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

FORM S-11/A

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

INVESTORS REAL ESTATE TRUST
(Exact name of registrant as specified in governing instruments)
12 South Main Street, Suite 100
Minot, ND 58701
(Address of principal executive offices, including zip code)

TIMOTHY P. MIHALICK
12 South Main Street, Suite 100
Minot, ND 58701
 (Name and address of agent for service)

Copies of communications to:

THOMAS A. WENTZ, JR.
INVESTORS REAL ESTATE TRUST
12 South Main Street, Suite 100
Minot, ND 58701
 (701) 837-4738
FAX (701) 838-7785

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

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

CALCULATION OF REGISTRATION FEE

 

Title of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price  Per Unit	Proposed Maximum Aggregate  Offering Price	Amount of Registration Fee
Investors Real Estate Trust Shares of Beneficial Interest	2,500,000  Shares	$8.75 Per Share	$21,875,000.00  aggregate offering  price	$5,468.75

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

Page 1

1,000,000 COMMON SHARES

INVESTORS REAL ESTATE TRUST

COMMON SHARES OF BENEFICIAL INTEREST

     We are offering 1,000,000 common shares.  The shares are listed on the Nasdaq Small Cap Market under the symbol "IRETS."  Shares being offered for sale are of one class without par value. There is no limit on the number of shares that may be issued. All shares participate equally in dividends when declared, and in net assets upon liquidation.  The shares are non-assessable and have no preference, conversion, exchange, pre-emptive or redemption rights.  A shareholder is entitled to one vote for each share of beneficial interest owned.  With respect to the election of trustees, the shares have cumulative voting rights allowing one vote for each share for as many trustees to be elected.  See "Description of IRET's Shares of Beneficial Interest" on page 101.

     To preserve our status as a real estate investment trust for federal income tax purposes, we impose certain restrictions on ownership of our shares.  See "Ownership and Transfer Restrictions" on page 102.

 

	Per Share	Total if all shares sold	Percentage
Public Offering Price	$8.75	$ 21,875,000	100%
Less Selling Commission	.70	1,750,000	8%
Proceeds to us before expenses	$8.05	$20,125,000	92%

     After the payment of all fees and expenses associated with this offering and assuming all the shares are sold, IRET will receive approximately $20,066,500 or 91.735% of the sale proceeds.

INVESTING IN OUR SHARES INVOLVES RISKS.  SEE "RISK FACTORS" BEGINNING ON PAGE 15 TO READ ABOUT THE RISKS YOU SHOULD CONSIDER BEFORE BUYING OUR SHARES.

     The shares will be offered on a best efforts basis only by broker/dealers who have signed a securities sales agreement and are registered with the National Association of Security Dealers (NASD).  The broker/dealers are not required to sell a specific number or dollar amount of shares, but will use their best efforts to sell the shares offered.  The broker/dealers will be paid an 8% commission on each share sold.  There are no minimum purchase requirements.  Any money received from investors will go immediately to IRET and will not be placed in escrow or trust.  This offering will end on the earlier of one year from the date of this prospectus or when all share have been sold.

      Broker/dealers who have agreed to sell the shares arelisted on page 35.

These securities have not been approved or disapproved by the securities and exchange commission or any state securities commission nor has the commission or any state securities commission passed upon the accuracy or adequacy of this prospectus.  Any representation to the contrary is a criminal offense.

 Effective Date: August 13, 2001 Prospectus

Page 2

TABLE OF CONTENTS

 

PROSPECTUS	PAGE
Use of Proceeds - Summary	8
The Company	8
Selected Financial Information for the Past Three Year	9
Real Estate Holdings and Income by State	9
Real Estate Investment by State for the Year Ended April 30	10
Gross Revenue from Real Estate Activities for the Year Ended April 3	10
Net Income from Real Estate Activities for the Year Ended April 30	11
Commercial Square Footage and Apartment Units Owned for theYear Ended April 30	11
Board of Trustees and Officers	12
Available Information Concerning IRET	14
Securities and Exchange Commission	14
Reports to Security Holders	14
Additional Information	14
Risk Factors	15
Price of Shares May be Higher than Nasdaq Price	15
Price Exceeds Book Value	16
High Leverage on Individual Properties or the Overall Portfolio May Result in Losses	16
Inability to Sell all the Shares May Prevent Completion of Rochester  or Bismarck Apartments	16
Delay or Increased Costs of the Apartments to be Build in Rochester or Bismarck Could Negatively Impact Earnings	17
Changes in the Business Environment May Result in Losses	17
Senior Securities will be Paid Before IRET Shares	18
Current and Future Commercial Vacancy May Negatively Impact Earnings	18
Mortgage Lending May Result in Losses	19
Lack of Employment Contracts may Prevent IRET from Retaining Qualified Management.	19
Environmental Liability may Result in Significant Losses	20
Competition May Negatively Impact IRET's Earnings	20
Low Trading Volume of IRET on the Nasdaq will Prevent the Timely Resale of Shares	21
Ability of IRET's Board of Trustees to Change Policy Without Shareholder Approval	21
Certain Restrictions on Transfer of Shares May Result in Losses	21
Real Estate Investment Risks May Result in Losses	21
Risks Due to Investment in Real Estate	22
Investments in Newly Acquired Properties May Not Perform in Accordance with Expectations	23

Page 3

PROSPECTUS	PAGE
Illiquidity of Real Estate and Reinvestment Risk May Reduce Economic Returns Investors	23
Inability to Implement Growth Strategy; Potential Failure to Identify, Acquire or Integrate New Acquisitions	24
Uninsured and Underinsured Losses; Limited Insurance Coverage	25
Adverse Changes in Laws May Affect Our Potential Liability Relating to the Properties and Our Operations	25
Potential Effect on Costs and Investment Strategy from Compliance with Laws Benefiting Disabled Persons	25
Liabilities Assumed May Exceed Expectations	26
Risks Due to Real Estate Financing	26
Potential Inability to Renew, Repay or Refinance Our Debt Financing	27
Increase in Costs of Indebtedness Due to Rising Interest Rates	27
Potential Incurrence of Additional Debt and Related Debt Service	27
Potential Liability under Environmental Laws	27
Provisions Which Could Limit a Change in Control or Deter a Takeover	28
Tax Liabilities as a Consequence of Failure to Qualify as a REIT	28
Conflicts of Interest May Negatively Impact the Financial Performance of IRET	29
Front-End Fees and Costs Associated With This Offering	33
Offering Compensation.	33
Determination of Offering Price	34
Effective Date of Offering	34
Dilution	34
Plan of Distribution	34
Who May Invest	36
Use of Proceeds	36
Selected Financial Data for IRET for the Year Ended April 30	40
Management's Discussion and Analysis of Financial Conditions and Results of Operations	41
General	41
Results from Operations for the Fiscal Years Ended April 30, 2001, 2000 and 1999	41
Revenues	42
Capital Gain Income	42
Expenses and Net Income	43
Telephone Endorsement Fee	43
Comparison of Results from Commercial and Residential Properties	44
Charge for Impairment of Value Fiscal 2000	44
Commercial Properties - Analysis of Lease Expirations and Credit Exposure	45
Significant Properties	46
Significant Tenants of IRET	47
Results from Stabilized Properties	48

Page 4

PROSPECTUS	PAGE
Funds From Operation	48
Self-Advised Status	50
Property Acquisitions	50
Property Dispositions	53
Dividends	53
Liquidity and Capital Resources	54
Impact of Inflation	56
General Information As To Investors Real Estate Trust	57
Organization of IRET	57
Governing Instruments of IRET	57
Independent Trustees	57
Non-Independent Trustees	58
Shareholder Meetings	58
Structure of IRET	58
Policy With Respect To Certain Activities	60
To Issue Senior Securities	60
To Borrow Money	60
To Make Loans To Other Persons	61
Mortgage Loans Receivable	61
To Invest in the Securities of Other Companies for Purposes of Exercising Control	61
To Underwrite Securities of Other Issuers	62
To Engage in the Purchase and Sale (Or Turnover) of Investments	62
Offer Securities in Exchange for Property	62
To Purchase or Otherwise Re-Acquire Its Shares or Other Securities	63
To Make Annual and Other Reports Available to Shareholders	63
Investment Policies of IRET	64
Investments in Real Estate or Interests in Real Estate	64
Investments in Real Estate Mortgages	64
Investments in the Securities of or Interest in Persons Primarily Engaged in Real Estate Activities and Other Securities	65
Description of Investments	65
Description of Real Estate	67
Commercial Properties	67
Residential Properties	73
Fiscal Year 2001 Property Sales & Acquisitions	80
Title	80
Insurance	81
Planned Improvements	81
Occupancy and Leases	81
Shares Available for Future Sale	82
Operating Partnership Agreement	84
IRET, Inc. is the Sole General Partner	84

Page 5

PROSPECTUS	PAGE
Transferability of Limited Partnership and General Partnership Interests	84
Proceeds of This Offering will be Capital Contributions to IRET Properties	85
Exchange Rights of Limited Partners	86
Operation of IRET Properties and Payment of Expenses	87
Distributions and Liquidation.	87
Allocations	87
Term.	88
Fiduciary Duty	88
Tax Matters	88
Tax Treatment of IRET and Its Shareholders	89
Federal Income Tax.	89
State and Local Income Taxation	90
Taxation of IRET's Shareholders	90
Taxation of IRA's, 401K's, Pension Plans and Other Tax-exempted Shareholders	91
IRET reporting to the IRS and Backup Withholding	91
Tax Treatment of IRET Properties and Its Limited Partners	92
Classification as a Partnership	92
Income Taxation of IRET Properties and Its Partners	93
Partners and Not IRET Properties Subject to Tax.	93
Partnership Allocation Income, Losses and Capital Gain.	93
Tax Allocations with Respect to Contributed Property	93
Tax Basis in IRET Properties	94
Sale of Real Estate	94
ERISA and Prohibited Transaction Considerations	95
Status of IRET and IRET Properties under ERISA	95
Market Price Of and Dividends On IRET's Shares of Beneficial Interest.	97
Market for IRET Shares of Beneficial Interest	97
Dividend Reinvestment Plan	101
Description of IRET's Shares of Beneficial Interest	101
Ownership and Transfer Restrictions	102
Legal Proceeding	102
Security Ownership of Certain Beneficial Owners and Management.	103
Directors and Executive Officers	104
Trustee Compensation	105
Executive Compensation Table	106
Certain Relationships and Related Transactions	108
Management Services	108
Acquisition of Odell-Wentz & Associates, L.L.C	108
Property Management Services	108
Security Sales Services	109
Legal Services	109
Selection, Management and Custody of IRET's Assets.	110

Page 6

PROSPECTUS	PAGE
Real Estate Management	109
Policies with Respect to Certain Transactions	112
Selling To or Buying Property From IRET	112
Sales Commissions or Finder Fees	112
Competition with IRET	112
Interests of Named Experts and Counsel	113
Limitations of Liability	113
Indemnification of Trustees	113
Quantitative & Qualitative Disclosures About Market Risk.	114
Legal Matters	115
Experts	115
Investors Real Estate Trust Unaudited Pro Forma Consolidated Financial Statements	116
Pro Forma Consolidated Statements of Operations for the Year ended April 30, 2001 (unaudited)	116
Consolidated Financial Statements - Fiscal Year Ended April 30, 2001, 2000, and 1999 and Independent Auditor's Report	F-1 to F-43

Page 7

USE OF PROCEEDS - SUMMARY

     IRET plans to use any proceeds raised by this offering to fund the construction of 146 apartment units to be located in Rochester, Minnesota and134 apartment units to be located in Bismarck, North Dakota.  Please see "Use of Proceeds" on page 36.

THE COMPANY

     Investors Real Estate Trust ("IRET") was organized under the laws of the State of North Dakota on July 31, 1970.   Since its formation, IRET has qualified and operates as a "real estate investment trust" under Sections 856-858 of the Internal Revenue Code.  IRET is a self-administered and self-managed company.  As of April 30, 2001, IRET owned and operated a portfolio of 63 apartment communities containing 7,869 apartment units and 60 commercial buildings containing 2,513,518 square feet of leasable space.

     IRET conducts all of its daily business operations through its operating partnership, IRET Properties, a North Dakota Limited Partnership.  IRET Properties is principally engaged in acquiring, owning, operating and leasing multi-family apartment buildings and commercial real estate.  The sole general partner of IRET Properties is IRET, Inc.  IRET owns 100% of IRET, Inc.

     As the general partner, IRET, Inc. owns a 76% interest as of April 30, 2001, in IRET Properties.  The remaining ownership of IRET Properties is held by individual limited partners, none of whom own more than 10% of the outstanding limited partnership units of IRET Properties.

     IRET's principal source of operating revenue is rental income from real estate properties owned and operated by its operating partnership.  A minor amount of revenue is derived from interest on short-term investments in government securities and interest on savings deposits.  In addition to operating income, IRET has received capital gain income when real estate properties have been sold at a price in excess of the depreciated cost of said properties.

     IRET has its only office at 12 South Main, Suite 100, Minot, North Dakota 58701, (701) 837-4738.  IRET operates mainly within the states of North Dakota and Minnesota, although it has real estate investments in the states of Colorado, Georgia, Idaho, Iowa, Kansas, Michigan, Montana, Nebraska, South Dakota, Washington, and Texas.

