount at which carried
(A) at end of period (B)
------------------------ -------------------------------------------------
Buildings Adjustments Land Buildings Accumulated
and to and and Total Depreciation
Encumbrance Land improvements Basis (C) improvements improvements (D) (E)
----------- ----------- ------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Single-user Retail
- ------------------
Walgreens/Decatur
Decatur, IL.......... $ 727,472 78,330 1,130,723 - 78,330 1,130,723 1,209,053 109,931

Zany Brainy
Wheaton, IL.......... 1,245,000 838,000 1,626,033 664 838,000 1,626,697 2,464,697 81,313

Ameritech
Joliet, IL........... 522,375 170,000 883,293 2,544 170,000 885,837 1,055,837 19,595

Dominicks-Schaumburg
Schaumburg, IL....... 5,345,500 2,294,437 8,388,263 2,679 2,294,437 8,390,942 10,685,379 163,147

Dominicks-Highland Park
Highland Park, IL.... 6,400,000 3,200,000 9,593,565 2,200 3,200,000 9,595,765 12,795,765 224,931

Dominicks-Glendale Heights
Glendale Heights, IL. - 1,265,000 6,934,230 9,194 1,265,000 6,943,424 8,208,424 61,949

Party City
Oakbrook Terrace, IL. - 750,000 1,230,030 - 750,000 1,230,030 1,980,030 6,809

Eagle Country Market
Roselle, IL.......... - 966,667 1,935,350 - 966,667 1,935,350 2,902,017 7,097

Neighborhood Retail Centers
- ---------------------------
Eagle Crest Shopping Center
Naperville, IL....... 2,350,000 1,878,618 2,938,352 115,828 1,878,618 3,054,180 4,932,798 281,851

Montgomery-Goodyear
Montgomery, IL...... 630,000 315,000 834,659 (11,158) 315,000 823,501 1,138,501 61,859

Hartford/Naperville Plaza
Naperville, IL....... 2,310,000 990,000 3,427,961 13,002 990,000 3,440,963 4,430,963 277,899

Nantucket Square
Schaumburg, IL....... 2,200,000 1,908,000 2,349,918 (69,881) 1,908,000 2,280,037 4,188,037 171,240

Antioch Plaza
Antioch, IL.......... 875,000 268,000 1,360,445 (120,629) 268,000 1,239,816 1,507,816 90,049

Mundelein Plaza
Mundelein, IL........ 2,810,000 1,695,000 3,965,560 (53,429) 1,695,000 3,912,131 5,607,131 229,796

Regency Point
Lockport, IL......... 4,373,461 1,000,000 4,720,800 (19,377) 1,000,000 4,701,423 5,701,423 274,247
------------ ----------- ------------ ----------- ----------- ------------ ----------- -----------
Subtotal $ 29,788,808 17,617,052 51,319,182 (128,363) 17,617,052 51,190,819 68,807,871 2,061,713

Date
Con-
stru- Date
cted Acq
----- -----
<S> <C> <C>
Single-user Retail
- ------------------
Walgreens/Decatur
Decatur, IL.......... 1988 01/95

Zany Brainy
Wheaton, IL.......... 1995 07/96

Ameritech
Joliet, IL........... 1995 05/97

Dominicks-Schaumburg
Schaumburg, IL....... 1996 05/97

Dominicks-Highland Park
Highland Park, IL.... 1996 06/97

Dominicks-Glendale Heights
Glendale Heights, IL. 1997 09/97

Party City
Oakbrook Terrace, IL. 1985 11/97

Eagle Country Market
Roselle, IL.......... 1990 11/97

Neighborhood Retail Centers
- ---------------------------
Eagle Crest Shopping Cente
Naperville, IL....... 1991 03/95

Montgomery-Goodyear
Montgomery, IL...... 1991 09/95

Hartford/Naperville Plaza
Naperville, IL....... 1995 09/95

Nantucket Square
Schaumburg, IL....... 1980 09/95

Antioch Plaza
Antioch, IL.......... 1995 12/95

Mundelein Plaza
Mundelein, IL........ 1990 03/96

Regency Point
Lockport, IL......... 1993 04/96
---- -----
Subtotal
</TABLE>

F-22

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Schedule III (continued)
Real Estate and Accumulated Depreciation

December 31, 1997

<TABLE>
<CAPTION>
Initial Cost Gross amount at which carried
(A) at end of period (B)
------------------------ --------------------------------------------------

Buildings Adjustments Land Buildings Accumulated
and to and and Total Depreciation
Encumbrance Land improvements Basis (C) improvements improvements (D) (E)
----------- ----------- ------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subtotal $ 29,788,808 17,617,052 51,319,182 (128,363) 17,617,052 51,190,819 68,807,871 2,061,713

Prospect Heights
Prospect Heights, IL. 1,095,000 494,300 1,683,755 (9,724) 494,300 1,674,031 2,168,331 83,479

Montgomery-Sears
Montgomery, IL....... 1,645,000 768,000 2,714,173 (48,504) 768,000 2,665,669 3,433,669 134,141

Salem Square
Countryside, IL...... 3,130,000 1,735,000 4,449,217 (16,960) 1,735,000 4,432,257 6,167,257 209,482

Hawthorn Village
Vernon Hills, IL..... 4,280,000 2,619,500 5,887,640 46,891 2,619,500 5,934,531 8,554,031 274,230

Six Corners
Chicago, IL.......... 3,100,000 1,440,000 4,538,152 3,638 1,440,000 4,541,790 5,981,790 182,845

Spring Hill Fashion Corner
West Dundee, IL...... 4,690,000 1,794,000 7,415,396 3,955 1,794,000 7,419,351 9,213,351 278,079

Crestwood Plaza
Crestwood, IL........ 904,380 325,577 1,483,183 4,750 325,577 1,487,933 1,813,510 49,565

Park St. Claire
Schaumburg, IL....... 762,500 319,578 986,920 226,674 319,578 1,213,594 1,533,172 59,391

Lansing Square
Lansing, IL.......... 8,150,000 4,075,000 12,179,383 18,087 4,075,000 12,197,470 16,272,470 407,128

Summit of Park Ridge
Park Ridge, IL....... 1,600,000 672,000 2,497,950 5,886 672,000 2,503,836 3,175,836 83,749

Grand and Hunt Club
Gurnee, IL........... 1,796,000 969,840 2,622,575 (52,811) 969,840 2,569,764 3,539,604 85,654

Quarry Outlot
Hodgkins, IL......... 900,000 522,000 1,278,431 8,872 522,000 1,287,303 1,809,303 42,860

Maple Park Place
Bolingbrook, IL...... 7,650,000 3,665,909 11,669,428 10,603 3,665,909 11,680,031 15,345,940 440,388

Aurora Commons
Aurora, IL........... 9,392,602 3,220,000 8,318,661 3,901 3,220,000 8,322,562 11,542,562 281,096
------------ ----------- ------------ ------------ ----------- ------------ ----------- ------------
Subtotal $ 78,884,290 40,237,756 119,044,046 76,895 40,237,756 119,120,941 159,358,697 4,673,800

Date
Con-
stru- Date
cted Acq
----- -----
<S> <C> <C>
Subtotal

Prospect Heights
Prospect Heights, IL. 1985 06/96

Montgomery-Sears
Montgomery, IL....... 1990 06/96

Salem Square
Countryside, IL...... 1973 08/96

Hawthorn Village
Vernon Hills, IL..... 1979 08/96

Six Corners
Chicago, IL.......... 1966 10/96

Spring Hill Fashion Corn
West Dundee, IL...... 1985 11/96

Crestwood Plaza
Crestwood, IL........ 1992 12/96

Park St. Claire
Schaumburg, IL....... 1994 12/96

Lansing Square
Lansing, IL.......... 1991 12/96

Summit of Park Ridge
Park Ridge, IL....... 1986 12/96

Grand and Hunt Club
Gurnee, IL........... 1996 12/96

Quarry Outlot
Hodgkins, IL......... 1996 12/96

Maple Park Place
Bolingbrook, IL...... 1992 01/97

Aurora Commons
Aurora, IL........... 1988 01/97

Subtotal

</TABLE>

F-23

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Schedule III (continued)
Real Estate and Accumulated Depreciation

December 31, 1997
<TABLE>
<CAPTION>
Initial Cost Gross amount at which carried
(A) at end of period (B)
------------------------ --------------------------------------------------

Buildings Adjustments Land Buildings Accumulated
and to and and Total Depreciation
Encumbrance Land improvements Basis (C) improvements improvements (D) (E)
----------- ----------- ------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subtotal $ 78,884,290 40,237,756 119,044,046 76,895 40,237,756 119,120,941 159,358,697 4,673,800

Lincoln Park Place
Chicago, IL.......... 1,050,000 819,000 1,299,902 (11,788) 819,000 1,288,114 2,107,114 39,828

Niles Shopping Center
Niles, IL............ 1,617,500 850,000 2,408,467 (22,157) 850,000 2,386,310 3,236,310 56,614

Mallard Crossing
Elk Grove Village, IL - 1,778,667 6,331,943 (22,929) 1,778,667 6,309,014 8,087,681 148,038

Cobblers Crossing
Elgin, IL............ - 3,200,000 7,763,940 (67,400) 3,200,000 7,696,540 10,896,540 179,263

Calumet Square
Calumet City, IL..... 1,032,920 527,000 1,537,316 6,664 527,000 1,543,980 2,070,980 29,861

Sequoia Shopping Center
Milwaukee, WI........ 1,505,000 1,216,914 1,802,336 (8,060) 1,216,914 1,794,276 3,011,190 32,470

Riversquare Shopping Center
Naperville, IL....... - 2,853,226 3,124,732 103,872 2,853,226 3,228,604 6,081,830 64,297

Rivertree Court
Vernon Hills, IL..... 15,700,000 8,651,875 22,861,547 6,233 8,651,875 22,867,780 31,519,655 375,277

Shorecrest Plaza
Racine, WI........... - 1,150,000 4,749,758 (17,469) 1,150,000 4,732,289 5,882,289 66,035

Countryside
Countryside, IL...... - 1,375,000 925,106 - 1,375,000 925,106 2,300,106 -

Terramere Plaza
Arlington Heights, IL - 1,435,000 2,966,411 - 1,435,000 2,966,411 4,401,411 -

Wilson Plaza
Batavia, IL.......... - 310,000 984,720 - 310,000 984,720 1,294,720 -

Iroquois Center
Naperville, IL....... - 3,668,347 8,258,584 - 3,668,347 8,258,584 11,926,931 -

Fashion Square
Skokie, IL........... 6,200,000 2,393,534 6,822,071 - 2,393,534 6,822,071 9,215,605 -

Naper West
Naperville, IL....... - 5,335,000 9,584,779 - 5,335,000 9,584,779 14,919,779 -
------------ ----------- ------------ ------------ ----------- ------------ ----------- ------------
Total $105,989,710 75,801,319 200,465,658 43,861 75,801,319 200,509,519 276,310,838 5,665,483
============ =========== ============ =========== =========== ============ =========== ============

Date
Con-
stru- Date
cted Acq
----- -----
<S> <C> <C>
Subtotal

Lincoln Park Place
Chicago, IL.......... 1990 01/97

Niles Shopping Center
Niles, IL............ 1982 04/97

Mallard Crossing
Elk Grove Village, IL 1993 05/97

Cobblers Crossing
Elgin, IL............ 1993 05/97

Calumet Square
Calumet City, IL..... 1967/ 06/97
1994
Sequoia Shopping Center
Milwaukee, WI........ 1988 06/97

Riversquare Shopping Ce
Naperville, IL....... 1988 06/97

Rivertree Court
Vernon Hills, IL..... 1988 07/97

Shorecrest Plaza
Racine, WI........... 1977 07/97

Countryside
Countryside, IL...... 1975 12/97

Terramere Plaza
Arlington Heights, IL 1980 12/97

Wilson Plaza
Batavia, IL.......... 1986 12/97

Iroquois Center
Naperville, IL....... 1983 12/97

Fashion Square
Skokie, IL........... 1984 12/97

Naper West
Naperville, IL....... 1985 12/97

Total

</TABLE>

F-24

INLAND REAL ESTATE CORPORATION
(a Maryland corporation)

Schedule III (continued)

Real Estate and Accumulated Depreciation

December 31, 1997, 1996 and 1995

Notes:

(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) The aggregate cost of real estate owned at December 31, 1997 and 1996 for
federal income tax purposes was approximately $277,000,000 and
$95,000,000, unaudited respectively.

(C) As part of the Montgomery-Goodyear, Hartford/Naperville Plaza, Nantucket
Square, Antioch Plaza, Mundelein Plaza, Regency Point, Prospect Heights
Plaza, Montgomery-Sears and Salem Square 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. GAAP requires that as these payments are received, the
Company record the payments as a reduction in the purchase price of the
properties rather than as rental income. The Company has recorded
$410,361, $437,678 and $133,016 of such payments as of December 31, 1997,
1996 and 1995, respectively.

(D) Reconciliation of real estate owned:

<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of year...... $ 94,632,981 17,512,432 -
Purchases of property............. 181,251,256 77,421,408 17,594,313
Additions......................... 836,962 136,819 51,135
Payments received under
master leases................... (410,361) (437,678) (133,016)
------------- ------------- -------------
Balance at end of year............ $276,310,838 94,632,981 17,512,432
============= ============= =============
</TABLE>

(E) Reconciliation of accumulated depreciation:

<TABLE>
<S> <C> <C> <C>
Balance at beginning of year...... $ 1,109,038 169,894 -
Depreciation expense.............. 4,556,445 939,144 169,894
------------- ------------- -------------
Balance at end of year............ $ 5,665,483 1,109,038 169,894
============= ============= =============
</TABLE>

F-25

Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1997
(unaudited)

The following unaudited Pro Forma Balance Sheet of the Company is presented to
give effect to the acquisitions of the properties indicated in Note B of the
Notes to the Pro Forma Balance Sheet as though these transactions occurred
December 31, 1997. No pro forma adjustments were made for the following
properties which were completed in 1998; Oak Forest Commons, Downers Grove
Market and Staples Office Supply Store. This unaudited Pro Forma Balance Sheet
should be read in conjunction with the December 31, 1997 Financial Statements
and the notes thereto as files 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, 1997, 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

Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1997
(unaudited)

<TABLE>
<CAPTION>
December 31,
December 31, 1997
1997 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------- ------------- --------------
Assets
- ------
<S> <C> <C> <C>
Net investment in
properties ....................... $ 270,645,355 110,188,281 380,833,635
Cash and cash equivalents .......... 51,145,587 -- 51,145,587
Restricted cash .................... 2,073,799 -- 2,073,799
Accounts and rents
receivable ....................... 4,926,643 3,053,174 7,979,817
Other assets ....................... 4,798,747 -- 4,798,747
------------- ------------- -------------
Total assets ....................... $ 333,590,131 113,241,454 446,831,585
============= ============= =============

Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and accrued
expenses ......................... $ 1,193,874 -- 1,193,874
Accrued real estate taxes .......... 7,031,732 3,253,342 10,285,074
Distributions payable (C) .......... 1,777,113 -- 1,777,113
Security deposits .................. 754,359 90,335 844,694
Mortgages payable .................. 106,589,710 9,500,000 116,089,710
Unearned income .................... 495,535 -- 495,535
Other liabilities .................. 493,116 -- 493,116
Due to Affiliates .................. 377,825 -- 337,825
------------- ------------- -------------
Total liabilities .................. 118,673,264 12,843,677 131,516,941
------------- ------------- -------------
Common Stock (D) ................... 249,470 116,742 366,212
Additional paid in capital
(net of Offering costs) (D) ..... 220,640,608 100,281,035 320,921,643
Accumulated distributions in
excess of net income ............. (5,973,211) -- (5,973,211)
------------- ------------- -------------
Total Stockholders' equity ......... 214,916,867 100,397,777 315,314,644
------------- ------------- -------------
Total liabilities and
Stockholders' equity ............. $ 333,590,131 113,241,454 446,831,585
============= ============= =============
</TABLE>

See accompanying notes to pro forma balance sheet.

F-27

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1997
(unaudited)

(A) The December 31, 1997 Historical column represents the historical balance
sheet as presented in the December 31, 1997 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, 1997. The terms are
described in the notes that follow.

Pro Forma Adjustments
---------------------------------------------------
West
Woodfield Coopers Chicago Maple
Plaza Grove Dominick's Plaza
------------ ------------ ------------ ------------
Assets
- ------
Net investment in
properties........... $19,200,000 5,800,000 6,300,000 3,165,000
Accounts and rents
receivable........... 404,735 326,400 - 27,150
------------ ------------ ------------ ------------
Total assets........... $19,604,735 6,126,400 6,300,000 3,192,150
============ ============ ============ ============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ 404,735 340,000 - 46,800
Security deposits...... - 4,533 - 27,150
Mortgage payable....... - - - -
------------ ------------ ------------ ------------
Total liabilities...... 404,735 344,533 - 73,950
------------ ------------ ------------ ------------
Common Stock........... 22,326 6,723 7,326 3,626
Additional paid in capital
(net of Offering
Costs)............... 19,177,674 5,775,144 6,292,674 3,114,574
------------ ------------ ------------ ------------
Total Stockholders'
equity............... 19,200,000 5,781,867 6,300,000 3,118,200
------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity. 19,604,735 6,126,400 6,300,000 3,192,150
============ ============ ============ ============

F-28

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1997
(unaudited)

Pro Forma Adjustments
---------------------------------------------------

Lake Park Homewood Wisner Mill
Plaza Plaza Plaza Creek
------------ ------------ ------------ ------------
Assets
- ------
Net investment in
properties........... 12,275,000 1,936,300 1,885,300 11,295,000
Accounts and rents
receivable........... 286,000 130,008 72,600 589,760
------------ ------------ ------------ ------------
Total assets........... 12,561,000 2,066,308 1,957,900 11,884,760
============ ============ ============ ============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ 298,580 130,008 72,600 608,000
Security deposits...... 9,956 - 3,235 36,333
Mortgage payable....... - - - 9,500,000
------------ ------------ ------------ ------------
Total liabilities...... 308,536 130,008 75,835 10,144,333
------------ ------------ ------------ ------------
Common Stock........... 14,247 2,252 2,188 2,024
Additional paid in capital
(net of Offering
Costs)............... 12,238,217 1,934,048 1,879,877 1,738,403
------------ ------------ ------------ ------------
Total Stockholders'
equity............... 12,252,464 1,936,300 1,882,065 1,740,427
------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity. 12,561,000 2,066,308 1,957,900 11,884,760
============ ============ ============ ============

F-29

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1997
(unaudited)

Pro Forma Adjustments
---------------------------------------------------

Prairie St. James Chestnut Bergen
Square Crossing Court Plaza
------------ ------------ ------------ ------------
Assets
- ------
Net investment in
properties........... 3,101,000 7,477,000 16,144,000 17,247,680
Accounts and rents
receivable........... 55,000 83,000 194,600 729,000
------------ ------------ ------------ ------------
Total assets........... 3,156,000 7,560,000 16,338,600 17,976,680
============ ============ ============ ============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ 58,650 88,305 299,390 751,353
Security deposits...... 9,128 - - -
Mortgage payable....... - - - -
------------ ------------ ------------ ------------
Total liabilities...... 67,778 88,305 299,390 751,353
------------ ------------ ------------ ------------
Common Stock........... 3,591 8,688 18,650 20,029
Additional paid in capital
(net of Offering
Costs)............... 3,084,631 7,463,007 16,020,560 17,205,298
------------ ------------ ------------ ------------
Total Stockholders'
equity............... 3,088,222 7,471,695 16,039,210 17,225,327
------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity. 3,156,000 7,560,000 16,338,600 17,976,680
============ ============ ============ ============

F-30

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1997
(unaudited)

Pro Forma Adjustments
-------------------------
Total
Berwyn Pro Forma
Plaza Wauconda Adjustments
------------ ------------ ------------
Assets
- ------
Net investment in
properties........... 1,837,000 2,525,000 110,188,280
Accounts and rents
receivable........... 113,604 41,317 3,053,174
------------ ------------ ------------
Total assets........... 1,950,604 2,566,317 113,241,454
============ ============ ============

Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ 113,604 41,317 3,253,342
Security deposits...... - - 90,335
Mortgage payable....... - - 9,500,000
------------ ------------ ------------
Total liabilities...... 113,604 41,317 12,843,677
------------ ------------ ------------
Common Stock........... 2,136 2,936 116,742
Additional paid in capital
(net of Offering
Costs)............... 1,834,864 2,522,064 100,281,035
------------ ------------ ------------
Total Stockholders'
equity............... 1,837,000 2,525,000 100,397,777
------------ ------------ ------------
Total liabilities and
Stockholders' equity. 1,950,604 2,566,317 113,241,454
============ ============ ============

F-31

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1997
(unaudited)

Acquisitions of Property:

On January 2, 1998, the Company acquired Woodfield Plaza from an
unaffiliated third party for the purchase price of $19,200,000 on an all
cash basis, funded from cash and cash equivalents.

On January 9, 1998, the Company acquired Coopers Grove from an unaffiliated
third party for the purchase price of $5,800,000 on an all cash basis,
funded from cash and cash equivalents.

On January 22, 1998, the Company acquired West Chicago Dominick's from an
unaffiliated third party for the purchase price of approximately $6,300,000
on an all cash basis, funded from cash and cash equivalents.

On January 30, 1998, the Company acquired Maple Plaza from an unaffiliated
third party for the purchase price of $3,165,000 on an all cash basis,
funded from cash and cash equivalents.

On February 10, 1998, the Company acquired Lake Park Plaza from an
unaffiliated third party for the purchase price of approximately $12,275,000
on an all cash basis, funded from cash and cash equivalents.

On February 23, 1998, the Company acquired Homewood Plaza from an
unaffiliated third party for the purchase price of approximately $1,936,300
on an all cash basis, funded from cash and cash equivalents.