Page 8

Selected Financial Information For the Past Three Years
     IRET operates on a fiscal year ending April 30th. For the past three fiscal years, sources of operating revenue, total expenses, net real estate investment income, capital gain income, total income, and dividend distributions are as follows:
 

Fiscal Year Ending 4/30	2001	2000	1999
Revenue from Operations
Real Estate Rentals	$74,800,722	$54,257,881	$38,785,287
Interest, Discount & Fees	966,428	1,187,312	1,141,975
	$75,767,150	$55,445,193	$39,927,262
Expenses	$65,579,338	$46,896,635	$33,525,586
Income Before Gain/Loss on Properties and Minority Interest	$10,187,812	$  8,548,558	$  6,401,676
Gain on Sale of Properties	601,605	1,754,496	1,947,184
Minority Interest Portion of Operating Partnership Income	-2,095,177	-1,495,209	-744,725
Net Income	$  8,694,240	$  8,807,845	$ 7,604,135
Per Share
Net Income Per Share (basic and diluted)	$           .38	$             .42	$            .44
Dividends Paid	$           .55	$             .51	$            .47

 Real Estate Holdings and Income by State

     IRET's investment strategy is to maintain its real estate investment portfolio at approximately 70% invested in multi-family apartment communities located primarily in the upper Midwest and the remaining 30% of real estate owned in commercial property (warehouses, retirement homes, manufacturing plants, offices, and retail properties) leased to single or multiple tenants for 10 years or longer located throughout the upper Midwest.  IRET seeks to leverage all property acquired so that the debt is approximately 70% of the property's value.  See page 16 for the risks associated with high leveraging.
 
 

Page 9

     For the last three years, the business activity of IRET in the various states can be broken down as follows:

 

	Real Estate Investment by State For The Year Ended April 30 (1)
	Commercial							Apartments
	2001		2000		1999		2001			2000		1999
State	$	%	$	%	$	%	$		%	$	%	$	%
CO	0	0%	1,409,445	1%	0	0%	$  39,050,180		11%	$38,837,432	12%	38,599,278	17%
GA	3,971,878	2%	3,971,878	3%	3,971,878	6%	0		0%	0	0%	0	0%
ID	4,788,294	2%	4,788,094	4%	5,792,182	9%	3,853,638		1%	3,833,486	1%	3,822,199	2%
IA	0	0%	0	0%	0	0%	4,281,967		1%	0	0%	0	0%
KS	0	0%	0	0%	0	0%	26,818,295		7%	26,541,920	8%	0	0%
MI	2,121,474	1%	2,113,574	2%	2,113,574	3%	0		0%	0	0%	0	0%
MN	143,191,654	62%	44,384,465	37%	7,873,122	12%	55,485,023		15%	45,712,269	14%	38,645,843	17%
MT	4,832,860	2%	4,130,684	3%	3,627,565	5%	36,883,028		10%	24,982,540	8%	18,503,389	8%
NE	14,640,541	6%	13,112,879	11%	11,983,078	18%	9,956,873		3%	9,572,130	3%	0	0%
ND	48,492,536	21%	45,829,016	38%	25,212,104	37%	112,882,092		31%	107,836,564	33%	94,845,697	41%
SD	8,019,609	3%	974,739	1%	5,403,765	8%	16,769,796		5%	16,559,607	5%	16,427,555	7%
TX	0	0%	0	0%	0	0%	37,617,106		10%	37,473,258	11%	0	0%
WA	0	0%	0	0%	0	0%	17,979,624		5%	17,855,910	5%	17,731,015	8%
Other	0	0%	0	0%	1,273,596	2%	0		0%	0	0%	0	0%
Total	$230,058,846	100%	$120,714,774	100%	$67,250,864	100%	$361,577,622		100%	$329,205,117	100%	$228,574,976	100%

(1) Investment is the amount paid by IRET for the land and buildings plus the cost of any improvements made to the real estate.

	Gross Revenue from Real Estate Activities For The Year Ended April 30
	Commercial						Apartments
	2001		2000		1999		2001		2000		1999
State	$	%	$	%	$	%	$	%	$	%	$	%
CO	0	0%	0	0%	0	0	6,004,925	11%	4,387,457	10%	5,442,020	16%
GA	436,907	2%	436,907	4%	436,907	8%	0	0%	0	0%	0	0%
IA	0	0%	0	0%	0	0%	189,193	0%	0	0%	0	0%
ID	26,780	0%	63,081	1%	101,702	2%	521,415	1%	117,075	0%	324,505	1%
KS	0	0%	0	0%	0	0%	3,763,671	7%	2,006,578	5%	0	0%
MI	202,912	1%	192,264	2%	192,264	3%	0	0%	0	0%	0	0%
MN	10,085,064	53%	3,169,633	27%	459,246	8%	9,057,050	16%	7,707,359	18%	7,106,374	22%
MT	591,581	3%	569,668	5%	578,412	10%	4,649,153	8%	2,667,540	6%	1,761,288	5%
NE	1,367,740	7%	1,201,903	10%	416,755	7%	1,717,494	3%	1,065,585	3%	0	0%
ND	5,675,734	30%	5,878,584	49%	2,976,140	52%	18,982,213	34%	17,994,851	42%	14,825,877	45%
SD	607,293	3%	365,987	3%	613,735	11%	3,020,178	5%	2,654,752	6%	2,795,807	8%
TX	0	0%	0	0%	0	0%	5,339,707	10%	1,306,004	3%	0	0%
WA	0	0%	0	0%	0	0%	2,561,714	5%	2,472,654	6%	754,255	2%
Total	$18,994,011	100%	$11,878,027	100%	$5,775,161	100%	$55,806,713	100%	$42,379,855	100%	$33,010,126	100%

 Page 10

 

	Net Income from Real Estate Activities For The Year Ended April 30
	Commercial						Apartments
	2001		2000		1999		2001		2000		1999
State	$	%	$	%	$	%	$	%	$	%	$	%
CO	0	0%	0	0%	0	0%	1,832,402	11%	1,551,246	12%	1,456,732	14%
GA	310,708	4%	321,847	6%	313,720	11%	0	0%	0	0%	0	0%
IA	0	0%	0	0%	0	0%	55,868	0%	0	0%	0	0%
ID	-377,029	-5%	-349,029	-6%	-346,420	-12%	173,756	1%	187,005	1%	182,780	2%
KS	0	0%	0	0%	0	0%	787,400	5%	745,696	6%	0	0%
MI	93,154	1%	78,988	1%	75,732	3%	0	0%	0	0%	0	0%
MN	3,993,685	48%	1,718,743	31%	247,823	8%	3,108,143	19%	2,759,136	21%	2,465,305	23%
MT	155,815	2%	205,684	4%	221,922	7%	1,570,239	10%	1,107,386	8%	752,074	7%
NE	719,870	9%	589,536	11%	215,732	7%	376,243	2%	318,190	2%	0	0%
ND	3,179,328	38%	2,694,967	49%	1,870,459	63%	5,496,014	34%	4,290,775	33%	4,546,399	43%
SD	268,989	3%	199,381	4%	361,894	12%	895,872	5%	1,007,574	8%	853,890	8%
TX	0	0%	0	0%	0	0%	1,227,386	8%	432,807	3%	0	0%
WA	0	0%	0	0%	0	0%	783,319	5%	692,017	5%	312,817	3%
Total	$8,344,520	100%	$5,460,117	100%	$2,960,862	100%	$16,306,642	100%	$13,091,832	100%	$10,569,997	100%

 

	Commercial Square Footage and Apartment Units Owned For the Year Ended April 30
	Commercial						Apartments
	2001		2000		1999		2001		2000		1999
State	sq. ft.	%	sq. ft.	%	sq. ft.	%	Units	%	Units	%	Units	%
CO	29,408	1%	40,000	2%	0	0%	597	8%	597	8%	597	11%
GA	0	0%	29,408	2%	29,408	2%	0	0%	0	0%	0	0%
IA	0	0%	0	0%	0	0%	132	2%	0	0%	0	0%
ID	69,599	3%	139,198	9%	139,198	12%	60	1%	60	1%	60	1%
KS	0	0%	0	0%	0	0%	520	7%	520	7%	0	0%
MI	16,000	1%	16,000	1%	16,000	1%	0	0%	0	0%	0	0%
MN	1,430,460	57%	554,962	35%	176,319	15%	1,236	16%	1,163	16%	1,079	20%
MT	70,598	3%	64,803	4%	59,603	5%	749	10%	475	6%	330	6%
NE	126,774	5%	127,274	8%	101,274	8%	264	3%	264	4%	0	0%
ND	682,893	27%	623,593	39%	600,765	48%	3,085	39%	3,014	41%	2,740	50%
SD	87,786	3%	11,971	1%	106,147	9%	418	5%	418	6%	418	8%
TX	0	0%	0	0%	0	0%	504	6%	504	7%	0	0%
WA	0	0%	0	0%	0	0%	304	4%	304	4%	304	5%
Total	2,513,518	100%	1,607,209	100%	1,228,714	100%	7,869	100%	7,319	100%	5,528	100%

Page 11

Board of Trustees and Officers
     The overall management and operations of IRET is controlled by the Second Restated Declaration of Trust dated February 10, 1999.  This document requires all business decisions and investment policies be set by a Board of Trustees elected by the shareholders.  As of June 1, 2001, the Trustees are:
 

Name	Title	Principal Activity Last Five Years	Age	First Elected	Term  Expires
Jeffrey L. Miller	Chairman	President of M&S Concessions, Inc.; Former President of Coca-Cola Bottling, Co.	57	1985	09/25/01
C. Morris Anderson	Vice Chairman	Director of Dakota Boys Ranch (26 yrs.); President of North Hill Bowl, Inc.; Chairman of the Board, International Inn, Inc.; Director, Norwest Bank - Minot, N.A.	72	1970	09/25/01
John F. Decker	Trustee	Financial Advisor/Senior Vice President, D.A. Davidson;	59	1998	09/25/01
Daniel L. Feist	Vice Chairman	President- Feist Construction & Realty; Former Director of First Bank - Minot, N.A.;  Director ND Holdings, Inc. - Minot, ND	69	1985	09/25/01
Steven B. Hoyt	Trustee	CEO of Hoyt Properties, Inc,; Board Member of Stonehaven Realty Trust; President of Complast, Inc.	49	2001	09/25/01
Patrick G. Jones	Trustee	Investor	53	1986	09/25/01
Timothy P. Mihalick	Trustee	Senior Vice President & Chief Operating  Officer of IRET	42	1999	09/25/01
Stephen L. Stenehjem	Trustee	President & Chief Executive Officer of Watford City BancShares, Inc.; President & Chairman of First International Bank & Trust, Watford City, ND; Vice President & Director of First International       Bank & Trust, Scottsdale, AZ	46	1999	09/25/01
Thomas A. Wentz, Jr.	Trustee	Vice President & General Counsel of IRET; Director of SRT Communications, Inc.;  Sole General Partner of Wenco, Ltd.; Shareholder & Attorney with Pringle      & Herigstad, P.C. until 12/31/99	35	1996	09/25/01

     The trustees are permitted to delegate the day-to-day operations of IRET's business activities to full-time employees.

Page 12

     As of June 13, 2001, IRET had 17 employees.  The officers of IRET are as follows:

 

Officers	Title	Age	Year Joined IRET
Thomas A. Wentz, Sr.	President & Chief Executive Officer	66	1971
Timothy P. Mihalick	Senior Vice President & Chief Operating Officer	42	1981
Thomas A. Wentz, Jr.	Vice President & General Counsel	35	1999
Diane K. Bryantt	Secretary & Chief Financial Officer	37	1996

The remainder of this page has been intentionally left blank.

Page 13

AVAILABLE INFORMATION CONCERNING IRET

Securities and Exchange Commission
     IRET is currently a reporting company pursuant to the Securities Exchange Act of 1934 and annually files a Form 10-K during July and quarterly Forms 10-Q for the first three quarters of each year with the Securities and Exchange Commission. The information filed by IRET can be inspected and copied at the Public Reference Room maintained by the Securities and Exchange Commission in Washington, DC, at 450 Fifth Street NW, Room 1024, Washington, DC 20549.  For further information about the Public Reference Room, please call 1-800-SEC-0330.

     The Securities and Exchange Commission maintains a website at http://www.sec.gov.  Annual and quarterly reports, proxy statements and other information regarding IRET can be obtained from the SEC website.

     IRET also maintains a website at www.iret.com which contains information about the company.

Reports to Security Holders
     IRET provides shareholders with an annual report on or about the second week of August of each year containing financial statements audited by IRET's independent accountants for the prior fiscal year ended.  For the first three quarters of each year, IRET provides shareholders with a quarterly report containing unaudited summary financial statements and such other information as IRET deems appropriate or as required by law.   The quarterly reports are distributed on or before April 15, October 15, and January 15, of each year.

Additional Information
     Copies of any document discussed in this prospectus is available free of charge upon request to Timothy P. Mihalick, 12 South Main Street, Suite 100, Minot, North Dakota 58701, (701-837-4738).