On February 23, 1998, the Company acquired Wisner Plaza from an unaffiliated
third party for the purchase price of approximately $1,885,300 on an all
cash basis, funded from cash and cash equivalents.

On March 4, 1998, the Company acquired Mill Creek from an unaffiliated third
party for the purchase price of $11,360,000. As part of the purchase, the
Company assumed the existing debt of $9,500,000. The mortgage requires
interest only payments at the rate of 8% per annum through September 1999.
The balance of the purchase price was funded from cash and cash equivalents.

On March 5, 1998, the Company acquired Oak Forest Commons from an
unaffiliated third party for the purchase price of approximately $12,460,000
on an all cash basis, funded from cash and cash equivalents.
Oak Forest Commons was constructed in 1998.

On March 6, 1998, the Company acquired Prairie Square from an unaffiliated
third party for the purchase price of $3,101,000 on an all cash basis,
funded from cash and cash equivalents.

On March 25, 1998, the Company acquired Downers Grove Market from an
unaffiliated third party for the purchase price of approximately
$17,679,000 on an all cash basis, funded from cash and cash equivalents.
Downers Grove Market was constructed in 1998.

F-32

Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1997
(unaudited)

On March 31, 1998, the Company acquired St. James Crossing from an
unaffiliated third party for the purchase price of approximately $7,477,000
on an all cash basis, funded from cash and cash equivalents.

On March 31, 1998, the Company acquired Chestnut Court from an unaffiliated
third party for the purchase price of approximately $16,144,000 on an all
cash basis, funded from cash and cash equivalents.

Probable Acquisitions of Property:

The Company anticipates acquiring Bergen Plaza from an unaffiliated third
party for the purchase price of approximately $17,247,680 on an all cash
basis, funded from cash and cash equivalents.

The Company anticipates acquiring Berwyn Plaza from an unaffiliated third
party for the purchase price of approximately $1,837,000 on an all cash
basis, funded from cash and cash equivalents.

The Company anticipates acquiring Wauconda from an unaffiliated third party
for the purchase price of approximately $2,525,000 on an all cash basis,
funded from cash and cash equivalents.

The Company anticipates financing the construction of a Staples Office
Supply Store to be constructed in 1998. The total price will be
approximately $2,694,000 and will be funded from cash and cash equivalents.

(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 $116,742,000, net of additional Offering
costs of $16,344,223 are reflected as received as of December 31, 1997,
prior to the purchase of the properties. Offering costs consist principally
of registration costs, printing and selling costs, including commissions.

F-33

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of the properties indicated in Note B and
Note C of the Notes to the Pro Forma Statement of Operations as though they
occurred the earlier of January 1, 1997 or the date operations commenced. No pro
forma adjustments have been made for Oak Forest Commons and Downers Grove Market
as these centers were completed in 1998 and no significant operations existed
for the year ended December 31, 1997. Construction has not begun on Staples
Office Supply Store and therefore, there were no operations for the year ended
December 31, 1997. This unaudited Pro Forma Statement of Operations should be
read in conjunction with the December 31, 1997 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, 1997, 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-34

Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

Pro Forma Adjustments
---------------------------

1997 1997 1998
Historical Acquisitions Acquisitions 1997
(A) (B) (C) Pro Forma
------------ ------------ ------------ ------------

Rental income..... $21,112,365 9,903,951 10,840,529 41,856,845
Additional rental
income.......... 6,592,983 3,622,583 4,437,622 14,653,188
Interest
income(D)....... 1,615,520 - - 1,615,520
Other income...... 100,717 - - 100,717
------------ ------------ ------------ ------------
Total income.... 29,421,585 13,526,534 15,278,151 58,226,270
------------ ------------ ------------ ------------
Professional services
and general and
administrative
fees............ 482,954 - - 482,954
Advisor asset
management fee.(G) 843,000 1,832,719 1,102,523 3,778,242
Property operating
expenses........ 8,863,024 4,476,786 5,337,410 18,677,220
Interest expense.. 5,654,564 1,338,640 760,000 7,753,204
Depreciation (E).. 4,556,445 2,371,640 2,747,050 9,675,135
Amortization...... 124,884 - - 124,884
Acquisition costs
expensed........ 249,493 - - 249,493
------------ ------------ ------------ ------------
Total expenses.... 20,774,364 10,019,785 9,946,983 40,741,132
------------ ------------ ------------ ------------
Net income...... $ 8,647,221 3,506,749 5,331,168 17,485,138
============ ============ ============ ============

Weighted average
common stock shares
outstanding (F). 15,225,983 26,900,183
============ ============

Net income per weighted
average common stock
outstanding (F). $ .57 .65
============ ============

See accompanying notes to pro forma statement of operations.

F-35

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

(A) The 1997 Historical column represents the historical statement of operations
of the Company for the year ended December 31, 1997, as filed with the SEC
on Form 10-K.

(B) Total pro forma adjustments for the year ended December 31, 1997 are as
though the 1997 acquisitions of the following properties occurred the
earlier of January 1, 1997 or the date operations commenced (May 13, 1997
for the Glendale Heights Dominick's). All properties were purchased on an
all cash basis except for Maple Park, Aurora Commons, Lincoln Park Place and
Rivertree Court. Pro forma adjustments for interest expense on these
properties were based on the following terms.

Maple Park Shopping Center

Aurora Commons Shopping Center

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.

Lincoln Park Place Shopping Center

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.

F-36

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1997
(unaudited)

Rivertree Court

Fashion Square

As part of the acquisition of Fashion Square, the Company assumed the
existing bond financing, in the remaining principal balance of $6,200,000.
Monthly interest only payments are due on the financing through December 1,
2014 maturity date. The interest rate changes weekly and is currently 4.1%.
The bond financing is secured by a Letter of Credit issued by LaSalle
National Bank, who receives an annual fee of 1.25% of the outstanding
principal balance.

F-37

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

(B) Total pro forma adjustments for 1997 acquisitions are as though they were
acquired the earlier of January 1, 1997 or the date operations commenced.

<TABLE>
<CAPTION>
Niles
Maple Park Aurora Lincoln Shopping Cobblers Mallard Calumet Ameritech
Place Commons Park Place Center Mall Mall Square Outlot
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income..... 39,736 82,740 14,159 98,780 341,053 356,037 130,663 36,768
Additional rental
income.......... 8,168 26,594 5,714 39,507 189,843 138,412 146,565 8,091
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Total income...... 47,904 109,334 19,873 138,287 530,896 494,449 277,228 44,859
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Advisor asset
management fee.. - - - - - - - -
Property operating
expenses........ 10,039 30,055 6,352 43,952 205,189 161,720 152,445 9,746
Interest expense.. - - - - - - - -
Depreciation...... - - - - - - - -
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Total expenses.... 10,039 30,055 6,352 43,952 205,189 161,720 152,445 9,746
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Net income (loss). 37,865 79,279 13,521 94,335 325,707 332,729 124,783 35,113
=========== =========== =========== =========== =========== ============ =========== ===========

Highland Glendale
Schaumburg Sequoia Park River Rivertree Shorecrest Heights
Dominicks Plaza Dominicks Square Court Plaza Dominicks Party City
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income..... 269,510 182,563 405,156 358,182 1,923,392 311,714 303,692 166,666
Additional rental
income.......... - 67,441 - 157,773 588,600 128,728 - 33,000
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Total income...... 269,510 250,004 405,156 515,955 2,511,992 440,442 303,692 199,666
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Advisor asset
management fee.. - - - - - - - -
Property operating
expenses........ 5,390 78,364 8,103 166,076 732,510 154,027 7,592 39,000
Interest expense.. - - - - - - - -
Depreciation...... - - - - - - - -
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Total expenses.... 5,390 78,364 8,103 166,076 732,510 154,027 7,592 39,000
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Net income (loss). 264,120 171,640 397,053 349,879 1,779,482 286,415 296,099 160,666
=========== =========== =========== =========== =========== ============ ============ ===========

</TABLE>

F-38

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

(B) Total pro forma adjustments for 1997 acquisitions are as though they were
acquired the earlier of January 1, 1997 or the date operations commenced.

<TABLE>
<CAPTION>
Roselle Wilson Terramere Iroquois Fashion Naper West
Eagle Countryside Plaza Plaza Center Square Plaza
----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income..... 307,980 256,000 136,100 419,563 1,376,053 808,935 1,578,508
Additional rental
income.......... 77,500 - 50,500 376,745 446,667 543,963 588,773
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total income...... 385,480 256,000 186,600 793,309 1,822,720 1,352,897 2,167,281
----------- ----------- ----------- ----------- ----------- ------------ ------------
Advisor asset
management fee.. - - - - - - -
Property operating
expenses........ 100,000 87,000 61,100 406,416 551,333 741,680 718,696
Interest expense.. - - - - - - -
Depreciation...... - - - - - - -
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total expenses.... 100,000 87,000 61,100 406,416 551,333 741,680 718,696
----------- ----------- ----------- ----------- ----------- ------------ ------------
Net income (loss). 285,480 169,000 125,500 389,892 1,271,387 611,217 1,448,585
=========== =========== =========== =========== =========== ============ ============

Total
1997
Pro Forma Acquisitions
Adjustments Pro Forma
----------- -------------
<S> <C> <C>
Rental income..... - 9,903,951
Additional rental
income.......... - 3,622,583
----------- ------------
Total income...... - 13,526,534
----------- ------------
Advisor asset
management fee.. 1,832,719 1,832,719
Property operating
expenses........ - 4,476,786
Interest expense.. 1,338,640 1,338,640
Depreciation...... 2,371,640 2,371,640
----------- ------------
Total expenses.... 5,542,999 10,019,785
----------- ------------
Net income (loss). (5,542,999) 3,506,749
=========== ============

</TABLE>

F-39

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

(C) Total pro forma adjustments for 1998 acquisitions are as though they were
acquired the earlier of January 1, 1997 or the date operations commenced.

West
Woodfield Coopers Chicago Maple
Plaza Grove Dominick's Plaza
----------- ----------- ----------- -----------
Rental income..... 2,235,315 577,096 628,320 369,317
Additional rental
income.......... 755,071 401,492 - 129,431
----------- ----------- ----------- -----------
Total income...... 2,990,386 978,588 628,320 498,748
----------- ----------- ----------- -----------
Advisor asset
management fee.. 192,000 58,000 63,000 31,650
Property operating
expenses........ 873,792 444,031 18,850 133,667
Interest expense.. - - - -
Depreciation...... 483,000 146,600 157,500 83,400
----------- ----------- ----------- -----------
Total expenses.... 1,548,792 648,631 239,350 248,717
----------- ----------- ----------- -----------
Net income (loss). 1,441,594 329,957 388,970 250,031
=========== =========== =========== ===========

Lake Park Homewood Wisner Mill
Plaza Plaza Plaza Creek
----------- ----------- ----------- -----------
Rental income..... 1,216,080 220,375 206,312 1,085,374
Additional rental
income.......... 472,163 132,016 59,636 725,135
----------- ----------- ----------- -----------
Total income...... 1,688,243 332,391 265,948 1,810,509
----------- ----------- ----------- -----------
Advisor asset
management fee.. 122,750 19,363 18,853 113,600
Property operating
expenses........ 467,427 166,951 101,312 823,792
Interest expense.. - - - 760,000
Depreciation...... 293,000 46,500 45,900 272,500
----------- ----------- ----------- -----------
Total expenses.... 883,177 232,814 166,065 1,969,892
----------- ----------- ----------- -----------
Net income (loss). 805,066 99,577 99,883 (159,383)
=========== =========== =========== ===========

F-40

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
December 31, 1997
(unaudited)

Prairie St. James Chestnut Bergen
Square Crossing Court Plaza
----------- ----------- ----------- -----------

Rental income..... 315,796 720,615 1,197,317 1,681,564
Additional rental
income.......... 87,777 183,197 306,682 980,649
----------- ----------- ----------- -----------
Total income...... 403,573 903,812 1,503,999 2,662,213
----------- ----------- ----------- -----------
Advisor asset
management fee.. 31,000 74,770 161,440 172,477
Property operating
expenses........ 130,448 257,225 593,967 1,105,206
Interest expense.. - - - -
Depreciation...... 87,800 187,000 403,600 431,200
----------- ----------- ----------- -----------
Total expenses.... 249,248 518,995 1,159,007 1,708,883
----------- ----------- ----------- -----------
Net income (loss). 154,325 384,817 344,992 953,330
=========== =========== =========== ===========

Total 1998
Berwyn Acquisitions
Plaza Wauconda Pro Forma
----------- ----------- ------------
Rental income..... 176,345 230,703 10,840,529
Additional rental
income.......... 131,460 72,913 4,437,622
----------- ----------- ------------
Total income...... 307,805 303,616 15,278,151
----------- ----------- ------------
Advisor asset
management fee.. 18,370 25,250 1,102,523
Property operating
expenses........ 147,830 72,912 5,337,410
Interest expense.. - - 760,000
Depreciation...... 45,925 63,125 2,747,050
----------- ----------- ------------
Total expenses.... 212,125 161,287 9,946,983
----------- ----------- ------------
Net income (loss). 95,680 142,329 5,331,168
=========== =========== ============

F-41

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Woodfield Plaza, Schaumburg, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Woodfield Plaza
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $2,235,315 - 2,235,315
Additional rental income.. 755,071 - 755,071
----------- ----------- -----------
Total income.............. 2,990,386 - 2,990,386
----------- ----------- -----------
Advisor asset
management fee.......... - 192,000 192,000
Property operating
expenses................ 801,632 72,160 873,792
Depreciation.............. - 483,000 483,000
----------- ----------- -----------
Total expenses............ 801,632 747,160 1,548,792
----------- ----------- -----------
Net income (loss)......... $2,188,754 (747,160) 1,441,594
=========== =========== ===========

Acquisition of Coopers Grove, Country Club Hills, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Coopers Grove
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 577,096 - 577,096
Additional rental income.. 401,492 - 401,492
----------- ----------- -----------
Total income.............. 978,588 - 978,588
----------- ----------- -----------
Advisor asset
management fee.......... - 58,000 58,000
Property operating
expenses................ 428,031 16,000 444,031
Depreciation.............. - 146,600 146,600
----------- ----------- -----------
Total expenses............ 428,031 220,600 648,631
----------- ----------- -----------
Net income (loss)......... $ 550,557 (220,600) 329,957
=========== =========== ===========

F-42

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of West Chicago Dominick's, West Chicago, Illinois

This pro forma adjustment reflects the purchase of West Chicago Dominick's
as if the Company had acquired the property as of January 1, 1997, and is
based on information provided by the Seller.

Acquisition of Maple Plaza, Downers Grove, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

F-43

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Lake Park Plaza, Michigan City, Indiana

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Lake Park Plaza
-----------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $1,216,080 - 1,216,080
Additional rental income.. 472,163 - 472,163
----------- ----------- -----------
Total income.............. 1,688,243 - 1,688,243
----------- ----------- -----------
Advisor asset
management fee.......... - 122,750 122,750
Property operating
expenses................ 467,427 - 467,427
Depreciation.............. - 293,000 293,000
----------- ----------- -----------
Total expenses............ 467,427 415,750 883,177
----------- ----------- -----------
Net income (loss)......... $1,220,816 (415,750) 805,066
=========== =========== ===========

Acquisition of Homewood Plaza, Homewood, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Homewood Plaza
-------------------------------------
Year ended
December 31, Pro Forma
1997 Adjustments Total
----------- ----------- -----------
Rental income............. $ 200,375 - 200,375
Additional rental income.. 132,016 - 132,016
----------- ----------- -----------
Total income.............. 333,391 - 333,391
----------- ----------- -----------
Advisor asset
management fee.......... - 19,363 19,363
Property operating
expenses................ 166,951 - 166,951
Depreciation.............. - 46,500 46,500
----------- ----------- -----------
Total expenses............ 166,951 65,863 232,814
----------- ----------- -----------
Net income (loss)......... $ 165,440 (65,863) 99,577
=========== =========== ===========

F-44

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Wisner Plaza, Chicago, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Acquisition of Mill Creek, Palos Park, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

F-45

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Prairie Square, Sun Prairie, Wisconsin

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Acquisition of St. James Crossing, Westmont, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

St. James Crossing
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 720,615 - 720,615
Additional rental income.. 183,197 - 183,197
----------- ----------- -----------
Total income.............. 903,812 - 903,812
----------- ----------- -----------
Advisor asset
management fee.......... - 74,770 74,770
Property operating
expenses................ 257,225 - 257,225
Depreciation.............. - 187,000 187,000
----------- ----------- -----------
Total expenses............ 257,225 261,770 518,995
----------- ----------- -----------
Net income (loss)......... $ 646,587 (261,770) 384,817
=========== =========== ===========

F-46

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Acquisition of Chestnut Court, Darien, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Probable Acquisition of Bergen Plaza, Oakdale, Minnesota

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

F-47

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

Probable Acquisition of Berwyn Plaza, Berwyn, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

Probable Acquisition of Wauconda, Wauconda, Illinois

Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1997 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:

F-48

Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1997
(unaudited)

(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, 1997 was calculated by estimating the additional shares sold to
purchase each of the Company's properties on a weighted average basis.

(G) Advisor Asset Management Fees are calculated as 1% of the Average Invested
Assets (as defined).

F-49

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 Woodfield Plaza Shopping Center for
the year ended December 31, 1997. 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.

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 Real Estate
Corporation, as described in note 2. The presentation is not intended to be a
complete presentation of Woodfield Plaza'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 Woodfield Plaza for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 14, 1998

F-50

Woodfield Plaza Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Gross income:
Base rental income.............................. $2,235,315
Operating expense and real estate
tax recoveries................................ 746,038
Other income.................................... 9,033
-----------
Total Gross Income.............................. 2,990,386
-----------
Direct operating expenses:
Real estate taxes............................... 507,949
Operating expenses.............................. 197,974
Management Fees................................. 62,400
Insurance....................................... 20,614
Utilities....................................... 12,695
-----------
Total direct operating expenses................. 801,632
-----------
Excess of gross income over
direct operating expenses..................... $2,188,754
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-51

Woodfield Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Woodfield Plaza Shopping Center (Woodfield Plaza) is located in Schaumburg,
Illinois. It consists of approximately 177,418 square feet of gross leasable
area and was 100% leased and occupied at December 31, 1997. Approximately
47% of Woodfield Plaza is leased to one tenant representing approximately
34% of total revenues. Inland Real Estate Corporation has signed a sale and
purchase agreement for the purchase of Woodfield Plaza from an unaffiliated
third party.

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 Woodfield
Plaza's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Woodfield Plaza
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

Woodfield Plaza leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Woodfield Plaza 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 1997
expenses for which the tenants have not yet been billed.

F-52

Woodfield Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
1998 $ 2,046,996
1999 1,985,440
2000 1,910,654
2001 1,875,192
2002 1,901,996
Thereafter 15,702,281
-----------
$25,442,559
===========

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be comparable
to the proposed future operations of Woodfield Plaza. Costs such as mortgage
interest, depreciation, amortization, estimated real estate taxes and
professional fees are excluded from the Historical Summary.

Real estate tax expense is estimated based upon bills for 1996. The
difference between the estimate and the final tax bill is not expected to
have a material impact on the Historical Summary.

Woodfield Plaza is managed pursuant to the terms of a management agreement
for a fixed annual fee of $62,400. Subsequent to the sale of Woodfield Plaza
(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-53

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 The Shops at Coopers Grove for the
year ended December 31, 1997. 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.

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 Real Estate
Corporation, as described in note 2. The presentation is not intended to be a
complete presentation of The Shops at Coopers Grove'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 The Shops at Coopers Grove for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
March 31, 1998

F-54

The Shops at Coopers Grove
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Gross income:
Base rental income.............................. $ 577,096
Operating expense and real estate
tax recoveries................................ 401,492
-----------
Total Gross Income.............................. 978,588
-----------
Direct operating expenses:
Real estate taxes............................... 340,627
Operating expenses.............................. 47,290
Utilities....................................... 15,959
Insurance....................................... 24,155
-----------
Total direct operating expenses................. 428,031
-----------
Excess of gross income over
direct operating expenses..................... $ 550,557
===========

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-55

The Shops at Coopers Grove
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

The Shops at Coopers Grove (Coopers Grove) is located in Country Club Hills,
Illinois. It consists of approximately 72,500 square feet of gross leasable
area and was approximately 96% leased and occupied at December 31, 1997.
Approximately 77% of The Shops at Coopers Grove is leased to one tenant
representing approximately 78% of total revenues. Inland Real Estate
Corporation has signed a sale and purchase agreement for the purchase of The
Shops at Coopers Grove from an unaffiliated third party.

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 The Shops
at Coopers Grove's revenues and expenses. The Historical Summary has been
prepared on the accrual basis of accounting and requires management of The
Shops at Coopers Grove 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

The Shops at Coopers Grove leases retail space under various lease
agreements with its tenants. All leases are accounted for as operating
leases. The leases include provisions under which The Shops at Coopers Grove
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 1997 expenses for which the tenants have not yet been
billed.

F-56

The Shops at Coopers Grove
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $ 604,547
1999 608,933
2000 601,665
2001 571,556
2002 516,765
Thereafter 3,884,507
----------
$6,787,973
==========

</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of The Shops at Coopers
Grove. Costs such as mortgage interest, depreciation, amortization and
professional fees are excluded from the Historical Summary.

Coopers Grove has not received its real estate tax bill for 1997. Real
estate tax expense is estimated based upon bills for 1996. The difference
between the estimate and the final tax bill is not expected to have a
material impact on the Historical Summary.

F-57

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 Plaza Shopping Center for the
year ended December 31, 1997. 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.