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RISK FACTORS

     An investment in the shares involves various risks.  Before investing you should carefully consider the following risks:

Price of Shares May be Higher Than Nasdaq Price
     The price of the shares has been determined by IRET based on the recent trading price on the Nasdaq Smallcap Market from May 1, 2001, to August 3, 2001, and comparison to IRET's peer group.  The $8.75 price is higher than the price paid by most of the current holders of IRET's shares. The $8.75 price may be higher than the price at which IRET shares trade on the Nasdaq Smallcap Market.  IRET considers the following companies to be its peer group:
 

Symbol	Company Name	Latest Price 05/25/01	Market Value  ($ millions)	FFO* Latest 12 Months	Price to  FFO* Latest  12 Months	Distribution Indicated Per Share	Yield	Payout as of 12 Mos. FFO*
	Apartment REITS
AEC	Associated Estates Realty Corp	$10.40	$202	$1.33	7.8 x	$1.00	9.6%	75.2%
AIV	Apartment Investment & Mgmt	45.98	3,247	3.61	12.7 x	3.12	6.8%	86.4%
AML	AMLI Residential Properties	22.95	569	2.73	8.4 x	1.88	8.2%	68.9%
ASN	Archstone Communities Trust SBI	25.00	3,209	2.21	11.3 x	1.64	6.6%	74.2%
AVB	Avalon Bay Communities Inc.	46.79	3,210	3.70	12.6 x	2.56	5.5%	69.2%
BRE	BRE Properties Incorporated	30.10	1,465	2.61	11.5 x	1.86	6.2%	71.3%
CPT	Camden Property Trust	34.80	1,377	3.56	9.8 x	2.44	7.0%	68.5%
EQR	Equity Residential Properties	53.60	7,965	5.11	10.5 x	3.26	6.1%	64.8%
ESS	Essex Property Trust Incorporated	46.90	882	3.61	13.0 x	2.80	6.0%	77.6%
GBP	Gables Residential Trust	28.30	849	3.02	9.4 x	2.27	8.0%	75.2%
HME	Home Properties of New York, Inc.	29.17	638	2.86	10.2 x	2.28	7.8%	79.7%
MAA	Mid-America Apartment Communities	24.60	503	2.78	8.8 x	2.34	9.5%	84.2%
PEI	Pennsylvania REIT	24.25	327	3.06	7.9 x	2.04	8.4%	68.7%
PPS	Post Properties Incorporated	36.49	1,634	3.55	10.3 x	3.12	8.6%	87.9%
SMT	Summit Properties Incorporated	24.58	656	2.43	10.1 x	1.85	7.5%	76.1%
SRW	Smith Charles Residential	48.32	1,099	3.73	13.0 x	2.34	4.8%	62.7%
TCR	Cornerstone Realty Income Trust	10.30	355	1.29	8.0 x	1.12	10.9%	86.8%
TCT	Town and Country Trust	19.45	312	1.91	10.2 x	1.72	8.8%	90.1%
UDR	United Dominion Realty	13.32	1,378	1.47	9.1 x	1.08	8.1%	73.5%
	Average of 19 Apartment REITs	$30.28	$1,572	$2.87	10.5 x	$2.14	7.1%	74.6%
	Commercial REITS
BED	Bedford Property Investors, Inc.	$19.65	$438	$2.45	8.0 x	$1.80	9.2%	73.5%
BDN	Brandywine Realty Trust	19.88	942	2.55	7.8 x	1.64	8.3%	64.3%
CRE	Carramerica Realty Corporation	27.88	1,984	3.01	9.3 x	1.85	6.6%	61.5%
GLB	Blenborough Realty Trust, Inc.	18.59	601	2.18	8.5 x	1.68	9.0%	77.1%
KRC	Kilroy Realty Corporation	25.12	678	2.79	9.0 x	1.92	7.6%	68.8%
OFC	Corporate Office PPTYS Trust	10.30	339	1.21	8.5 x	0.80	7.8%	66.1%
PGE	Prime Group Realty Trust	13.74	214	1.81	7.6 x	1.35	9.8%	74.6%
PKY	Parkway Properties Incorporated	31.10	296	4.11	7.6 x	2.52	8.1%	61.3%
RA	Reckson Associates Realty Corp	22.12	1,016	2.66	8.3 x	1.54	7.0%	57.9%
SPK	Spieker Properties Incorporated	57.15	3,950	4.60	12.4 x	2.80	4.9%	60.9%
TZH	Trizec Hahn Corporation	17.20	2,976	1.99	8.6 x	0.35	2.0%	17.6%
	Average of 11 Commercial REITs	$23.88	$1,213	$2.67	8.9 x	$1.66	6.9%	62.2%
	Weighted Average REIT Index 2/3rd weighted apartments, 1/3rd weighted commercial	$28.15	$1,453	$2.80	10.0 x	$1.98	7.0%	70.7%
IRETS	Investors Real Estate Trust	$8.75	$208	$.79	11.0 x	$0.58	6.6%	72.3%

*FFO Funds From Operations.  Industry analysts generally consider funds from operations to be an approximate measure of the performance of an equity REIT.  Funds from operation is defined as taxable income increased by non-cash deductions of real estate asset depreciation and amortization and reduced by capital gain income and other extra-ordinary income items.  Each company listed above may calculate its FFO in a slightly different manner than the other companies listed above. 

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Price Exceeds Book Value

      The book value of IRET shares of beneficial interest is substantially less than the $8.75 purchase price. As of April 30, 2001, the book value of the 24,068,346 shares then outstanding was $4.94 per share. Assuming all of the shares registered under this offering are sold, the estimated resulting book value will be $5.23 per share. Thus, a purchasing shareholder paying $8.75 per share will incur an immediate book value dilution of $3.52 per share.

 High Leverage on Individual Properties or the Overall Portfolio May Result in Losses
     IRET seeks to borrow approximately 70% of the cost of real estate purchased or constructed. The Declaration of Trust, Article 1, Section J provides that the aggregate borrowings of IRET, secured and unsecured, shall be reasonable in relation to the net assets of IRET, and shall be reviewed by the trustees at least quarterly. The maximum borrowings in relation to the net assets, in the absence of a satisfactory showing that a higher level of borrowing is appropriate, shall not exceed 300% of net assets in the aggregate. Any borrowing in excess of the 300% limit shall be approved by a majority of the independent trustees and disclosed to shareholders in the next quarterly report of IRET along with justification for the excess. There is no limit on the amount of money IRET may borrow on an individual property.  For the past three years as of April 30th, the aggregate indebtedness of IRET has been as follows:
 
 

	2001	2000	1999
Net Assets	$   177,948,354	$   145,038,261	$   100,263,836
Total debt	389,086,105	287,940,038	191,229,475
Leverage percentage	219%	199%	191%

     This amount of leverage may expose IRET to cash flow problems in the event rental income decreases. Such a scenario may require IRET to sell properties at a loss, reduce or eliminate quarterly cash distributions to shareholders or default on the mortgage which would result in loss of the property through foreclosure.

Inability to Sell All the Shares May Prevent Completion of Rochester or Bismarck Apartments
     The shares are being sold by the broker/dealers on a "best efforts" basis whereby the selling agent is only required to use its best efforts to locate purchasers for the shares, but is not obligated to ensure that a minimum number or that even any shares are sold. Therefore, no assurance is given as to the amount of proceeds that will be available for investment by IRET.  In the event fewer than all the shares are sold during the offering period which is the shorter of one year from the date on the front of the prospectus or when all shares have been sold, IRET would not have sufficient money to complete the construction of the apartments in Rochester or Bismarck.  This could result in the fixed operating expenses of IRET, as a percentage of gross income, to be higher and consequently reduce the taxable income distributable to shareholders.  Even if less than all the share available are sold, investors will not have any money returned.
 
 

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Delay or Increased Costs for the Apartments to be Built in Rochester or Bismarck Could Negatively Impact Earnings
Even though IRET has prepared a detailed budget and timeline for completion of the apartments to be built in Rochester and Bismarck certain factors beyond IRET's control could cause a delay in the completion of the apartments to be build in both cities as well as dramatically increase the costs of construction.  Those factors include, but are not limited to, the weather, availability of qualified labor and materials, city permits and zoning approval.  Any of these factors could delay or increase the costs of the project.  Delay beyond the completion date or cost overruns beyond the budget will delay IRET opening the property and collecting rent.  However, IRET will still incur the fixed costs of insurance, taxes and management without any income.  The result will be reduced earnings.

Changes in the Business Environment May Result in Losses
     The results of operations of IRET will depend, among other things, upon the availability of opportunities for the investment and reinvestment of the funds of IRET.  The yields available from time to time on mortgages and other real estate investments depend to a large extent on the type of security involved, the type of investment, the condition of the lending market, the geographical location of the property, general economic conditions, competition, and other factors, none of which can be predicted. A majority of IRET's assets are presently invested in real estate in North Dakota and Minnesota. Please refer to pages 67-98 for the breakdown of IRET's operations by state.

      As a result of this concentration in two states, IRET may be subject to substantially greater risk than if its investments were more dispersed geographically.  Local conditions, such as building by competitors or a decrease in employment may adversely affect the performance of IRET's investments.

      The Minnesota economic climate has been strong.  Its economy is well diversified among agriculture, service, manufacturing and high technology.  Minnesota has an unemployment rate below  4% and, according to the latest 2000 census, the state's population grew by 12.4% over the last decade to over 4,900,000 people.  As a result of this population growth over the past decade, IRET has experienced a strong demand for both its multi-family and commercial properties.

      In contrast, the North Dakota economy is dependent on the areas of agriculture and mineral development.  Both of these industries were depressed for most of the past decade.  In the opinion of IRET there appears little prospect for improvement.  While the North Dakota unemployment rate is below 4%, the state experienced almost zero population growth during the last decade and currently has a high concentration of people over 65.  During the past decade, the population located in the rural areas declined significantly while that of the cities and towns over 15,000 increased on average by 5%.  This increase was due to the rural population moving to North Dakota's larger towns and cities of Fargo, Bismarck, Grand Forks, Minot, Jamestown, Dickinson, Williston, and Devils Lake.  Of IRET's assets in North Dakota, over 90% are located in the cities and towns previously listed.  All of those locations experienced positive population and job growth over the past decade.  It is predicted that the rural population in North Dakota will continue to move to North Dakota's larger towns and cities over the coming decade.

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      However, if this trend does not continue or these individuals decide to leave North Dakota, IRET will experience difficulty in renting its real estate at acceptable rates of return.  This will result in a decrease in net income and a corresponding decline in the level of distributions to shareholders.

      IRET currently has no limitations or targets concerning the concentration of assets or geographic location of business activities.

Senior Securities will be Paid Before IRET Shares
      As of April 30, 2001, IRET has issued $11,876,417 of securities to other investors which are senior to the shares offered for sale under this document.  As a result, in the event IRET ceases operations or liquidates and distributes all of its assets, the holders of the senior securities will be paid in full first before any money is distributed to shareholders.  This preference will result in shareholders receiving less money.  Currently, IRET is authorized to issue no more than $5,000,000 in senior securities.  However, this policy can be changed by the trustees at any time without advance notice to or a vote of the shareholders.

Current and Future Commercial Vacancy May Negatively Impact Earnings
      Over the next 12 months leases covering approximately 11.69% of the total commercial square footage owned by IRET will expire.  As of April 30, 2001, approximately 3.6% of the total commercial square footage owned by IRET was vacant.  Of the current vacancy, 2,7% is represented by the warehouse in Boise, Idaho which has been vacant for the last eleven (11) months.  As a result, in the event IRET is unable to rent or sell those properties affected by an expiring lease or that are already vacant, then 14.6% of IRET's total commercial portfolio per square foot will be vacant.  If not corrected, this vacancy will negatively impact IRET's earnings and result in lower distributions to shareholders and a possible decline in the value of IRET real estate portfolio.
 
 

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Mortgage Lending May Result in Losses
     As of April 30, 2001, IRET has made the following mortgages which also includes a recent loan as of June 30, 2001:

Mortgage Loans Receivable
 

Location	Real Estate Security	6/30/01	4/30/01	4/30/00	4/30/99	Interest Rate	Priority
Higley Heights - Phoenix, AZ	Orange Grove	$              0	$                0	$       598,843	$       742,811	8.00%	First
Great Plains Software - Fargo, ND	Campus/Office Facility	0	0	0	9,185,758	9.50%	First
Hausmann Rentals - Moorhead, MN	Apartment Building	277,019	278,527	287,115	294,968	9.00%	First
1516 N. Street -  Bismarck, ND	Apartment Building	0	0	0	159,965	10.25%	First
Scottsbluff Estates - Scottsbluff, NE	Apartment Building	106,608	106,926	108,752	110,437	8.00%	Second
Fairfield Apts - Hutchinson, MN	Apartment Building	42,692	43,313	45,930	46,500	8.75%	First
1921 7th Street NW - Minot, ND	Rental House	745	954	2,269	3,282	7.00%	First
Inwards Building - Detroit Lakes, MN	Apartment Building	0	0	0	117,493	9.00%	First
Edgwood Vista - Norfolk, MN	Alzheimers Facility	477,375	477,375	477,375	0	11.00%	First
Mankato Heights Plaza - Mankota, MN	Strip Mall	3,200,000	0	0	0	10.00%	First
Other Mortgages		130,000	130,000	130,000	60,000	8.00%
Total		$ 4,234,438	$    1,037,095	$  1,650,284	$ 10,721,213
Less:
Unearned Discounts		$                0	$                 0	$          -392	$         -1,898
Deferred gain from property         dispositions		0	0	0	$         -1,000
Allowance for Losses		0	0	$     120,314	$     -120,314
		$  4,234,438	$   1,037,095	$  1,529,578	$ 10,598,001

       All real property investments are subject to some degree of risk, which, in some cases, varies according to the size of the investment as a percentage of the value of the real property. In the event of a default by a borrower on a mortgage loan, it may be necessary for IRET to foreclose its mortgage or engage in negotiations that may involve further outlays to protect IRET's investment. The mortgages securing IRET's loans may be, in certain instances, subordinate to mechanics' liens, materialmen's liens, or government liens and, in instances in which IRET invests in a junior mortgage, to liens of senior mortgages, and IRET may be required to make payments in order to maintain the status of the prior lien or to discharge it entirely. In certain areas, IRET might lose first priority of its lien to mechanics' or materialmen's liens due to wrongful acts of the borrower. It is possible that the total amount which may be recovered by IRET in such cases may be less than its total investment, with resultant losses to IRET.  Loans made by IRET may, in certain cases, be subject to statutory restrictions limiting the maximum interest charges and imposing penalties, which may include restitution of excess interest, and, in some cases, may affect enforceability of the debt. There can be no assurance that all or a portion of the charges and fees which IRET receives on its loans may not be held to exceed the statutory maximum, in which case IRET may be subjected to the penalties imposed by the statutes.

Lack of Employment Contracts may Prevent IRET from Retaining Qualified Management
     Certain operating expenses of IRET, including compensation to employees and trustees, must be met regardless of profitability.  IRET will be dependent upon its officers for essentially all aspects of its business operations.  Because the officers have experience in the specialized business segment in which IRET operates, the loss of any of the officers, for any reason, would likely have a material adverse affect on IRET's operations.  The officers may terminate their
 
 

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relationship with IRET at any time and without providing any advance notice to IRET.  IRET currently relies on the following key employees:
 
 

Name	Position	Age
Thomas A. Wentz, Sr.	President & Chief Executive Officer	66
Timothy P. Mihalick	Senior Vice President  & Chief Operating Officer	42
Thomas A. Wentz, Sr.	Vice President & Legal Counsel	35
Diane K. Bryantt	Secretary & Chief Financial Officer	37

       IRET does not have any employment contracts or agreements with any employees or trustees.  IRET would incur significant expense in order to recruit and relocate officers to its location in Minot, North Dakota.

Environmental Liability May Result in Significant Losses
      Investments in real property create a potential for environmental liability on the part of the owner of or any mortgage lender on such real property.  Under federal and state legislation, property owners are liable for cleanup expenses in connection with hazardous wastes or other hazardous substances found on their property.  No assurance can be given that a substantial financial liability may not occur with respect to properties owned or acquired in the future by IRET.  It is the policy of IRET to obtain a Phase I environmental survey upon purchasing property.  If the Phase I indicates any possible environmental problems, IRET's policy is to order a Phase II study which involves testing the soil and ground water for actual hazardous substances.  As of the date of this prospectus, IRET is unaware of any environmental liability with respect to properties in its portfolio as discovered through a Phase I or Phase II study.  By its nature, a Phase I is only a limited visual inspection of the property and review of documents related to the property.  It does not involve any actual testing of soil or ground water for the presence of hazardous substances or other environmental problems.  As a result, it is possible that a Phase I may fail to reveal an environmental problem.

Competition May Negatively Impact IRET's Earnings
      Investments of the types in which IRET is interested may be purchased on a negotiated basis by many kinds of institutions, including other real estate investment trusts, private partnerships, individuals, pension funds and banks.  There are a number of other real estate investment trusts in operation, many of which are active in one or more of IRET's areas of investment.  According to the National Association of Real Estate Investment Trusts (NAREIT) as of March 2001, there were 178 publicly traded real estate investment trusts and another 20 real estate investment trusts not traded on a public exchange.  According to the NAREIT list, IRET is currently ranked in the middle category according to market capitalization and annual gross revenue.

      There are also thousands of private limited partnerships organized to invest in real estate. Investments must thus be made by IRET in competition with such other entities.  The yields available on mortgage and other real estate investments depend upon many factors, including the supply of money available for such investments and the demand for mortgage money.  The presence of the foregoing competitors increases the price for real estate assets as well as the available supply of funds to prospective borrowers from IRET.  All these factors, in turn, vary in
 
 

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relation to many other factors such as general and local economic conditions, conditions in the construction industry, opportunities for other types of investments, international, national and local political affairs, legislation, governmental regulation, tax laws, and other factors.  IRET cannot predict the effect which such factors will have on its operations.

       In no market in which IRET operates does a particular competitor own or otherwise control more than 10% of the available apartment units or more than 5% of the available commercial real estate space for rent to the public.

Low Trading Volume of IRET on the Nasdaq will Prevent the Timely Resale of Shares
       No assurance can be given that a purchaser of IRET shares under this offering would be able to resell such shares when desired.  Effective October 17, 1997, IRET shares of beneficial interest have been traded on the National Association of Securities Dealers Automated Quotation System Small Capitalization Index (NASDAQ).  Since October 17, 1997, the average daily trading volume has been 13,184 and the average monthly trading volume through June 30, 2001, has been 272,823  As a result of this low trading volume, an owner of IRET shares will encounter difficulty in selling shares of IRET in a timely manner and may incur a substantial loss.

Ability of IRET's Board of Trustees to Change Policy Without Shareholder Approval
The major policies of IRET, including its policies with respect to development, acquisitions, financing, growth, debt capitalization and distributions will be determined by the trustees.  Accordingly, the trustees may amend or revoke those policies and other policies without advance notice to or the approval of shareholders.

Certain Restrictions on Transfer of Shares May Result in Losses
      Provisions of the Declaration of Trust of IRET designed to enable IRET to maintain its status as a REIT, authorize IRET (i) to refuse to effect a transfer of any shares of stock of IRET to any person if such transfer would jeopardize IRET's qualification as a REIT, and (ii) to repurchase any such shares held by any such person.  The Declaration of Trust specifically provides:

"To ensure compliance with the Internal Revenue Code provision that no more than 50% of the outstanding shares may be owned by five or fewer individuals, the trustees may at any time redeem shares from any shareholder at the fair market value thereof (as determined in good faith by the trustees based on an independent appraisal of trust assets made within six months of the redemption date).  Also, the trustee may refuse to transfer shares to any person whose acquisition of additional shares might, in the opinion of the trustees, violate the above requirement."

Real Estate Investment Risks May Result in Losses

      IRET's current assets and any additional properties in which IRET may invest in the future are subject to risks typically associated with investments in real estate.  Such risks include the possibility that the properties will not generate income sufficient to meet operating expenses, will generate income and capital appreciation, if any, at rates lower than those anticipated or will yield returns lower than those available through investment in comparable real estate or other
 
 

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investments.  Income from properties and yields from investments in such properties may be affected by many factors, including changes in government regulation, general or local economic conditions, the available local supply of and demand for improved real estate, a reduction in rental income as the result of the inability to maintain occupancy levels, natural disasters or other factors.

      Equity investments in real estate are relatively illiquid and, therefore, the ability of IRET to vary its portfolio promptly in response to changed condition will be limited.  While IRET is authorized to invest in various types of income-producing real properties, its current strategy is to concentrate on acquiring and holding investment apartments and commercial property for long-term.  Consequently, IRET will be subject to the risks associated with investments in only those two types of property.

      While it is difficult to clearly identify specific properties which may not produce sufficient returns, IRET currently has two commercial properties facing great risk of not producing rental income.  Those properties are the Boise warehouse which is currently vacant and producing no income.  IRET is still paying all expenses associated with the property which are expected to be $500,000 over the next 12 months.

      The second building is the Carmike Cinema building in Grand Forks, North Dakota.  The tenant is currently in Chapter 11 bankruptcy.  All rent has been paid to date, but the tenant may reject the lease in the bankruptcy proceeding.  The deadline for rejection of the lease does not expire until November 1, 2001.  IRET currently receives $278,512 in rent annually which based on fiscal year 2001 gross revenues of $74,774,464.  Annual rent from Carmike represents less than 1% of annual gross revenue.  However, should Carmike reject the lease, IRET would incur a decline in net income.

      The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing on page F1 through F46.  In this section, "we" or "us" refers to IRET and "you" refers to IRET' s shareholders.

Risks Due to Investment in Real Estate
        Real property investments are subject to varying degrees of risk. The yields available from equity investments in real estate depend upon the amount of revenues generated and expenses incurred. If properties do not generate revenues sufficient to meet operating expenses, debt service and capital expenditures, our results of operations and ability to make distributions to you and to pay amounts due on our debt will be adversely affected. The performance of the economy in each of the areas in which the properties are located affects occupancy, market rental rates and expenses. These factors consequently can have an impact on the revenues from the properties and their underlying values. The financial results of major local employers may also have an impact on the revenues and value of certain properties.

       Other factors may further adversely affect revenues from properties. These factors include the general economic climate, local conditions in the areas in which properties are located such as an oversupply of apartment units or a reduction in the demand for apartment units, the attractiveness of the properties to residents, competition from other multifamily communities and
 
 

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commercial properties and our ability to provide adequate facilities maintenance, services and amenities. Our revenues would also be adversely affected if residents were unable to pay rent or we were unable to rent apartments on favorable terms.

        If we were unable to promptly relet or renew the leases for a significant number of apartment units, or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then our funds from operations would, and our ability to make expected distributions to you and to pay amounts due on our debt may, be adversely affected. There is also a risk that as leases on the properties expire, tenants will vacate or enter into new leases on terms that are less favorable to us. Operating costs, including real estate taxes, insurance and maintenance costs, and mortgage payments, if any, do not, in general, decline when circumstances cause a reduction in income from a property. We could sustain a loss as a result of foreclosure on the property, if a property is mortgaged to secure payment of indebtedness and we were unable to meet our mortgage payments. In addition, applicable laws, including tax laws, interest rate levels, and the availability of financing also affect revenues from properties and real estate values.

Investments in Newly Acquired Properties May Not Perform in Accordance with Expectations
        In the normal course of business, we typically evaluate potential acquisitions, enter into non-binding letters of intent, and may, at any time, enter into contracts to acquire and may acquire additional properties. However, no assurance can be given that we will have the financial resources to make suitable acquisitions or that properties that satisfy our investment policies will be available for acquisition. Acquisitions of properties entail risks that investments will fail to perform in accordance with expectations. Such risks may include construction costs exceeding original estimates, possibly making a project uneconomical. Other risks may include financing not being available on favorable terms or at all and construction and lease-up may not be completed on schedule. Estimates of the costs of improvements to bring an acquired property up to standards established for the market position intended for that property might prove inaccurate. In addition, there are general real estate investment risks associated with any new real estate investment. Although we undertake an evaluation of the physical condition of each new investment before it is acquired, certain defects or necessary repairs may not be detected until after the investment is acquired. This could significantly increase our total acquisition costs, which could have a material adverse effect on us and our ability to make distributions to you and pay amounts due on our debt.

Illiquidity of Real Estate and Reinvestment Risk May Reduce Economic Returns to Investors
        Real estate investments are relatively illiquid and, therefore, tend to limit our ability to adjust our portfolio in response to changes in economic or other conditions. Additionally, the Code places certain limits on the number of properties a REIT may sell without adverse tax consequences. To affect our current operating strategy, we have in the past raised, and will seek to continue to raise additional funds, both through outside financing and through the orderly disposition of assets which no longer meet our investment criteria. Depending upon interest rates, current development and acquisition opportunities and other factors, generally we will reinvest the proceeds in commercial and multifamily properties, although such funds may be employed in other uses. In the markets we have targeted for future acquisition of commercial and
 
 

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multifamily properties, there is considerable buying competition from other real estate companies, many of whom may have greater resources, experience or expertise than us. In many cases, this competition for acquisition properties has resulted in an increase in property prices and a decrease in property yields. Due to the relatively low capitalization rates currently prevailing in the pricing of potential acquisitions of commercial and multifamily properties which meet our investment criteria, no assurance can be given that the proceeds realized from the disposition of assets which no longer meet our investment criteria can be reinvested to produce economic returns comparable to those being realized from the properties disposed of, or that we will be able to acquire properties meeting our investment criteria. To the extent that we are unable to reinvest proceeds from the assets which no longer meet our investment criteria, or if properties acquired with such proceeds produce a lower rate of return than the properties disposed of, such results may have a material adverse effect on us. In addition, a delay in reinvestment of such proceeds may have a material adverse effect on us.

       We will seek to structure future dispositions as tax-free exchanges, where appropriate, utilizing the non-recognition provisions of Section 1031 of the Code to defer income taxation on the disposition of the exchanged property. For an exchange of such properties to qualify for tax-free treatment under Section 1031 of the Code, certain technical requirements must be met. Given the competition for properties meeting our investment criteria, it may be difficult for us to identify suitable properties within the foregoing time frames in order to meet the requirements of Section 1031. Even if we can structure a suitable tax-deferred exchange, as noted above, we cannot assure that we will reinvest the proceeds of any of these dispositions to produce economic returns comparable to those currently being realized from the properties which were disposed of.

        All of the properties currently owned by us are located in developed areas. There are numerous other real estate companies, many of which have greater financial and other resources than we have, within the market area of each of the properties which will compete with us for tenants and development and acquisition opportunities. The number of competitive properties and real estate companies in such areas could have a material effect on (1) our ability to rent our real estate properties and the rents charged and (2) development and acquisition opportunities. The activities of these competitors could cause us to pay a higher price for a new property than we otherwise would have paid or may prevent us from purchasing a desired property at all, which could have a material adverse effect on us and our ability to make distributions to you and to pay amounts due on our debt.

Inability to Implement Growth Strategy; Potential Failure to Identify, Acquire or Integrate New Acquisitions
        Our future growth will be dependent upon a number of factors, including our ability to identify acceptable properties for development and acquisition, complete acquisitions and developments on favorable terms, successfully integrate acquired and newly developed properties, and obtain financing to support expansion. There can be no assurance that we will be successful in implementing our growth strategy, that growth will continue at historical levels or at all, or that any expansion will improve operating results. The failure to identify, acquire and integrate new properties effectively could have a material adverse affect on us and our ability to make distributions to you and to pay amounts due on our debt.
 
 

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      A substantial portion of our growth over the last several years has been attributable to acquisitions. We intend to continue to acquire both stabilized commercial and multifamily properties to the extent we identify properties that meet our investment criteria.  Acquisitions of new properties entail risks that investments will fail to perform in accordance with expectations. Estimates of the costs of improvements to bring an acquired property up to standards established for the market position intended for that property may prove inaccurate. In addition, there are general investment risks associated with any new real estate investment, including unexpected maintenance problems.