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 Plaza Shopping Center for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 9, 1998

F-58

Maple Plaza Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 369,317
Operating expense and real estate
tax recoveries................................ 129,431
----------
Total Gross Income.............................. 498,748
----------
Direct operating expenses:
Operating expenses.............................. 64,387
Real estate taxes............................... 47,796
Utilities....................................... 17,385
Insurance....................................... 4,099
----------
Total direct operating expenses................. 133,667
----------
Excess of gross income over
direct operating expenses....................... $ 365,081
==========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-59

Maple Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Maple Plaza Shopping Center(Maple Plaza) is located in Downers Grove,
Illinois. It consists of approximately 31,298 square feet of gross
leasable area and was 100% leased and occupied at December 31, 1997.
Approximately 19% of Maple Plaza Shopping Center is leased to one tenant
representing approximately 19% of total revenues. Inland Real Estate
Corporation has signed a sale and purchase agreement for the purchase of
Maple Plaza from an unaffiliated third party.

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
Plaza's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Maple Plaza 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 Plaza leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Maple Plaza 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 1997
expenses for which the tenants have not yet been billed.

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 decreased base rental income by $7,977 for the
year ended December 31, 1997.

F-60

Maple Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $ 277,452
1999 126,697
2000 48,285
Thereafter 73,750
----------
$ 526,184
==========

</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Maple Plaza. Costs such as
mortgage interest, depreciation, amortization and professional fees are
excluded from the Historical Summary.

Maple Plaza has not received its real estate tax bill for 1997. Real
estate tax expense is estimated based upon bills for 1996. The difference
between the estimate and the final tax bill is not expected to have a
material impact on the Historical Summary.

Maple Plaza is managed pursuant to the terms of a management agreement for
an annual fee of 3.5% of gross revenues (as defined). rents. Subsequent to
the sale of Maple Plaza (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-61

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 Lake Park Plaza Shopping Center for
the year ended December 31, 1997. 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.

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 Lake Park Plaza Shopping Center for the year ended December 31,
1997, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
February 6, 1998

F-62

Lake Park Plaza Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $1,216,080
Operating expense and real estate
tax recoveries................................ 465,497
Other income.................................... 6,666
----------
Total Gross Income.............................. 1,688,243
----------
Direct operating expenses:
Operating expenses.............................. 128,428
Real estate taxes............................... 298,580
Utilities....................................... 10,450
Insurance....................................... 29,969
----------
Total direct operating expenses................. 467,427
----------
Excess of gross income over
direct operating expenses....................... $1,220,816

==========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-63

Lake Park Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Lake Park Plaza Shopping Center (Lake Park Plaza) is located in Michigan
City, Indiana. It consists of approximately 229,639 square feet of gross
leasable area and was 96% leased and occupied at December 31, 1997.
Approximately 50% of Lake Park Plaza is leased to one tenant representing
approximately 34% of total revenues. Inland Real Estate Corporation has
signed a sale and purchase agreement for the purchase of Lake Park Plaza
from an unaffiliated third party.

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 Lake Park
Plaza's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Lake Park Plaza
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

Lake Park Plaza leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. The leases
include provisions under which Lake Park Plaza 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 1997
expenses for which tenants have not yet been billed.

F-64

Lake Park Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $ 1,236,345
1999 1,195,014
2000 1,167,037
2001 1,059,454
2002 992,596
Thereafter 6,887,666
-----------
$12,538,112
===========

</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Lake Park Plaza. Costs
such as mortgage interest, depreciation, amortization and professional fees
are excluded from the Historical Summary.

Lake Park Plaza has not received its final real estate tax bill for 1997.
Real estate tax expense is estimated based upon bills from 1996. The
difference between the estimate and the final tax bill is not expected to
have a material impact on the Historical Summary.

F-65

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 St. James Crossing Shopping Center
for the year ended December 31, 1997. 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.

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 St. James Crossing Shopping Center for the year ended December 31,
1997, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
April 2, 1998

F-66

St. James Crossing Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 720,615
Operating expense and real estate
tax recoveries................................ 183,197
-----------
Total Gross Income.............................. 903,812
-----------
Direct operating expenses:
Real estate taxes............................... 88,305
Operating expenses.............................. 109,502
Management fees................................. 32,674
Insurance....................................... 2,664
Utilities....................................... 24,080
-----------
Total direct operating expenses................. 257,225
-----------
Excess of gross income over
direct operating expenses..................... $ 646,587
===========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-67

St. James Crossing Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

St. James Crossing Shopping Center (St. James Crossing) is located in
Westmont, Illinois. It consists of approximately 52,000 square feet of
gross leasable area and was 94% leased and occupied at December 31, 1997.
Approximately 14% of St. James Crossing is leased to one tenant
representing approximately 8% of base rental income. Inland Real Estate
Corporation has signed a sale and purchase agreement for the purchase of
St. James Crossing from an unaffiliated third party.

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 St. James
Crossing's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management of St. James
Crossing 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

St. James Crossing leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. The leases
include provisions under which St. James Crossing 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 1997
expenses for which the tenants have not yet been billed.

F-68

St. James Crossing Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

<TABLE>

Year Amount
---- ------
<S> <C>
1998 $ 776,978
1999 691,776
2000 465,947
2001 277,221
2002 72,117
-----------
$ 2,284,038
===========
</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of St. James Crossing. Costs
such as mortgage interest, depreciation, amortization, and professional
fees are excluded from the Historical Summary.

St. James Crossing had not received its final real estate tax bill for
1997. Real estate tax expense is estimated based upon bills for 1996. The
difference between the estimate and the final tax bill is not expected to
have a material impact on the Historical Summary.

St. James Crossing is self-managed pursuant to the terms of a management
agreement for an annual fee of 4% of cash basis revenues (as defined).
Subsequent to the sale of St. James Crossing (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-69

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 Chestnut Court Shopping Center for
the year ended December 31, 1997. 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.

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 Chestnut Court Shopping Center for the year ended December 31,
1997, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
April 2, 1998

F-70

Chestnut Court Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 1,197,317
Lease termination income........................ 765,504
Operating expense and real estate
tax recoveries................................ 306,682
-----------
Total Gross Income.............................. 2,269,503
-----------
Direct operating expenses:
Real estate taxes............................... 299,390
Operating expenses.............................. 169,683
Management fees................................. 86,608
Utilities....................................... 30,337
Insurance....................................... 7,949
-----------
Total direct operating expenses................. 593,967
-----------
Excess of gross income over
direct operating expenses..................... $ 1,675,536
===========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-71

Chestnut Court Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Chestnut Court Shopping Center (Chestnut Court) is located in Darien,
Illinois. It consists of approximately 168,000 square feet of gross
leasable area and was 65% leased and occupied at December 31, 1997. Inland
Real Estate Corporation has signed a sale and purchase agreement for the
purchase of Chestnut Court from an unaffiliated third party.

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 Chestnut
Court's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Chestnut Court
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

Chestnut Court leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Chestnut Court 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 1997
expenses for which the tenants have not yet been billed.

Chestnut Court received approximately $765,500 of tenant termination
income during the year ended December 31, 1997 related to an early lease
termination.

F-72

Chestnut Court Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $ 1,204,736
1999 906,089
2000 650,462
2001 428,346
2002 280,379
Thereafter 251,659
-----------
$ 3,721,671
===========

</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Chestnut Court. Costs such
as mortgage interest, depreciation, amortization, and professional fees are
excluded from the Historical Summary.

Chestnut Court had not received its final real estate tax bill for 1997.
Real estate tax expense is estimated based upon bills for 1996. The
difference between the estimate and the final tax bill is not expected to
have a material impact on the Historical Summary.

Chestnut Court is self-managed pursuant to the terms of a management
agreement for an annual fee of 4% of rental revenues plus certain
reimbursable expenses (as defined). Subsequent to the sale of Chestnut
Court (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-73

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 Bergen Plaza for the year ended
December 31, 1997. 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.

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 Bergen Plaza for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
March 9, 1998

F-74

Bergen Plaza
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 1,681,564
Operating expense and real estate
tax recoveries................................ 937,791
Other income.................................... 42,858
-----------
Total Gross Income.............................. 2,662,213
-----------
Direct operating expenses:
Real estate taxes............................... 751,353
Operating expenses.............................. 156,683
Management fees................................. 132,603
Insurance....................................... 24,877
Utilities....................................... 39,690
-----------
Total direct operating expenses................. 1,105,206
-----------
Excess of gross income over
direct operating expenses..................... $ 1,557,007
===========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-75

Bergen Plaza
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Bergen Plaza is located in Oakdale, Minnesota. It consists of
approximately 271,000 square feet of gross leasable area and was 97% leased
and occupied at December 31, 1997. Approximately 56% of Bergen Plaza is
leased to two tenants representing approximately 40% of base rental income.
Inland Real Estate Corporation has signed a sale and purchase agreement for
the purchase of Bergen Plaza 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 Bergen
Plaza's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Bergen Plaza 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

Bergen Plaza leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Bergen Plaza 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 1997
expenses for which the tenants have not yet been billed.

F-76

Bergen Plaza
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $ 1,687,127
1999 1,552,153
2000 1,274,762
2001 1,220,201
2002 1,097,070
Thereafter 4,169,039
-----------
$11,000,352
===========

</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Bergen Plaza. Costs such
as mortgage interest, depreciation, amortization and professional fees are
excluded from the Historical Summary.

Bergen Plaza has not received its final real estate tax bill for 1997. Real
estate tax expense is estimated based upon bills for 1996. The difference
between the estimate and the final tax bill is not expected to have a
material impact on the Historical Summary.

Bergen Plaza is managed pursuant to the terms of a management agreement
with the Seller for an annual fee of 5% of revenues (as defined) and an
administrative fee equal to 5% of operating expense recoveries (as
defined). Subsequent to the sale of Bergen Plaza (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-77

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 Berwyn Plaza Shopping Center for the
year ended December 31, 1997. 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.

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 Berwyn Plaza Shopping Center for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 15, 1998

F-78

Berwyn Plaza Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 176,345
Operating expense and real estate
tax recoveries................................ 131,460
----------
Total Gross Income.............................. 307,805
----------
Direct operating expenses:
Real estate taxes............................... 113,604
Operating expenses.............................. 14,462
Management fees................................. 1,830
Insurance....................................... 5,934
----------
Total direct operating expenses................. 135,830
----------
Excess of gross income over
direct operating expenses..................... $ 171,975
==========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-79

Berwyn Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Berwyn Plaza Shopping Center (Berwyn Plaza) is located in Berwyn,
Illinois. It consists of approximately 18,000 square feet of gross leasable
area and was 100% leased and occupied at December 31, 1997. Approximately
74% of Berwyn Plaza is leased to one tenant representing approximately 65%
of the total revenues. Inland Real Estate Corporation has signed a sale
and purchase agreement for the purchase of Berwyn Plaza from an
unaffiliated third party.

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 Berwyn
Plaza's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Berwyn Plaza 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

Berwyn Plaza leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Berwyn Plaza 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 1997
expenses for which the tenants have not yet been billed.

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 decreased base rental income by $(8,905) for
the year ended December 31, 1997.

F-80

Berwyn Plaza Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $ 182,400
1999 148,800
2000 123,375
2001 115,000
2002 115,000
Thereafter 2,367,083
-----------
$ 3,051,658
===========

</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Berwyn Plaza. Costs such
as mortgage interest, depreciation, amortization and professional fees are
excluded from the Historical Summary.