Uninsured and Underinsured Losses; Limited Insurance Coverage
      We carry comprehensive liability, fire, extended coverage and rental loss insurance with respect to our properties with certain policy specifications, limits and deductibles.  No assurance can be given that such coverage will be available on acceptable terms or at an acceptable cost, or at all, in the future, or if obtained, that the limits of those policies will cover the full cost of repair or replacement of covered properties. In addition, there may be certain extraordinary losses (such as those resulting from civil unrest) that are not generally insured (or fully insured against) because they are either uninsurable or not economically insurable. Should an uninsured or underinsured loss occur to a property, we could be required to use our own funds for restoration or lose all or part of our investment in, and anticipated revenues from, the property and would continue to be obligated on any mortgage indebtedness on the property. Any such loss could have a material adverse effect on us and our ability to make distributions to you and pay amounts due on our debt.

Adverse Changes in Laws May Affect Our Potential Liability Relating to the Properties and Our Operations
      Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to all tenants in the form of higher rents, and may adversely affect our cash available for distribution and our ability to make distributions to you and to pay amounts due on our debt. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, which could have a material adverse effect on us and our ability to make distributions to you and pay amounts due on our debt.  In addition, future enactment of rent control or rent stabilization laws or other laws regulating multifamily housing may reduce rental revenues or increase operating costs.

Potential Effect on Costs and Investment Strategy from Compliance with Laws Benefiting Disabled Persons
      A number of federal, state and local laws (including the Americans with Disabilities Act) and regulations exist that may require modifications to existing buildings or restrict certain renovations by requiring improved access to such buildings by disabled persons and may require other structural features which add to the cost of buildings under construction. Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. The costs of compliance with these laws and regulations may be substantial, and limits or restrictions on construction or completion of certain renovations may limit implementation of our investment strategy in certain instances or reduce overall
 
 

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returns on our investments, which could have a material adverse effect on us and our ability to make distributions to you and to pay amounts due on our debt. We review our properties periodically to determine the level of compliance and, if necessary, take appropriate action to bring such properties into compliance. We believe, based on property reviews to date, that the costs of such compliance should not have a material adverse effect on us. Such conclusions are based upon currently available information and data, and no assurance can be given that further review and analysis of our properties, or future legal interpretations or legislative changes, will not significantly increase the costs of compliance.

Liabilities Assumed May Exceed Expectations
     We acquire properties either by acquiring title to the properties and related assets (plus assumption of associated contractual obligations of the contributing parties) or by acquiring all of the ownership interests in the partnerships or limited liability companies which held such properties.  As a matter of law, we automatically assume all of the liabilities (known, unknown or contingent) of the partnerships and limited liability companies whose ownership interests were acquired by us, potentially including liabilities unrelated to the properties conveyed pursuant to such transfer. Moreover, even in cases where title to the properties and related assets (rather than ownership interests therein) were acquired by us, the legal doctrine of successor liability may give creditors of and claimants against the prior owners the right to hold us responsible for liabilities which arose with respect to such properties prior to their acquisition by us, whether or not such liabilities were expressly assumed by us.

      As a result of the foregoing, there can be no assurance that we will not be subject to liabilities and claims arising from events which occurred or circumstances which existed prior to our acquisition of those properties, which could have a material adverse effect on us and our ability to make distributions to you and pay amounts due on our debt.

Risks Due to Real Estate Financing
     We anticipate that future developments and acquisitions will be financed, in whole or in part, under various construction loans, lines of credit, other forms of secured or unsecured financing or through the issuance of additional debt or equity by us. We expect periodically to review our financing options regarding the appropriate mix of debt and equity financing. Equity, rather than debt, financing of future developments or acquisitions could have a dilutive effect on the interests of our existing shareholders. Similarly, there are certain risks involved with financing future developments and acquisitions with debt, including those described below. In addition, if new developments are financed through construction loans, there is a risk that, upon completion of construction, permanent financing for such properties may not be available or may be available only on disadvantageous terms or that the cash flow from new properties will be insufficient to cover debt service. If a newly developed or acquired property is unsuccessful, our losses may exceed our investment in the property. Any of the foregoing could have a material adverse effect on us and our ability to make distributions to you and to pay amounts due on our debt.
 
 

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Potential Inability to Renew, Repay or Refinance Our Debt Financing
    We are subject to the normal risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, the risk that indebtedness on our properties, or unsecured indebtedness, will not be able to be renewed, repaid or refinanced when due or that the terms of any renewal or refinancing will not be as favorable as the terms of such indebtedness. If we were unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of the properties on disadvantageous terms, which might result in losses to us. Such losses could have a material adverse effect on us and our ability to make distributions to you and pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of our revenues and asset value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code.

Increase in Cost of Indebtedness Due to Rising Interest Rates
      We have incurred and expect in the future to incur indebtedness which bears interest at a variable rate. Accordingly, increases in interest rates would increase our interest costs, which could have a material adverse effect on us and our ability to make distributions to you or cause us to be in default under certain debt instruments (including our debt). In addition, an increase in market interest rates may lead holders of our common shares to demand a higher yield on their shares from distributions by us, which could adversely affect the market price for IRET Shares of Beneficial Interest.

Potential Incurrence of Additional Debt and Related Debt Service
      We currently fund the acquisition and development of multifamily communities partially through borrowings (including our line of credit) as well as from other sources such as sales of properties which no longer meet our investment criteria or the contribution of property to joint ventures. We could become more highly leveraged, resulting in an increase in debt service, which could have a material adverse effect on us and our ability to make distributions and to pay amounts due on our debt and in an increased risk of default on our obligations.

Potential Liability Under Environmental Laws
      Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances in, on, around or under such property. Such laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of, or failure to remediate properly, such substances may adversely affect the owner's or operator's ability to sell or rent the affected property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos- containing materials
 
 

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and other hazardous or toxic substances. The operation and subsequent removal of certain underground storage tanks are also regulated by federal and state laws. In connection with the current or former ownership (direct or indirect), operation, management, development and/or control of real properties, we may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may be potentially liable for removal or remediation costs, as well as certain other costs, including governmental fines, and claims for injuries to persons and property.

      Our current policy is to obtain a Phase I environmental study on each property we seek to acquire and to proceed accordingly. No assurance can be given, however, that the Phase I environmental studies or other environmental studies undertaken with respect to any of our current or future properties will reveal all or the full extent of potential environmental liabilities, that any prior owner or operator of a property did not create any material environmental condition unknown to us, that a material environmental condition does not otherwise exist as to any one or more of such properties or that environmental matters will not have a material adverse effect on us and our ability to make distributions to you and to pay amounts due on our debt. We currently carry no insurance for environmental liabilities.

      Certain environmental laws impose liability on a previous owner of property to the extent that hazardous or toxic substances were present during the prior ownership period. A transfer of the property does not relieve an owner of such liability. Thus, we may have liability with respect to properties previously sold by us or our predecessors.

Provisions Which Could Limit a Change in Control or Deter a Takeover
      In order to maintain our qualification as a REIT, not more than 50% in value of our outstanding capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities). In order to protect us against risk of losing our status as a REIT due to a concentration of ownership among our shareholders, our Trust Agreement provide, among other things, that if the Board determines, in good faith, that direct or indirect ownership of IRET Shares of Beneficial Interest has or may become concentrated to an extent that would prevent us from qualifying as a REIT, the Board may prevent the transfer or call for redemption (by lot or other means affecting one or more shareholders selected in the sole discretion of the Board) of a number of shares sufficient in the opinion of the Board to maintain or bring the direct or indirect ownership of IRET Shares of Beneficial Interest into conformity with the requirements for maintaining REIT status. These limitations may have the effect of precluding acquisition of control of us by a third-party without consent of the Board.

Tax Liabilities as a Consequence of Failure to Qualify as a REIT
      Although management believes that we are organized and are operating so as to qualify as a REIT under the Code, no assurance can be given that we have in fact operated or will be able to continue to operate in a manner so as to qualify or remain so qualified. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations and the determination of various factual matters and circumstances not entirely within our control. For example, in order to qualify as a REIT, at least 90% of our taxable gross income in any year must be derived from qualifying sources and we must make distributions to shareholders aggregating annually at least 90% of our
 
 

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REIT taxable income (excluding net capital gains). Thus, to the extent revenues from non qualifying sources such as income from third-party management represents more than 10% of our gross income in any taxable year, we will not satisfy the 90% income test and may fail to qualify as a REIT, unless certain relief provisions apply, and, even if those relief provisions apply, a tax would be imposed with respect to excess net income, any of which could have a material adverse effect on us and our ability to make distributions to you and to pay amounts due on our debt. Additionally, to the extent the Operating Partnership or certain other subsidiaries are determined to be taxable as a corporation, we would not qualify as a REIT, which could have a material adverse effect on us and our ability to make distributions to you and to pay amounts due on our debt. Finally, no assurance can be given that new legislation, new regulations, administrative interpretations or court decisions will not change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification.

      If we fail to qualify as a REIT, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at corporate rates, which would likely have a material adverse effect on us and our ability to make distributions to you and to pay amounts due on our debt. In addition, unless entitled to relief under certain statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would reduce funds available for investment or distributions to you because of the additional tax liability to us for the year or years involved. In addition, we would no longer be required to make distributions to you. To the extent that distributions to you would have been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain investments to pay the applicable tax.

Conflicts of Interest May Negatively Impact the Financial Performance of IRET
Certain officers and trustees of IRET either directly or though entities controlled by them, are now engaged, and may engage in the future, in other real estate ownership, management or development activities for their own personal accounts.  Accordingly, certain conflicts of interest may arise with respect to the allocation of time and efforts of such entities and persons between their own personal activities and those of IRET.  As of April 30, 2001, the ownership structure of Investors Real Estate Trust was as follows:
 

Entity	Owner
Investors Real Estate Trust (IRET)	Publicly traded on Nasdaq with 4,673 shareholders
IRET, Inc.	100% owned by Investors Real Estate Trust (IRET)
IRET Properties	71% owned by IRET, Inc. and 29% individual limited partners
PineCone IRET, Inc.	100% owned by IRET
Miramont IRET, Inc.	100% owned by IRET
Forest Park Properties, LP	100% owned by IRET Properties
Thomasbrook Properties, LP	100% owned by IRET Properties

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Entity	Owner
Dakota Hill Properties, LP	100% owned by IRET Properties
MedPark Properties, LP	100% owned by IRET Properties
7901 Properties, LP	100% owned by IRET Properties
Health Investors Business Trust	100% owned by IRET Properties
Meadow 2 Properties, LP	100% owned by IRET Properties
Ridge Oaks, LP	100% owned by IRET Properties
Minnesota Medical Investors	68% owned by IRET Properties and 32% by an unrelated investment group

Currently, other than ownership of IRET shares and limited partnership units of IRET Properties as listed on page 103, no employee or trustee has any ownership interest in any IRET subsidiary, real estate project or business activity.

       The organizational document of IRET may have the affect of  lessening the negative impact of the any conflict of interest between officer and trustees and IRET.  For purposes of applying the conflict of interest requirements, the term Affiliate includes employees of IRET.  The Declaration of Trust specifically provides as follows:

 "Article 1, Section 7.  Conflicts of Interest and Investment Restrictions.

A.. Sales and Leases to IRET.

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

B.            Sales and Leases to SPONSOR, ADVISOR, TRUSTEES or any AFFILIATE.

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

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

C.                     Loans.

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

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

D.                     Investments.

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

2.                 IRET shall not invest in equity securities unless a majority of TRUSTEES (including a majority of INDEPENDENT TRUSTEES)

E. Investment Policies.

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

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

F.           Multiple Programs.

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

G.                     Other Transactions.

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

H.                     Appraisal of Real Property.

The consideration paid for real property acquired by IRET shall ordinarily be based on the fair market value of the property as determined by a majority of the TRUSTEES. In cases in which a majority of the INDEPENDENT TRUSTEES so determine, and in all cases in which assets are acquired from the ADVISORS, TRUSTEES, SPONSORS, or AFFILIATES thereof, such fair market value shall be as determined by an INDEPENDENT EXPERT selected by the INDEPENDENT TRUSTEES."

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"Article 4, Section 9.  Fiduciary Duty.

The TRUSTEES and ADVISOR of IRET shall be deemed to be in a fiduciary relationship to IRET and the SHAREHOLDERS. The TRUSTEES of IRET shall also have a fiduciary duty to the SHAREHOLDERS to supervise the relationship of IRET with the ADVISOR."

       The Declaration of Trust requirements listed above may only be changed upon the majority vote of the shareholders after proper written notice.

      Furthermore, all employees are required to work full-time for and use their best efforts for the benefit of IRET.  This requirement may be changed at anytime without notice or a vote of the shareholders by the trustees.
 
 

The remainder of this page has been intentionally left blank.

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Front-End Fees and Costs Associated With This Offering

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

Type	Minimum	Cap	Maximum Percentage
Selling agent commission 8% of the amount sold	$            0	$  1,750,000	8.000%
Legal Fees	7,500	7,500	.034%
Advertising, Printing and Promotion Expenses	40,000	40,000	.182%
Registration Fees	10,000	10,000	.045%
Accounting Fees	1,000	1,000	.004%
	$   58,500	$  1,808,500	8.265%

Offering Compensation
The following table sets forth the fees and other compensation which IRET is to pay in association with this offering.  No officer, trustee or employee of IRET will receive any additional compensation, bonus or fees as a result of the offering other than their normal salary as listed on pages 105 and 106.  Additionally, no officer, trustee or employee of IRET will be selling any shares of IRET they own as part of this offering.
 

Item of Compensation	Recipient	Amount / Method
Incentive Fees	N/A	While authorized by the Restated Declaration of Trust, no incentive fees shall be paid to anyone.  This may be changed by a vote of the Trustees at anytime with incentive fees then payable for future transactions as limited by the Restated Declaration of Trust.
Broker-Dealer Fees	Selling Brokerage Firms	Eight percent or $.70 of each share sold for a total possible commission of $1,750,000.
Advertising, Printing and Promotion Expenses		Up to $40,000 may be paid as compensation for advertising and promotional expenses.
Experts' Fees	Pringle & Herigstad, P.C.	$7,500 for legal fees, plus filing fees, accounting fees and printing costs estimated to be another $51,000.

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DETERMINATION OF OFFERING PRICE

      The price for this offering is based upon the recent a bid and ask price reported on the Nasdaq small cap market over the past two months (See page 97 "Market Price of IRET Shares") and comparison to IRET's peer group.  See page 15, "Risk Factors."
 

EFFECTIVE DATE OF OFFERING

The offering of shares pursuant to this prospectus will last for a period of one year from the effective date on the front cover or until all shares have been sold on a first-come first-serve basis, whichever occurs first.

DILUTION

      The book value of IRET shares of beneficial interest is substantially less than the purchase price to new shareholders under this Offering.  As of April 30, 2001, the book value of the 24,068,346 shares outstanding was $4.94 per share.  Assuming all of the shares registered under this offering are sold, the estimated resulting book value will be $5.23 per share.  Thus, a purchasing shareholder paying $8.75 per share under this offering will incur an immediate book value dilution of $3.52 per share.

PLAN OF DISTRIBUTION

For the sole purpose of selling the shares to be offered pursuant to this prospectus, IRET has entered into Security Sales Agreements with a number of broker/dealers who are members of the National Association of Security Dealers (NASD).  There are no underwriters associated with this offering.  None of the broker/dealers involved are required to take and pay for or to sell a specific number of shares.  This offering shall be conducted on a best efforts basis under which a participating broker/dealer is required to take and pay for only those shares that are actually sold to the public.  All shares of IRET available for sale to the public will be available for purchase through broker/dealers who have signed a selling agreement with IRET.  The shares offered will only be sold for cash payable in United States Dollars.  There will be no other distribution or sale of IRET shares to the public except through IRET's dividend reinvestment plan available only to current IRET shareholders. See page 101  - "Dividend Reinvestment Plan."
 
 

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     As of June 15, 2001, the following NASD registered broker/dealers have agreed to use their best efforts to sell the IRET shares offered under this prospectus to the public:
 
 

American Investment Services, Inc.	Investment Centers of America, Inc.
Berthel Fisher & Co.	Iron Street Securities, Inc.
Eagle One Investments, LLC	ND Capital, Inc.
Fintegra Financial Solutions	Netcap Preferred Equity, LTD.
First Montauk Securities Corp.	Okoboji Financial Services, Inc.
Garry Pierce Financial Services, LLP	Primevest Financial Services, Inc.
Huntingdon Securities Corporation	Proequities, Inc.
Inland National Securities, Inc.	Protective Group Securities
Intersecurities, Inc.	VSR Financial Services, Inc.
INVEST Financial	Sigma Financial

      The material terms of the Security Sales Agreement are as follows:

 

*	For each share sold and paid for, IRET will pay a commission of 8% or $.70 per share. There will be no discounts, other compensation, commissions, finders fees or other compensation paid to any broker/dealer.
*	Subject only to a minimum purchase of 100 shares, no broker/dealer is required to sell a minimum number of shares.
*	There are no limits on the number of shares a particular broker/dealer may sell provided no more than the total offering of 2,500,000 shares may be sold.  All sales are on a first come first serve basis according to date on which IRET receives a completed subscription agreement in its Minot, North Dakota office along with payment in full of the shares purchased.
*	Either IRET or the broker/dealer may terminate the Security Sales Agreement at anytime without penalty or further obligation.
*	IRET has not agreed to indemnify any broker/dealer for liability arising under the Securities Act.
*	No broker/dealer has a right to nominate or elect a member to the board of trustees.

      None of the broker/dealers intend to engage in any passive market making activities, stabilization or other transactions that otherwise may affect the price of the shares offered or the price of IRET on the NASDAQ.

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WHO MAY INVEST

      In order to purchase shares, an investor must be a resident of one of the states listed below as well as meet the other requirements listed:
 
 

State	Income or Net Worth Requirements	Minimum Purchase
Montana	None	100 shares or $875.00
Minnesota	Either individually or with a spouse has an annual gross income of at least $60,000 during the previous calendar year, have a net worth of at least $60,000 (exclusive of principal residence and its furnishings and automobile), and are purchasing shares for only the investors own account or retirement plan.  Either individually or with a spouse have a net worth of at least $225,000 (exclusive of the principal residence and its furnishings and automobiles), and are purchasing shares for only the investors own account or retirement plan.	100 shares or $875.00
North Dakota	None	100 shares or $875.00
South Dakota	None	100 shares or $875.00

USE OF PROCEEDS

      IRET plans to use any proceeds actually raised to fund the construction of 2 73-unit apartment buildings to be located in RocHester, Minnesota and two 67-unit apartment buildings to be located in Bismarck, North Dakota.

Rochester
      IRET purchased 15 acres of unimproved land in Rochester in 1999. The entire parcel has been zoned to allow for the construction of up to 300 apartment units.  In 2000, IRET constructed one 73-unit apartment community called Sunset Trail I which was completed and opened to residents during the end of September 2000.  As of July 1, 2001, Sunset Trail I was 100% occupied.  The two additional communities to be constructed by IRET using the proceeds raised from this offering are designed the same as Sunset Trail I.  Based on the actual costs incurred by IRET in the construction of Sunset Trail I, IRET expects to incur the following costs for the construction of the additional units.  Please refer to the specific risk factor on delay or cost overruns on page 17.

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Apartment Community	Location	Cost
Sunset Trail II  - 73 Units	Rochester, MN	$      5,300,000
Sunset Trail III  - 73 Units	Rochester, MN	5,300,000
Total		$    10,600,000

 Bismarck
      IRET currently owns sufficient unimproved land in Bismarck, North Dakota which has been zoned to allow for the construction of two 67-unit apartment communities.  Over the past four years, IRET has constructed three 67-unit apartment communities at the same location called Cottonwood I, II and III.  As of July 1, 2001, Cottonwood I, II and III were over 98% occupied.  The two new 67-unit communities to be constructed are designed the same as the previous three Cottonwood apartments.  Based on the actual costs incurred by IRET, in the construction of Cottonwood I, II and III, IRET expects to incur the following construction costs:
 
 

Apartment Community	Location	Cost
Cottonwood IV - 67 Units	Bismarck, ND	$      4,700,000
Cottonwood V - 67 Units	Bismarck, ND	4,700,000
Total		$      9,400,000

      Assuming all the offered shares are sold and after deduction from the offering proceeds of all the front-end fees and expenses associated with the offering, IRET will have $20,066,500 to fund the construction of the two 73-unit Rochester apartment communities and the two 67-unit Bismarck apartment communities.  See page 33 -  "Front End Fees."

 

	Dollars	Percent
Gross Offering Proceeds	$21,875,000	100.0%
Selling Commissions	(1,750,000)	8.0%
Legal Fees	(7,500)	Less than 1% (.00034)
Advertising, Printing and Promotion Expenses	(40,000)	Less than 1% (.00182)
Registration Fees	(10,000)	Less than 1% (.00045)
Accounting Fees	(1,000)	Less than 1% (.00004)
Cash Available for Construction of Properties	$20,066,500	91.735%

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     In the event less than all the shares offered under this prospectus are sold, IRET will not receive enough money to cover the entire estimated construction cost of $20,000,000.  Depending on the actual amount of shares sold, IRET will need to acquire additional funds from other sources.

 

Assumed Share Sales	Net Proceeds to IRET	Funds Needed from Other Sources After Expenses
25%	$      5,016,625	$    14,983,375
50%	10,033,250	9,966,750
75%	15,049,875	4,950,125
100%	20,066,500	0

      IRET intends to cover any shortfall using funds from the sources identified below.

 

*	Depreciation Revenue As a "Real Estate Investment Trust" under the Internal Revenue Code, IRET must distribute at least 90% of its taxable income. However, in computing taxable income, a deduction for depreciation of the buildings owned by IRET is allowed.  In the Fiscal year ended April 30, 2001, this depreciation deduction was $12,299,532. IRET is under no legal obligation to pay out depreciation revenue. The amount of this depreciation may be used by IRET to complete the construction of the apartment communities in Rochester, Minnesota and Bismarck, North Dakota.
*	Additional Long Term Leverage or Loans IRET seeks to borrow approximately 70% of the cost of any real estate constructed. Upon completion of the two apartment buildings, IRET intends to place loans on the property. However, until the apartments are completed and at least 95% leased, IRET will be unable to place any financing on the project. As a result, in order to cover the full cost of the Rochester apartments, IRET may need to borrow money using its existing real estate as collateral. As of April 30, 2001, the ratio of mortgage liabilities to total Trust real estate assets was $368,953,755 of mortgage liabilities to $590,833,974 of net real estate owned or 62.4%. Thus, as much as $44,630,026 could be borrowed on the existing portfolio before reaching a debt ratio of 70%.  No assurance can be given that IRET would be able to borrow this or any amount of additional money.
*	Marketable Securities IRET maintains an investment in marketable securities with a value as of April 30, 2001, of $660,865.  The securities are shares of common stock in five other publicly traded real estate investment trusts. Please see page 64 for a complete description of the securities. These securities are held in brokerage accounts with Smith Barney. The current policy of Smith Barney is to allow IRET to borrow up to 90% of the market value of these securities for short-term needs at an interest rate equal to the current prime rate. Based on the current market value IRET would be able to borrow $594,779.  Smith Barney may change this policy at anytime without notice to IRET. As of July 1, 2001, IRET has not borrowed against the stock.
*	Credit  Lines IRET may enter into short-term credit line borrowing agreements with banks if the need arises. As of the date of this prospectus, IRET has credit lines of $17,500,000 with various banks. The available credit lines and the amount available to IRET is as follows as of July 1, 2001:

 Page 38

 

Bank	Credit Line	Amount Outstanding	Amount Available	Interest Rate	Maturity Date
First Western Bank & Trust -  Minot, ND	$   4,000,000	$               0	$  4,000,000	7.00%	08/15/02
First International Bank & Trust - Minot, ND	3,500,000	0	3,500,000	7.00%	10/15/02
Bremer Bank	10,000,000	0	10,000,000	7.00%	08/01/02
Totals	$ 17,500,000	$               0	$17,500,000

No assurance can be given that these line of credit borrowing arrangements will be available to IRET beyond the expiration term listed.

Page 39

SELECTED FINANCIAL DATA FOR IRET FOR THE YEAR ENDED APRIL 30

	2001	2000	1999	1998	1997
Consolidated Income Statement Data
Revenue	$  75,767,150	$  55,445,193	$ 39,927,262	$ 32,407,545	$ 23,833,981
Income before gain/loss on properties and minority interest	10,187,812	9,867,874	6,401,676	4,691,198	3,499,443
Gain on repossession/ Sale of properties	601,605	1,754,496	1,947,184	465,499	398,424
Loss on Impairment of Properties	0	-1,319,316	0	0	0
Minority interest of portion of  operating partnership income	-2,095,177	-1,495,209	-744,725	-141,788	-18
Net income	8,694,240	8,807,845	7,604,135	5,014,909	3,897,849
Consolidated Balance Sheet Data
Total real estate investments	$548,580,418	$418,216,516	$280,311,442	$213,211,369	$177,891,168
Total assets	570,322,124	432,978,299	291,493,311	224,718,514	186,993,943
Shareholders' equity	118,945,160	109,920,591	85,783,294	68,152,626	59,997,619
Consolidated Per Share Data  (basic and diluted)
Income before gain/loss on properties and minority interest	$          .44	$               .47	$              .37	$               .30	$              .25
Net Income	.38	.42	.44	.32	.28
Dividends	.55	.51	.47	.42	.39
Calendar Year	2001	2000	1999	1998	1997
Tax status of dividend
Capital gain	.72%	30.3%	6.3%	2.9%	21.0%
Ordinary income	86.76%	69.7%	76.0%	97.1%	79.0%
Return of capital	12.52%	0%	17.7%	0.0%	0.0%

Page 40

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

General
      IRET has operated as a "real estate investment trust" under Sections 856-858 of the Internal Revenue Code since its formation in 1970 and is in the business of owning income-producing real estate investments, both residential and commercial.

      On February 1, 1997, IRET restructured itself as an Umbrella Partnership Real Estate Investment Trust  (UPREIT).  IRET, through its wholly owned subsidiary, IRET, Inc., is the general partner of IRET Properties, a North Dakota limited partnership (the "Operating Partnership").

       On July 1, 2000, IRET became "self-advised" as a result of the acquisition of the advisory business and assets of Odell-Wentz and Associates, L.L.C.  Prior to that date, Odell-Wentz had been the advisor to the Trust and had furnished office space, employees, and equipment to conduct all of the day-to-day operations of IRET.  The Operating Partnership issued 255,000 of its limited partnership units to Odell-Wentz and Associates, L.L.C. in exchange for the advisory business and assets.  The valuation of the advisory business and assets of $2,083,350 was determined by an independent appraisal of the business and assets by a certified public accounting firm not otherwise employed by either IRET or the advisory company.  All employees of the advisory company became employees of IRET Properties on July 1, 2000, with the exception of Roger R. Odell who retired.

       No other material change in IRET's business is contemplated at this time.

       The following discussion and analysis should be read in conjunction with the attached audited financial statements prepared by Brady, Martz & Associates, P.C. of Minot, North Dakota, certified public accountants, which firm and its predecessors have served as the auditor for IRET since its inception in 1970.

       Certain matters included in this discussion are forward-looking statements within the meaning of federal securities laws.  Although IRET believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that the expectations expressed will actually be achieved.  Many factors may cause actual results to differ materially from IRET's current expectations, including general economic conditions, local real estate conditions, the general level of interest rates and the availability of financing, timely completion and lease-up of properties under construction, and various other economic risks inherent in the business of owning and operating investment real estate.