Berwyn Plaza has not received its final real estate tax bill for 1997. Real
estate tax expense is estimated based upon bills for 1996. The difference
between the estimate and the final tax bill is not expected to have a
material impact on the Historical Summary.

Berwyn Plaza is managed pursuant to the terms of a management agreement for
a fixed annual fee of 1% of gross revenues (as defined). Subsequent to the
sale of Berwyn Plaza (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-81

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 Wauconda Shopping Center for the
year ended December 31, 1997. 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.

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 Wauconda Shopping Center for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
March 9, 1998

F-82

Wauconda Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 230,703
Operating expense and real estate
tax recoveries................................ 72,913
----------
Total Gross Income.............................. 303,616
----------
Direct operating expenses:
Real estate taxes............................... 41,317
Operating expenses.............................. 15,823
Management fees................................. 12,000
Insurance....................................... 3,772
----------
Total direct operating expenses................. 72,912
----------
Excess of gross income over
direct operating expenses..................... $ 230,704
==========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-83

Wauconda Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Wauconda Shopping Center is located in Wauconda, Illinois. It consists of
approximately 29,700 square feet of gross leasable area and was 100%
leased and occupied at December 31, 1997. Approximately 73% of Wauconda
Shopping Center is leased to one tenant representing approximately 66% of
base rental income. Inland Real Estate Corporation has signed a sale and
purchase agreement for the purchase of Wauconda Shopping Center from an
unaffiliated third party.

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 Wauconda
Shopping Center's revenues and expenses. The Historical Summary has been
prepared on the accrual basis of accounting and requires management of
Wauconda Shopping 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

Wauconda Shopping 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 Wauconda Shopping Center
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 1997 expenses for which the tenants have not yet been
billed.

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 decreased base rental income by $5,356 for the
year ended December 31, 1997.

F-84

Wauconda Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $ 223,307
1999 206,510
2000 201,508
2001 148,500
2002 156,600
Thereafter 587,250
-----------
$ 1,523,675
===========
</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Wauconda Shopping Center.
Costs such as mortgage interest, depreciation, amortization and
professional fees are excluded from the Historical Summary.

Wauconda Shopping Center has not received its final real estate tax bill
for 1997. Real estate tax expense is estimated based upon bills from 1996.
The difference between the estimate and the final tax bill is not expected
to have a material impact on the Historical Summary.

Wauconda Shopping Center is managed pursuant to the terms of a management
agreement for an annual fee of 5% of base rents. Subsequent to the sale of
Wauconda Shopping Center (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-85

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 Mill Creek for the year ended
December 31, 1997. 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.

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 Mill Creek for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
March 2, 1998

F-86

Mill Creek
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $1,085,374
Operating expense and real estate
tax recoveries................................ 723,707
Other income 1,428
----------
Total Gross Income.............................. 1,810,509
----------
Direct operating expenses:
Operating expenses.............................. 96,793
Real estate taxes............................... 615,431
Utilities....................................... 17,553
Insurance....................................... 13,195
Management Fees................................. 36,000
----------
Total direct operating expenses................. 778,792
----------
Excess of gross income over
direct operating expenses..................... $1,031,537
==========
</TABLE>

See accompanying notes to historical summary of gross income and direct
operating expenses.

F-87

Mill Creek
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

1. Business

Mill Creek is located in Palos Park, Illinois. It consists of 102,428
square feet of gross leasable area and was 98% leased and occupied at
December 31, 1997. Approximately 65% of Mill Creek is leased to one tenant
representing approximately 56% of total revenues. Inland Real Estate
Corporation has signed a sale and purchase agreement for the purchase of
Mill Creek from an unaffiliated third party.

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 Mill
Creek's revenues and expenses. The Historical Summary has been prepared on
the accrual basis of accounting and requires management of Mill Creek 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

Mill Creek leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Mill Creek 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 1997
expenses for which the tenants have not yet been billed.

F-88

Mill Creek
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1997

Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are as follows:

Year Amount
---- ------
<S> <C>
1998 $1,121,833
1999 1,065,478
2000 853,824
2001 712,862
2002 710,586
Thereafter 3,917,515
----------
$8,382,098
==========

</TABLE>

4. Direct Operating Expenses

Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Mill Creek. Costs such as
mortgage interest, depreciation, amortization and professional fees are
excluded from the Historical Summary.

Mill Creek has not received its real estate tax bill for 1997. Real
estate tax expense is estimated based upon bills for 1996. The difference
between the estimate and the final tax bill is not expected to have a
material impact on the Historical Summary.

Mill Creek is managed pursuant to the terms of a management agreement for
$3,000 per month (for a total of $36,000 per year). Subsequent to the sale
of Mill Creek (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-89

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

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,
1997. The Table particularly focuses upon the dollar amount available for
investment in properties expressed as a percentage of total dollars raised.

Since 1987, Inland Real Estate Investment Corporation has organized and
completed the offerings of three 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, 1997.

A-2

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, 1997 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

TABLE II

COMPENSATION TO IREIC AND AFFILIATES (A)
(000's omitted)

<TABLE>
<CAPTION>
Public
Programs
----------
6 Programs
----------
<S> <C>
Date offering commenced ............................... --
Dollar amount raised .................................. $172,241
========

Amounts paid or payable to general partner or
affiliates from proceeds of offerings:
Selling commissions and underwriting fees (B)...... 5,885
Other offering expenses (C) ....................... 2,310
Acquisition cost and expense (D) .................. 10,088
========

Dollar amount of cash available (deficiency)
from operations before deducting
(adding) payments to (from) general partner or
affiliates (E) ...................................... $ 16,025
========

Amounts paid to (received from) general partner
or affiliates related to operations:
Property management fees (F) ...................... $ 845
Partnership subsidies received .................... 0
Accounting services ............................... 228
Data processing service ........................... 158
Legal services .................................... 239
Other administrative services ..................... 855
Property upgrades ................................. 848
Property operating expenses ....................... 0

Dollar amount of property sales and refinancings
before payments to general partner and
affiliates (G):
Cash .............................................. $ 15,529
Equity in notes and undistributed sales
proceeds ........................................ 5,960

Dollar amounts paid or payable to general partner
or affiliates from sales and refinancings (H):
Sales commissions ................................. $ 267
Property upgrade .................................. 8
Mortgage brokerage fee ............................ 0
Participation in cash distributions ............... 0
</TABLE>

A-4

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, 1997 and the figures relating to
cash available from operations are for the three years ending December 31,
1997. 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
----------
6 Programs
----------

<S> <C>
Acquisition fees....................... $ 9,975
Reimbursement (at cost) for upgrades
and acquisition due diligence........ 113
Partnership down payments.............. 38,745
Inland down payments................... (38,745)

Acquisition cost and expense........... $ 10,088
===========
</TABLE>

(E) See Note (F) to Table III.

A-5

TABLE II--(Continued)

COMPENSATION TO IREIC AND AFFILIATES
(000's omitted)

NOTES TO TABLE II

(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) See Table V and Notes thereto regarding sales and disposals of properties.

(H) 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

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, 1997.
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

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.
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
------- ------- ------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues .......................... $ 388 411 457 744 564 104 0
Profit on sale of properties.. .......... 1,003 0 229 0 0 0 0

Less:
Operating expenses .................... 150 145 146 64 4 1 0
Interest expense ...................... 0 0 0 0 0 0 0
Partnership expenses .................. 174 170 167 175 86 1 0
Depreciation & amortization ........... 0 2 5 4 3 3 1

Net income (loss)-GAAP basis............. $ 1,067 94 368 501 471 99 (1)
======= ======= ======= ======= ======= ======= =======

Taxable income (loss) (A):
Allocated to investors from
operations .......................... 62 93 137 495 466 100 (1)
Allocated to general partner
from operations ..................... 1 1 1 5 5 1 0

Total from operations ................... 63 94 138 500 471 101 (1)

From gain on sale:
Capital(alloc. to investors) .......... 1,004 0 231 0 0 0 0
Capital (alloc. to general
partner) ............................ 0 0 0 0 0 0 0
Ordinary (recapture) .................. 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------

$ 1,067 94 369 500 471 101 (1)
======= ======= ======= ======= ======= ======= =======

Cash available (deficiency)
from operations (B) ................... (408) 130 172 633 397 94 0
Cash available from sales (C)............ 1,328 0 646 0 0 0 0
Cash (deficiency) from
refinancings .......................... 0 0 0 0 0 0 0
Total cash available before
distributions and special
items ................................. 920 130 818 633 397 94 0
</TABLE>

A-8

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.
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
------- ------- ------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Less distributions to investors:
From operations .................... 0 0 0 0 0 0 0
From sales and refinancings ........ 1,000 0 646 0 0 0 0
From return of capital ............. 0 0 0 0 0 0 0
From supplemental capital
contribution (return on
capital) ........................... 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 0 0 0
Cash available after
distributions before
special items ...................... (80) 130 172 633 397 94 0
------- ------- ------- ------- ------- ------- -------

Special items:
Fixed asset additions (D) .......... 0 0 0 0 0 0 0
Advances (repayments) from
(to) general partner or
affiliates ....................... 4 (20) 23 2 1 (85) 85
Repurchase of units (E) ............ (24) (20) 0 (2) 0 0 0
Use of partnership reserves ........ 0 0 0 2 0 0 0
Use of cash available for
offering purposes ................ 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Cash available after
distributions and special
items .............................. $ (100) 90 195 635 398 9 85
======= ======= ======= ======= ======= ======= =======

Tax and distribution data per
$1,000 invested (F):
Federal income tax results:
Ordinary income (loss):
From operations .................. 2 0 4 15 14 3 0
From recapture ................... 0 0 0 0 0 0 0
Capital gain ..................... 31 0 7 0 0 0 0
</TABLE>

A-9

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.
-----------------------------------------------
1997 1996 1995 1994 1993 1992 1991
------ ----- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash distributions to investors:
Source (on GAAP basis):
Investment income ........... 0 0 0 0 0 0 0
Return of capital ........... 31 0 20 0 0 0 0
Supplemental capital
contributions (return on
capital) ................... 0 0 0 0 0 0 0
Source (on cash basis):
Sales ....................... 31 0 20 0 0 0 0
Refinancings ................ 0 0 0 0 0 0 0
Operations .................. 0 0 0 0 0 0 0
Return of capital ........... 0 0 0 0 0 0 0
Supplemental capital
contributions (return on
capital) ................... 0 0 0 0 0 0 0

Percent of properties remaining
unsold (G)..................... 97.81%
======
</TABLE>

A-10

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
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) "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.
-----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net cash provided by operating
activities per the Form 10-K
annual report or 10-Q
quarterly report .................. $404) 110 195 635 398 9 85
Payments to (from) general
partner and affiliates ............ (4) 20 (23) (2) (1) 85 (85)
Principal payments on
long-term debt .................... 0 0 0 0 0 0 0
Payments for deferred loan
fees .............................. 0 0 0 0 0 0 0
----- ----- ----- ----- ----- ----- -----
$(408) 130 172 633 397 94 0
===== ===== ===== ===== ===== ===== =====
</TABLE>

(D) Fixed asset additions represent betterments and improvements to properties
which have been paid for from the operations of the respective properties.