 Results from Operations for the Fiscal Years Ended April 30, 2001, 2000, and 1999
      IRET operates on a fiscal year ending on April 30.  The following discussion and analysis is for the fiscal years ended 4/30/2001, 2000, and 1999.

Page 41

Revenues
      Total revenues of the Operating Partnership for Fiscal 2001 were $75,767,150, compared to $55,445,193 in Fiscal 2000 and $39,927,262 in Fiscal 1999.  The increase in revenues received during Fiscal 2001 in excess of the prior year revenues was $20,321,957.  This increase resulted from:
 
 

Rent from 28 properties acquired/completed in Fiscal 2001	$    6,890,585
Rent from 27 properties acquired in Fiscal 2000 in excess of  that received in 2000	12,888,919
Increase in rental income on existing properties	93,420
A decrease in Boise Warehouse rent (bankruptcy of tenant)	-36,301
A decrease in rent - properties sold in 2001	-32,404
A decrease in interest income	-371,585
An increase in straight line rents	383,015
An increase in ancillary income	506,308
	$  20,321,957

      The increase in revenues received during Fiscal 2000 in excess of that received in Fiscal 1999 was $15,517,931.  This increase resulted from:

 

Rent from 27 properties acquired/completed in Fiscal 2000	$  10,206,154
Rent from 12 properties acquired in Fiscal 1999 in excess of that received in 1999	4,419,227
An increase in rental income on existing properties	579,151
A decrease in rent on the Boise, Idaho Furniture Store (bankruptcy of tenant)	-38,622
A decrease in rent - properties sold during 1999	-524,680
An increase in interest income	45,337
An increase in rent (straight-line calculations)	831,364
	$  15,517,931

            As shown by the above analysis, the Fiscal 2001 and 2000 increases in revenues resulted primarily from the addition of new real estate properties to the Operating Partnership's portfolio.  Rents received on properties owned at the beginning of Fiscal 2000 increased by $579,151 in Fiscal 2000 and only $93,420 in Fiscal 2001.  Thus, new properties generated most of the new revenues during the past two years.

 Capital Gain Income
      The Operating Partnership realized capital gain income for Fiscal 2001 of $601,605.  This compares to $1,754,496 of capital gain income recognized in Fiscal 2000 and the $1,947,184 recognized in Fiscal 1999.  A list of the properties sold during each of these years showing sales price, depreciated cost plus sales costs and net gain (loss) is included in a later section of this discussion.

Expenses and Net Income
      The Operating Partnership's operating income for fiscal year 2001 increased to $10,187,812 from $8,548,558 earned in Fiscal 2000 and $6,401,676 earned in Fiscal 1999.  IRET's Net Income for generally accepted accounting purposes for Fiscal 2001 was $8,694,240, compared to $8,807,845 in Fiscal 2000 and $7,604,135 in Fiscal 1999.  On a per share basis, net income was $.38 per share in Fiscal 2001 compared to $.42 in Fiscal 2000 and $.44 in Fiscal 1999.

Page 42

       These changes in Operating Income and Net Income result from the changes in revenues and expenses detailed below:

       For Fiscal 2001, a decrease in net income of $113,605, resulting from:
 
 

A decrease in gain on sale of investments	$      -1,152,891
An increase in net rental income	12,572,228
A decrease in interest income	-371,585
An increase in ancillary income	506,308
An increase in interest expense	-8,217,228
An increase in depreciation expense	-3,839,420
An increase in operating expenses, administrative, advisory & trustee services	-119,274
An increase in amortization expense	-212,091
An increase in minority interest of operating partnership	-598,968
A decrease in loss on impairment	1,319,316
	$         -113,605

            The $1,203,710 increase in net taxable income for Fiscal 2000 over the net income earned in the prior fiscal year resulted from:
 
 

A decrease in gain from sale of investments	$         -192,688
An increase in net rental income (rents, less utilities, maintenance, taxes, insurance and management)	11,432,978
An increase in interest income	45,337
An increase in interest expense	-4,912,189
An increase in depreciation expense	-2,493,238
An increase in operating expenses and advisory trustee services	-545,270
An increase in amortization expense	-61,420
An increase in minority interest of operating partnership income	-750,484
An increase in loss on impairment of properties	-1,319,316
	$     1,203,710

     Telephone Endorsement Fee
      During Fiscal 2001, IRET received a payment of $869,505 from a major telecommunications provider for allowing marketing access by that company to residents of apartment communities owned by IRET, totaling 5,863 units.  The contract provides that IRET will allow promotional materials to be placed in its apartment communities advertising the availability of telecommunication services over a 12-year period.  Of this payment, $110,979 was recognized as income by IRET during Fiscal 2001.  The balance of $758,526 will be recognized ratably over

Page 43

the remaining portion of the contract period and there is a possibility of a refund of these monies if IRET should violate the contractual terms of the agreement.

 Comparison of Results from Commercial and Residential Properties
      The following is an analysis of the contribution by each of the two categories of real estate owned by IRET - residential and commercial - to IRET revenues as compared to the year-end depreciated cost of each:
 
 

Fiscal Years Ended 4/30	2001	%	2000	%	1999	%
Property Cost  - less depreciation
Commercial	$ 218,261,880	40%	$ 112,511,467	27%	$  60,141,248	22%
Residential	329,281,443	60%	304,175,471	73%	209,572,192	78%
Total	$ 547,543,323	100%	$ 416,686,938	100%	$269,713,440	100%
Revenues
Commercial	$   18,994,010	25%	$   11,878,026	22%	$    5,775,161	15%
Residential	55,806,712	75%	42,379,855	78%	33,010,126	85%
Total	$   74,800,722	100%	$   54,257,881	100%	$  38,785,287	100%
Expenses  - before depreciation - see Note 11 to Financial Statement for detail
Commercial	$   10,649,488	21%	$     6,417,909	18%	$    2,814,299	11%
Residential	39,500,071	79%	29,288,023	82%	22,440,129	89%
Total	$   50,149,559	100%	$  35,705,932	100%	$  25,254,428	100%
Segment Gross Profit - before depreciation
Commercial	$     8,344,522	34%	$     5,460,117	29%	$   2,960,862	22%
Residential	16,306,641	66%	13,091,832	71%	10,569,997	78%
Total	$   24,651,163	100%	$   18,551,949	100%	$ 13,530,859	100%

 Charge for Impairment of Value Fiscal 2000
      During fiscal 2000, IRET reduced the value of two properties to reflect the reduced rental income expected to be received from the properties.  The properties are the Boise warehouse, Boise, Idaho, and the First Avenue building, Minot, North Dakota.  Based on the reduced rental income the Boise building's value was reduced by $1,008,114 and First Avenue by $311,302.  The Boise warehouse is vacant and has been for the last 18 months.  First Avenue is mostly occupied but at rents below those necessary to justify the building's acquisition cost.
 
 

Page 44

Commercial Properties - Analysis of Lease Expirations and Credit Exposure
      The following table shows the annual lease expiration percentages for the commercial properties owned by IRET for Fiscal years 2001 through 2010 and the leases that will expire during Fiscal year 2011 and beyond.
 
 

Year of Lease Expiration	Square Footage of  Expiring Leases	Percentage of Total  Leased Square Footage	Annualized Base  Rent of Expiring  Leases at Expiration	Percentage of Total  Annualized Base Rent
2001	111,548	4.40%	$  165,396	0.75%
2002	164,941	6.60%	1,468,440	6.64%
2003	156,327	6.20%	908,393	4.11%
2004	152,845	6.10%	1,342,386	6.07%
2005	128,214	5.10%	1,170,815	5.29%
2006	64,743	2.60%	727,858	3.29%
2007	128,827	5.10%	766,844	3.47%
2008	96,301	3.80%	1,113,073	5.03%
2009	81,016	3.20%	592,695	2.68%
2010	102,999	4.10%	1,228,872	5.55%
2011 and beyond	1,325,757	42.80%	12,642,660	57.14%
Total	2,513,518	100.00%	$  22,127,432	100.00%

       The following table shows the percentage of commercial leases by size of leased space in 10,000 square foot increments:
 
 

Square Feet Under Lease	Percentage of Aggregate Portfolio  Leased Square Feet	Annualized  Base Rent	Percentage of Aggregate  Portfolio Annualized  Base Rent
10,000 or Less	13.93%	$  3,245,361	14.67%
10,001 - 20,000	14.75%	3,044,041	13.76%
20,001 - 30,000	14.50%	2,987,722	13.50%
30,001 - 40,000	7.75%	1,426,070	6.44%
40,001  - 50,000	9.94%	2,191,103	9.90%
50,001 +	39.14%	9,233,134	41.73%
Total	100.00%	$ 22,127,431	100.00%

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Page 45

Significant Properties
      During Fiscal 2000 and 2001, IRET acquired one apartment community (Dakota Hill - Irving, Texas acquired during fiscal year 2000) and two commercial properties (HealthEast Medical in Maplewood and Woodbury, Minnesota acquired in fiscal 2000 and Southdale Medical Center in Edina, Minnesota acquired in fiscal year 2001) where the purchase price exceeded 10% of the corresponding IRET portfolio for apartments in the case of Dakota Hill and commercial in the case of HealthEast and Southdale.  However, none of the acquisitions exceeded 10% of IRET's total portfolio value or account for more than 10% of IRET's gross or net income.

       The details of such acquisitions and their performance since acquisition are as follows:
 
 

	Dakota Hill	HealthEast	Southdale Medical*
Description	504-unit Class A Apartment Community	114,216 Square Feet Medical Office Buildings	195,983 Square Feet Medical Office Buildings
Address	7902 North MacArthur - Irving, TX	St. Johns Medical Office Building - 1600 Beam Ave, Maplewood, MN     Woodwinds Medical Office Bldgs. - 1875 Woodwinds Dr, Woodbury, MN	6545 France Ave S, Edina, MN
Date of Acquisition	02/01/2000	05/01/2000	12/13/2000
Purchase Price	$37,473,258	$21,600,999	$32,421,070
Loan	$25,550,000	$19,482,851	$24,000,000
Interest Rate - fixed for 10 years or longer	7.88%	7.940%	7.8%
Cash Investment	$10,152,420	$ 1,775,978	$  5,000,000
Fiscal 2001
Rental Income	$ 5,339,716	$ 1,916,636	$    954,315
Expenses	-2,461,696	- 0	- 30,852
Gross Income	2,878,020	1,916,636	923,463
Mortgage Interest Paid	-2,002,678	-1,533,964	-686,068
Depreciation	-859,058	-439,868	-210,883
Net Income	16,284	-57,196	26,512

Page 46

 

	Dakota Hill	HealthEast	Southdale Medical*
Fiscal 2000
Rental Income	$ 1,300,317	n/a	n/a
Expenses	-376,642	n/a	n/a
Gross Income	923,675	n/a	n/a
Mortgage Interest Paid	-502,988	n/a	n/a
Depreciation	-176,361	n/a	n/a
Net Income	$    244,326	n/a	n/a

* IRET owns a 60% interest in this property. Data shown is the full income and expense for this property.

 Significant Tenants of IRET
      The following table shows the lessees of commercial property that account for five percent or more of the total scheduled rent on May 1, 2001, from all commercial properties owned by IRET:
 
 

Lessee	Monthly Rent	% of Total
Step II, Inc. DBA Edgewood Vista	$  197,547	9.70%
HealthEast Medical	159,720	7.8%
Great Plains Software, a subsidiary of Microsoft, Inc.	156,250	7.7%
All Others	1,524,190	74.8%
Total Scheduled Rent on May 1, 2001	$  2,037,707	100.0%

       As of this date, two tenants of commercial space have filed for bankruptcy protection under Chapter 11 of the bankruptcy code.  Carmike Theatres is the lessee of a 28,300 square foot theatre in Grand Forks, North Dakota with a monthly rent of $23,654 and Teligent Communications, Inc. is the lessee of 21,677 square feet in the Lexington Commerce Center, Eagan, Minnesota with a monthly rent of $11,182, plus common area charges of $4,571.  Both Carmike and Teligent have the right to reject their lease obligations and vacate the leased premises.  At this time, both are paying rent and remain in possession.
 

 

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Page 47

Results from Stabilized Properties
      IRET defines fully stabilized properties as those both owned at the beginning of the prior fiscal year and having completed the rent-up phase (90% occupancy).  "Same store" results for Fiscal 2001 and 2000 for residential and commercial were:
 
 

Same Store Residential	Fiscal 2001	Fiscal 2000	% Change
Scheduled Rent	$   38,228,938	$   37,471,897	2.0%
Total Receipts	$   37,957,512	$   36,615,535	3.7%
Utilities & Maintenance	8,020,633	6,757,467	18.7%
Management YTD	3,770,137	3,615,178	4.3%
Taxes & Insurance	4,104,636	4,021,124	2.1%
Mortgage Interest	9,250,331	10,259,450	-10.9%
Total Expenses	$  25,145,737	$   24,653,219	2.0%
Net Operating Income	$  12,811,775	$   11,962,316	7.1%

 

Same Store Commercial	Fiscal 2001	Fiscal 2000	% Change
Scheduled Rent	$      6,439,820	$     6,298,261	2.2%
Total Receipts	$      6,318,864	$     6,146,533	2.8%
Utilities & Maintenance	336,672	285,478	17.9%
Management YTD	73,638	58,356	26.2%
Taxes & Insurance	210,145	200,784	7.7%
Mortgage Interest	2,799,274	2,831,082	-11.2%
Total Expenses	$      3,419,729	$     3,375,700	1.3%
Net Operating Income	$      2,899,135	$     2,770,833	4.6%

Funds From Operations
      IRET considers Funds From Operations ("FFO") a useful measure of performance for an equity REIT.  FFO herein is defined as net income available to shareholders determined in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures.  IRET uses the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO as amended by NAREIT to be effective January 1, 2000.  FFO for any period means the net income of the company for such period, excluding gains or losses from debt restructuring and sales of property, and plus depreciation and amortization of real estate assets in IRET's investment portfolio, and

Page 48

after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with GAAP.