A-11

TABLE III--(Continued)

OPERATING RESULTS OF PRIOR PROGRAMS
(000's included)

NOTES TO TABLE III

(E) 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.

(F) 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.

(G) 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).

A-12

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, 1997 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,
1997.

A-13

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,
1997. Since 1995, partnerships sponsored by Affiliates of the Advisor have sold
16 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-14

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 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 7.039 Ac. of Parcel #10... 09/16/94 04/21/95 286 0 0 0 286
Capital Fund 17.742 Ac. 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
Monthly Income Fund I-
Yorkville Living Center, Lot #11..... 01/29/88 09/12/97 40 0 0 0 40
Land I 2.081 Acres of Parcel #13....... 11/07/89 09/18/97 26 0 0 0 26
Land I 81.216 Acres of Parcel #1....... 01/19/89 Var 97 31 0 (3,580)(H) 2,170(G) 5,781
Land I 5.468 Acres of Parcel #15....... 01/03/90 Var 97 491 0 0 0 491
Land II 12.6506 Acres of Parcel #7..... 04/22/91 Var 97 1,133 0 0 0 1,027
Land II 2.61 Acres of Parcel #23....... 10/30/92 Var 97 477 0 0 0 477
Capital Fund 8.6806 Ac. of Parcel #2... 11/09/93 Var 97 686 0 0 0 686
Capital Fund 2.305 Ac. of Parcel #4.... 03/30/94 Var 97 642 0 0 0 642
</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 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 7.039 Ac. of Parcel #10.... 0 221 221
Capital Fund 17.742 Ac. 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
Monthly Income Fund I-
Yorkville Living Center, Lot #11...... 0 25 25
Land I 2.081 Acres of Parcel #13........ 0 6 6
Land I 81.216 Acres of Parcel #1........ 0 5,668 5,668
Land I 5.468 Acres of Parcel #15........ 0 173 173
Land II 12.6506 Acres of Parcel #7...... 0 746 746
Land II 2.61 Acres of Parcel #23........ 0 352 352
Capital Fund 8.6806 Ac. of Parcel #2.... 0 255 255
Capital Fund 2.305 Ac. of Parcel #4..... 0 70 70
</TABLE>

A-15

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 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 7.039 Ac. of Parcel #10 .... (9) 0 67 67 0
Capital Fund 17.742 Ac. 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
Monthly Income Fund I-
Yorkville Living Center, Lot #11....... (23) 0 15 0 15
Land I 2.081 Acres of Parcel #13......... 0 0 20 0 20
Land I 81.216 Acres of Parcel #1......... 0 0 (193) 0 (193)
Land I 5.468 Acres of Parcel #15......... 0 0 309 0 309
Land II 12.6506 Acres of Parcel #7....... 0 0 387 0 387
Land II 2.61 Acres of Parcel #23......... 0 0 125 0 125
Capital Fund 8.6806 Ac. of Parcel #2..... 0 0 431 0 431
Capital Fund 2.305 Ac. of Parcel #4...... 0 0 572 0 572

</TABLE>

A-16

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, 1997. 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 the remaining sixteen
six-unit condominium buildings comprising the Schaumburg Terrace
condominium complex to unaffiliated third parties. 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.

(G) As a result of the sale of the remaining approximately 81 acres of Parcel
1 on December 29, 1997, the Partnership received mortgage loans receivable
totaling $2,170,089, $575,000 accrues interest at 9% per annum and has a
maturity date of July 1, 1998. The remaining $1,595,089 accrues interest
at 9% per annum and has a maturity date of December 30, 2000.

(H) As a result of the sale of the remaining approximately 81 acres of Parcel
1 on December 29, 1997, the buyer assumed the current mortgage note held
by the Partnership which had a balance of $3,325,515 at that time.

A-17

INLAND REAL ESTATE CORPORATION
DISTRIBUTION REINVESTMENT PROGRAM

Inland Real Estate Corporation, a Maryland corporation (the
"Company"), pursuant to its Second Articles of Amendment and Restatement, as
amended (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.

i. As agent for the Stockholders who purchased Shares pursuant to
the Company's prior public Offerings, the first of which
commenced October 14, 1994 and was completed on July 22, 1996
and the second of which commenced on July 24, 1996 and the
third of which commenced on July 14, 1997 and was completed on
March 31, 1998 (the "Prior Offerings") and the current
offering of Shares by the Company pursuant to the prospectus
dated April 7, 1998 (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.

ii. Procedure for Participation. Any Stockholder who purchased
Shares pursuant to the Company's Prior Offerings 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.

iii. Purchase of Shares. Participants will acquire Shares from the
Company at a fixed price of $10.45 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

B-1

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 $10.45 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.

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 canceled. The Shares will continue to have 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.

iv. 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.

v. 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.

vi. 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

B-2

account. Upon termination of DRP participation, Distributions
will be distributed to the Stockholder in cash.

vii. 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.

viii. 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.

ix. Governing Law. This DRP shall be governed by the laws of the
State of Maryland.

B-3

EXHIBIT I

INLAND REAL ESTATE CORPORATION

SUBSCRIPTION AGREEMENT

[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.
- -------------------------------------------------------------------------------
MAKE CHECK PAYABLE TO LNB ESCROW AGREEMENT FOR IREC
<TABLE>
<S> <C>
(1) Investment
This subscription is in the amount of $__________ for the purchase of Shares of Inland Real Estate Corporation at $11 per
A Share. Minimum initial investment 300 Shares (100 Shares for IRA, Keogh and qualified plan accounts-Iowa requires 300
Shares for IRA accounts. Minnesota requires 200 Shares for IRA and qualified plan accounts).
This is an: [ ] INITIAL INVESTMENT [ ] ADDITIONAL INVESTMENT
====================================================================================================================================
(2) Distribution Reinvestment program: [ ] YES Subscriber elects to participate in the Distribution Reinvestment Program
B described in the Prospectus Distributions will be made by check unless box is marked
====================================================================================================================================
(3) REGISTERED OWNER - -
--------------------------------------------- ---------------------------------------
[ ] Mr [ ] Mrs [ ] Ms (AREA CODE) HOME TELEPHONE
---------------------------------------------
CO-OWNER
---------------------------------------------
[ ] Mr [ ] Mrs [ ] Ms
---------------------------------------------
(4) MAILING ADDRESS - -
--------------------------------------------- -------------------------------------
CITY, STATE & ZIP CODE (AREA CODE) BUSINESS TELEPHONE
---------------------------------------------
STATE OF RESIDENCE
------
(5) BIRTH DATE
-------------------- -----------------
C MONTH DAY YEAR MONTH DAY YEAR

(6) PLEASE INDICATE
CITIZENSHIP STATUS

[ ] U.S. CITIZEN
[ ] RESIDENT ALIEN
[ ] NON-RESIDENT ALIEN

(7) [ ] EMPLOYEE OR AFFILIATE

(8) SOCIAL SECURITY # CORPORATE OR CUSTODIAL
------------------------------- TAX IDENTIFICATION NUMBER
CO-OWNER
SOCIAL SECURITY # ------------------------------- -------------------------
====================================================================================================================================
(9) RESIDENCE ADDRESS IF DIFFERENT FROM ABOVE OR FOR INVESTOR OR QUALIFIED PLAN
D
---------------------------------------------------------------------------------------------
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) Name of Trustee or other Administrator
E C [ ] Community Property J [ ] Simplified Employee Pension/Trust (S.E.P) ______________________________________
D [ ] Tenants in Common K [ ] Uniform Gifts to Minors Act [ ] Taxable [ ] Grantor A or B
E [ ] Tenants by the Entirety State of ________________ a Custodian N [ ] Estate
F [ ] Corporate Ownership for _________________________________ O [ ] Other (Specify) ______________________
G [ ] Partnership Ownership [ ] Taxable [ ] Non-Taxable
====================================================================================================================================
(11) The undersigned certifies, under penalties of perjury (1) that the taxpayer identification number shown on the Subscription
Agreement/Signature Page is true, correct and complete, and (ii) that he 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 further 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 E-2 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.

Agreement Dated 19 X
- ---------------------------------------------------------------- --------------------------------------------------------------
Signature -- Registered Owner

(Print Name of Custodian of Trustee) X
-------------------------------------------------------------
Signature -- Co-Owner

- ---------------------------------------------------------------- A sale of the Shares may not be completed by the Soliciting
Authorized Signature (Custodian or Trustee) Dealers until at least five business days after receipt
of the Prospectus.
- ------------------------------------------------------------------------------------------------------------------------------------

(12) (Optional) Directly Deposit Cash Distributions to: --------------------------------------------------------------
Account Number -- MUST BE FILLED IN

Name of Bank, X
Brokerage Firm --------------------------------------------------------------
or Individual ------------------------------------- Signature -- Registered Owner
G--
Mailing Address -------------------------------------
- --
City, State & X
Zip Code ------------------------------------- --------------------------------------------------------------
Signature -- Co-Owner

(13) Broker/Dealer data -- completed by selling Registered Representative (Please use Rep's address -- not home office)

Name of - -
Salesperson -------------------------------------------
[]Mr. []Mrs. []Ms. ------------------------------------- Salesperson's Telephone
- --
Mailing
Address Have you changed Broker/Dealers?
- -- [] Yes [] No
City, State &
Zip Code -------------------------------------
- --
Broker/Dealer
Name ------------------------------------- X
- -- --------------------------------------------------------------
Home Office Signature -- Registered Representative
Mailing Address -------------------------------------
- --
City, State &
Zip Code -------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
[INLAND REAL ESTATE CORPORATION]

[INLAND LOGO]

PLEASE MAIL THE YELLOW COPY, THE WHITE COPY, AND YOUR CHECK MADE PAYABLE TO
"LNB/ESCROW AGENT FOR IREC" TO: Inland Securities Corporation, 2901 Butterfield
Road, Oak Brook, Illinois 60523, Attn: Investor Services. Please use ball point
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 dollars and cents
amount of the purchase. Minimum purchase 300 Shares ($3,300). Qualified Plans
100 Shares ($1,100). (Iowa requires 300 Shares ($3,300) for IRA accounts;
Minnesota requires 200 Shares ($2,200) for IRA and qualified accounts).
- --------------------------------------------------------------------------------
B

Item 2 - Check if you desire to participate in Distribution Reinvestment
Program.
- --------------------------------------------------------------------------------
REGISTRATION INFORMATION
C

Item 3 - Enter the exact name in which the Shares are to be held. For co-owners
enter the names of all owners. For investments by qualified plans, include the
exact name of the plan. For investments by qualified plans, enter the name of
the custodian or trustee on the first line and FBO the name of the investor on
the second line. 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. For qualified investments please enter mailing address of custodian or
trustee.

Item 5 - Enter birth (date(s) or date of incorporation.

Item 6 - 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 7 - 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 8 - Enter the Social Security number or Taxpayer I.D. number. The owner is
certifying that this number is correct. For qualified investments please enter
both the investor's social security number (for identification purposes) and the
custodian or trustee's Taxpayer I.D. number (for tax purposes).
- --------------------------------------------------------------------------------
D

Item 9 - The residence address if different. For qualified investments, please
enter the residence address of the investor.
- --------------------------------------------------------------------------------

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
F

Item 11 - The Subscription Agreement/Signature Page must be executed by the
owner(s), and if applicable, the trustee or custodian.
- --------------------------------------------------------------------------------
ALTERNATE ADDRESS FOR DISTRIBUTIONS (Optional)
G

Item 12 - If owners desire direct deposit of his/her/their cash distributions
to an account or address other than as set forth in the subscription
Agreement/Signature page, 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 REGISTERED REPRESENTATIVE
H

ITEM 13 - Enter the name of the Broker/Dealer and the name of the Registered
Representative, along with the street address, city, state, zip code and
telephone number of the 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 SUBSCRIPTION

The properly completed and executed Yellow and White 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 60523.

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.

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.

SUBSCRIPTION AGREEMENT/SIGNATURE PAGE

Certain states have imposed special financial suitability standards for
investors who purchase Shares.

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.

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.

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 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.

- -------------------------------------------------------------------------------
OFFICE USE ONLY Investor Check Date _________ Owner Account Number __________
Investor Check # ____________ Co-Owner Account Number _______
Check Amount $ ____________

Broker/Dealer Number __________________________

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

================================================================================

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

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ORGANIZATIONAL CHART . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ESTIMATED USE OF PROCEEDS OF OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
WHO MAY INVEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FIDUCIARY RESPONSIBILITY OF DIRECTORS AND THE ADVISOR; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 49
PRIOR PERFORMANCE OF THE COMPANY'S AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
REAL PROPERTY INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
SUMMARY OF THE ORGANIZATIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
HOW TO SUBSCRIBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
SALES LITERATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
DISTRIBUTION REINVESTMENT AND SHARE
REPURCHASE PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
REPORTS TO STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-i
PRIOR PERFORMANCE TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
DISTRIBUTION REINVESTMENT PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
</TABLE>

Until April 6, 2000 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

28,058,370 Shares

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

PROSPECTUS
April 7, 1998

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

Inland Securities
Corporation

================================================================================

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 30. Quantitative and Qualitative Disclosures About Market Risks.

The Company does not engage in hedging or like activities and therefore does not
have any material exposure to risk due to financial instruments, derivative
financial instruments or derivative commodity instruments.

Item 31. Other Expenses of Issuance and Distribution.

Securities and Exchange Commission Registration Fee ......... $92,166.00
NASD Filing Fee ............................................. 30,500.00
Printing and Mailing Expenses ............................... 650,000.00 *
Blue Sky Fees and Expenses .................................. 78,669.52
Legal Fees and Expenses ..................................... 250,000.00 *
Accounting Fees and Expenses ................................ 50,000.00 *
Advertising and Sales Literature ............................ 700,000.00 *
Due Diligence ............................................... 425,000.00 *
Miscellaneous ............................................... 770,000.00 *

Total ....................................................... $3,046,335.52
*estimated

Item 32. Sales to Special Parties.

Employees and associates of the Company and its Affiliates will be permitted to
purchase Shares net of sales commissions.

Item 33. Recent Sales of Unregistered Securities.

Options to purchase up to 13,500 Shares have been granted as of the date of this
Prospectus to the Independent Directors pursuant to the Independent Director
Stock Option Plan. On October 24, 1996, 1,000 shares of common stock were sold
to Roland Burris, a Director of the Company, for an aggregate of $9,050,
pursuant to the exercise of options by Mr. Burris. Since the transaction did
not involve any public offering or general solicitation and Mr. Burris had
access to the Company's registration statement and the requisite knowledge and
experience in financial and business matters to evaluate the transaction, the
Company relied on the exemption from registration provided in Section 4(2) of
the Securities Act in order to issue the shares to Mr. Burris.

Item 34. Indemnification of Directors and Officers.

The Company's Second Articles of Amendment and Restatement and Bylaws, as
amended, 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, officer, employee, or agent of the Company or the Advisor and its
Affiliate (each an "Indemnified Party"), provided, that: (i) the Indemnified
Party has 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 Indemnified
Party was 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 an Indemnified Party 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 the Indemnified Party 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.

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.

II-ii

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.

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 35. Treatment of Proceeds from Stock Being Registered.

Inapplicable.

Item 36. Financial Statements and Exhibits.

(a)(1) Financial Statements included in the Prospectus

Balance Sheets at December 31, 1997 and 1996

Statements of Operations for the years ended December 31, 1997, 1996, and
1995

Statements of Stockholders' Equity for the years ended December 31,1997,
1996, and 1995

II-iii

Statements of Cash Flows for the years ended December 31, 1997, 1996 and
1995

Notes to Financial Statements for the years ended December 31, 1997,
1996, and 1995

Pro Forma Balance Sheet for the year ended December 31, 1997 (unaudited)

Notes to Pro Forma Balance Sheet for the year ended December 31, 1997
(unaudited)

Pro Forma Statement of Operations for the year ended December 31, 1997
(unaudited)

Notes to Pro Forma Statement of Operations for the year ended
December 31, 1997 (unaudited)

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Woodfield Plaza

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Woodfield Plaza

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of the Shops at Coopers Grove

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of the Shops at Coopers
Grove

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Maple Plaza

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Maple Plaza

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Lake Park Plaza

II-iv

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Lake Park Plaza

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of St. James Crossing Shopping Center

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of St. James Crossing
Shopping Center

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Chestnut Court Shopping Center

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Chestnut Court Shopping
Center

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Bergen Plaza

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Bergen Plaza

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Berwyn Plaza

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Berwyn Plaza

II-v

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Wauconda Shopping Center

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Wauconda Shopping Center

Independent Auditors' Report

Historical Summary of Gross Income and Direct Operating Expenses for the
year ended December 31, 1997 of Mill Creek

Notes to the Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1997 of Mill Creek

(a)(2) Financial Statements included in this Supplement No. 8

(See "Index to Financial Statements" to Supplement No. 8)

(b) Exhibits

(i) The following documents are filed as part of this Registration
Statement:

Exhibit
No. Description

23.3 Consent of KPMG Peat Marwick LLP dated July 7, 1998.

27 Financial Data Schedule.

(ii) The following exhibits are incorporated herein by reference:

1.1 Form of Dealer Manager Agreement by and between Inland Real
Estate Corporation and Inland Securities Corporation.5

1.2 Form of Soliciting Dealers Agreement between Inland
Securities Corporation and Soliciting Dealers.5

1.3 Form of Warrant Purchase Agreement.5

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 Inland Monthly Income Fund III, Inc. Articles of Amendment.2

II-vi

3.4 Inland Real Estate Corporation Articles of Amendment of
Second Articles of Amendment and Restatement.4

3.5 Inland Real Estate Corporation Articles of Amendment of
Second Articles of Amendment and Restatement.5

3.6 Amendment to the Amended and Restated Bylaws of Inland Real
Estate Corporation.5

4 Specimen Stock Certificate.4

5 Opinion of Shapiro and Olander dated January 29, 1998 as to
the legality of the securities being registered.4

8 Opinion of Shefsky & Froelich Ltd. as to tax matters dated
April 2, 1998.5

10.1 Escrow Agreement between Inland Real Estate Corporation and
LaSalle National Bank, N.A.4

10.2 Advisory Agreement between Inland Real Estate Corporation
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

10.2(c) Amendment No. 3 to the Advisory Agreement effective as of
October 13, 1997.4

10.2(d) Amendment No. 4 to the Advisory Agreement dated
March 27, 1998.5

10.2(e) Amendment No. 5 to the Advisory Agreement dated
March 31, 1998.5

10.3 Form of Management Agreement Between Inland Real Estate
Corporation and Inland Commercial Property Management, Inc.2

10.4 Amended and Restated Independent Director Stock Option
Plan.1

II-vii

23.1 Consent of KPMG Peat Marwick LLP dated April 3, 1998.5

23.2 Consent of Shefsky & Froelich Ltd. dated January 29, 1998.4

24 Power of Attorney (included on signature page).4
_____________
1. Included in the Registrant's Registration Statement on Form S-11 (file
number 333-6459) as filed by Registrant on June 20, 1996.
2. Included in Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form S-11 (file number 333-6459) as filed by
the Registrant on July 18, 1996.
3. Included in Post Effective Amendment No. 1 to the Registrant's
Registration Statement on Form S-11 (file number 333-6459) as filed by
the Registrant on November 1, 1996.
4. Included in the Registrant's Registration Statement of Form S-11 (file
number 333-45233) as filed by the Registrant on January 29, 1998.
5. Included in Pre-Effective Amendment No. 1 to Registrant's Registration
Statement on Form S-11 (file 333-45233) as filed by the Registrant on
April 6, 1998.

Item 37. 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;

(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;

II-viii

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

II-ix

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.

II-x

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. 1 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 7th day of July, 1998.

Inland Real Estate Corporation

By: /s/ Robert D. Parks
Title: President, Chief Executive Officer, Chief
Operating Officer and Chairman of the
Board of Directors

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:

/s/ * President, Chief Executive Officer, July 7, 1998
Robert D. Parks Chief Operating Officer and Chairman
of the Board of Directors

/s/ * Director July 7, 1998
G. Joseph Cosenza

/s/ * Secretary, Treasurer and July 7, 1998
Kelly Tucek Chief Financial Officer
(Principal Accounting Officer)

/s/ * Director July 7, 1998
Joel G. Herter

/s/ * Director July 7, 1998
Heidi N. Lawton

/s/ * Director July 7, 1998
Roland W. Burris

Robert D. Parks, the undersigned attorney-in-fact, by signing his name below,
does hereby sign this Post Effective Amendment No. 1 to the Registration
Statement on behalf of the above-indicated Officers and Directors of Inland Real
Estate Corporation (constituting all the Directors) pursuant to powers of
attorney executed by such persons and heretofore filed with the Securities and
Exchange Commission.

*By: /s/ Robert D. Parks
Robert D. Parks
As attorney-in-fact

350690-3

EXHIBIT 23.3

Consent of KPMG Peat Marwick LLP

The Board of Directors
Inland Real Estate Corporation:

We consent to the use of our reports relating to the historical summary of gross
income and direct operating expenses of High Point Centre for the year ended
December 31, 1997, the historical summary of gross income and direct operating
expenses of Woodland Heights Shopping Center for the year ended December 31,
1997, the historical summary of gross income and direct operating expenses of
Eastgate Shopping Center for the year ended December 31, 1997, and the
historical summary of gross income and direct operating expenses of Winnetka
Commons for the year ended December 31, 1997 included herein and to the
reference to our firm under the heading "Experts" in this Registration Statement
(No. 333-45233) on Form S-11.

/s/KPMG Peat Marwick LLP

Chicago, Illinois
July 7, 1998