       FFO presented herein is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition.

       FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as a measure of IRET's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of IRET's needs or its ability to service indebtedness or make distributions.

       Funds From Operations for the Operating Partnership increased to $22,440,463 for Fiscal 2001, compared to $18,327,986 for Fiscal 2000 and $12,368,550 for Fiscal 1999.

       Calculations of Funds From Operations for the Operating Partnership are as follows:
 
 

Item	Fiscal 2001	Fiscal 2000	Fiscal 1999
Net Income Available to IRET Shareholders and Unit Holders from operations and capital gains	$  10,789,417	$  11,622,370	$    8,348,860
Less gain from property sales	-601,605	-1,754,496	-1,947,184
Operating income	$  10,187,812	$    9,867,874	$    6,401,676
Plus real estate depreciation and amortization (1)	12,252,651	8,460,112	5,966,874
Funds from operations	$  22,440,463	$  18,327,986	$  12,368,550
Weighted average shares and units outstanding - basic and diluted (2)	28,577,700	24,476,984	19,104,465
Distributions paid to Shareholders/Unit holders (3)	$  15,732,399	$  12,492,067	$    8,984,996

(1)	Depreciation on office equipment and other assets used by the Company are excluded.  Amortization of financing and other expenses are excluded, except for amortization of leasing commissions which are included.
(2)	Limited Partnership Units of the Operating Partnership are exchangeable for Shares of Beneficial Interest of IRET only on a one-for-one basis.
(3)	Distributions made equally on shares and units.

 

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Page 49

Self-Advised Status
      On July 1, 2000, IRET Properties became self-advised.  Prior to that date, Odell-Wentz and Associates, L.L.C., pursuant to an advisory contract with IRET, provided all office space, personnel, office equipment, and other equipment and services necessary to conduct all of the day-to-day operations of IRET.  Odell-Wentz and its predecessor firms had acted as advisor to the Trust since its inception in 1970.  IRET obtained an independent appraisal of the value of the advisory business and assets from certified public accounts not otherwise employed by either IRET or the advisory company.  The purchase price for the business and assets was $2,083,350 allocated as follows:
 
 

Real Estate	$         475,000
Furniture, Fixtures & Vehicles	193,350
Good Will	1,645,000
Less Real Estate Mortgages Assumed	-230,000
	$     2,083,350

IRET Properties issued 255,000 of its limited partnership units in exchange for the above-described assets.  Except for Roger R. Odell, who retired on July 1, 2000, all officers and employees of Odell-Wentz and Associates, L.L.C. were retained by IRET Properties.

 Property Acquisitions
      The Operating Partnership added $143,042,292 of real estate investments to its portfolio during Fiscal 2001, compared to $155,284,745 added in Fiscal 2000 and $62,455,508 in Fiscal 1999.  The Fiscal 2001 and 2000 additions are detailed below:

 Fiscal 2001 Property Acquisitions - for the period of 05-01-2000 to 04-30-2001
 
 

Commercial	Location	Property Type	Net Rentable Sq. Ft.	Purchase Price
12 South Main	Minot, ND	Office	11,300	$        385,000
17 South Main	Minot, ND	Office/Apartments	6,500	90,000
2030 Cliff Road	Eagan, MN	Office	13,374	950,000
Burnsville Bluffs	Burnsville, MN	Office	26,186	2,400,000
Cold Springs Center	St. Cloud, MN	Office	77,533	8,250,000
Conseco Financial Building	Rapid City, SD	Office	75,815	6,850,000
Dewey Hill Business Center	Edina, MN	Office	73,338	4,472,895
Edgewood Vista Addition	Duluth, MN	Assisted Living	26,412	2,200,000
Edgewood Vista Addition	East Grand Forks, MN	Assisted Living	5,100	516,700
Edgewood Vista	Fremont, NE	Assisted Living	5,100	535,550
Edgewood Vista	Hastings, NE	Assisted Living	5,100	550,800
Edgewood Vista	Kalispell, MT	Assisted Living	5,895	560,000
Edgewood Vista	Omaha, NE	Assisted Living	5,100	610,800
Commercial	Location	Property Type	Net Rentable Sq. Ft.	Purchase Price
HealthEast I & II	Woodbury & Maplewood, MN	Medical Office	114,216	21,588,498
Hospitality Associates	Minnetonka, MN	Office	4,000	400,000
Nicollet VII	Burnsville, MN	Office	118,400	7,200,000
Pillsbury Business Center	Bloomington, MN	Office	42,220	1,800,000
Plymouth IV & V	Plymouth, MN	Office	126,809	13,750,000
Sterner Lighting	Winsted, MN	Manufacturing	38,000	1,000,000
Stone Container Addition	Fargo, ND	Manufacturing	41,500	2,001,879
Stone Container	Waconia, MN	Warehouse	29,440	1,666,500
Southdale Medical Center   (60.31% part int.)	Edina, MN	Medical Office	195,983	32,421,070
			1,047,321	$110,199,692

Page 50

Residential		Units	Purchase Price
Cottonwood Phase III	Bismarck, ND***	67	1,854,800
Meadows, Phase III	Jamestown, ND***	27	1,865,182
Olympic Village	Billings, MT	274	$   11,616,500
Prairiewood Meadows	Fargo, ND	85	2,811,000
Ridge Oaks	Sioux City, IA	132	4,195,036
Sunset Trail, Phase I	Rochester, MN	73	6,493,150
Sunset Trail, Phase II	Rochester, MN**	n/a	4,006,932
		658	$   32,842,600
Total			$143,042,292

**	Property not placed in service at April 30, 2001.  Additional costs are still to be incurred.
***	Represents costs to complete a project started in year ending April 30, 2000.

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iscal 2000 Property Acquisitions - for the period of 05-01-1999 to 04-30-2000
 
 

Commercial	Location	Property Type	Net Rentable Sq. Ft.	Purchase Price
Maplewood Square	Rochester, MN	Retail	118,397	$  11,800,000
Great Plains	Fargo, ND	Software Mfg.	121,600	15,000,000
Edgewood Vista	Grand Island, NE	Assisted Living	5,100	446,000
Edgewood Vista	Columbus, NE	Assisted Living	5,100	446,000
Edgewood Vista	Belgrade, MT	Assisted Living	5,100	446,000
Corner C-Store	East Grand Forks, MN	Convenience Store	14,490	1,385,000
Flying Cloud Drive	Eden Prairie, MN	Office Building	61,217	4,900,000
Lexington Commerce Ctr.	Eagan, MN	Office Warehouse	89,440	4,800,000
Northgate II	Maple Grove, MN	Office Warehouse	25,999	2,300,000
Southeast Tech Ctr.	Eagan, MN	Office Warehouse	58,300	6,050,000
MedPark Mall	Grand Forks, ND	Retail	45,328	5,300,000
Edgewood Vista	Hermantown, MN	Assisted Living	57,187	4,800,000
			607,258	$ 57,673,000

 

Residential		Units	Purchase Price
Rimrock West	Billings, MT	78	3,750,000
Valley Park Manor	Grand Forks, ND	168	4,400,000
The Meadows I***	Jamestown, ND	27	247,700
Thomasbrook	Lincoln, NE	264	9,188,470
Pebble Creek	Bismarck, ND	18	720,000
Country Meadows II***	Billings, MT	67	3,010,325
Crown Colony	Topeka, KS	220	10,500,000
Sherwood	Topeka, KS	300	15,750,000
Sunset Trail**	Rochester, MN	n/a	1,500,000
Legacy IV	Grand Forks, ND	67	4,301,250
Dakota Hill	Irving, TX	504	36,500,000
The Meadows II	Jamestown, ND	27	1,845,000
Lancaster Place	St. Cloud, MN	84	3,200,000
The Meadows III**	Jamestown, ND	n/a	68,000
Cottonwood Lake III**	Bismarck, ND	n/a	2,631,000
		1,824	97,611,745
Total			$155,284,745

**	Property not placed in service at April 30, 2000.  Additional costs are still to be incurred.
***	Represents costs to complete a project started in year ending April 30, 1999.

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Property Dispositions
      Real Estate assets sold by the Operating Partnership during Fiscal 2001 and 2000 were as follows:
 
 

Property Sold	Sales Price	Book Value  & Sales Costs	Gain
Fiscal 2001
Evergreen Shopping Center, Evergreen, CO	$  1,450,000	$  1,448,310	$          1,689
Chalet Apartments, Minot, ND	390,000	366,566	23,434
Hill Park aka Garden Grove, Bismarck, ND	2,400,000	1,823,518	576,482
Total Fiscal 2001 Gain			$      601,605

 

Property Sold	Sales Price	Book Value  & Sales Costs	Gain
Fiscal 2000
Superpumper - Grand Forks, ND	$    485,000	$    398,521	$        86,479
Superpumper - Crookston, MN	428,000	338,097	89,903
Superpumper - Langdon, ND	239,000	174,648	64,352
Superpumper - Sydney, MT	120,000	102,839	17,161
Mandan Apartments, Mandan, ND	325,000	249,388	75,612
Sweetwater Apartments, Devils Lake, ND	480,000	144,697	335,303
Hutchinson Technology - Hutchinson, MN	5,200,000	4,090,997	1,109,003
Jenner 18-Plex - Devils Lake, ND	340,000	354,009	-14,009
Virginia Apartments, Minot, ND	165,000	175,308	-10,308
Installment Sales			1,000
Total Fiscal 2000 Gain			$  1,754,496

Dividends
      The following dividends were paid during Fiscal Years 2001, 2000 and 1999:
 
 

Date	2001	2000	1999
July 1,	$      .1325	$     .1240	$     .1100
October 1,	.1350	.1260	.1150
January 15,	.1400	.1280	.1200
April 1, 2000	.1425	.1300	.1225
	$      .5500	$     .5080	$     .4675

       The fiscal 2001 dividends increased 8.3% over the dividends paid during Fiscal Year 2000 and 17.6% over Fiscal 1999.

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Liquidity and Capital Resources
      Important equity capital and financing events in Fiscal 2001 were:
 
 

*	As a result of the sale of additional Shares of Beneficial Interest, shareholder equity increased by $9,024,569 and, in addition, the equity capital of the Operating Partnership was increased by $23,885,524 as a result of contributions of real estate in exchange for Operating Units, resulting in a total increase in equity capital for the Operating Partnership of $32,910,093.
*	Mortgage loan indebtedness increased substantially due to the acquisition of new investment properties to $368,956,930 on 04/30/01 from $265,056,767 on 04/30/00, and $175,071,069 on 04/30/99.  The weighted interest rate on these loans decreased to 7.56% per annum from 7.59% on 04/30/00 compared to 7.12% at the end of Fiscal 1999.
*	Of new real estate investments, $143,042,292 was made by the Operating Partnership, compared to $155,284,745 in Fiscal 2000 and $62,455,508 in Fiscal 1999.
*	Net cash provided from operating activities increased to $22,328,745 from $16,277,085 due to the addition of new investments to our real estate portfolio.
*	Net cash used in investing activities declined to $76,165,151 from the $120,041,064 used in Fiscal 2000.  This decrease resulted from the lesser amount of cash used to acquire new investment properties.
*	Net cash provided from financing activities also declined to $56,743,205 from the year earlier figure of $103,500,190, again due to the lower activity in acquiring new properties for cash and borrowed funds.

       IRET expects that its short-term liquidity requirements will be met through the net cash provided by its operations and also expects that it will meet its long-term liquidity requirements including scheduled debt maturities, construction and development activities, and property acquisitions through long-term secured borrowings and the issuance of additional equity securities by the Operating Partnership, including Shares of Beneficial Interest of the company as well as limited partnership units of the Operating Partnership to be issued in connection with acquisitions of improved real estate properties.  IRET believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and the payment of dividends in accordance with REIT requirements in both the short and long term.  Budgeted expenditures for ongoing maintenance and capital improvements and renovations to its real estate portfolio are expected to be funded from cash flow generated from operations of these properties.

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      Of the $368,956,930 of mortgage indebtedness on April 30, 2001, $31,592,149 were variable rate mortgages on which the future interest rate will vary based on changes in the interest rate index for each such loan and the balance of fixed rate mortgages was $337,364,781.  The principal payments due on all of the mortgage indebtedness are as follows:
 
 

Year Ending April 30	Mortgage Principal
2002	$       14,474,108
2003	8,298,146
2004	8,940,912
2005	9,746,970
2006	13,133,365
Later Years	314,363,429
Total Payments	$    368,956,930

      IRET has the following properties under construction: a 73-unit apartment community in Rochester, Minnesota and, as of April 30, 2001, the estimated cost of completing this complex is $2,500,000.  A 27-unit apartment community in Jamestown, North Dakota with an estimated cost of completion at April 30, 2001, at $500,000.  In addition, as of April 30, 2001, IRET is committed to provide construction financing for an assisted living and Alzheimer care facility in Virginia, MN for $7,000,000.  IRET had no other commitments for the development of new real estate properties on April 30, 2001.  IRET considers its existing cash and borrowing capacities to be adequate to fund its existing development activities.

       The following is a summary of IRET's equity capital and liability conditions at the end of Fiscal 2001 as compared to prior periods:
 
 

*	IRET's shareholder equity increased to $118,945,160 from $109,920,591 on April 30, 2000, and from $85,783,297 on April 30, 1999.  These increases resulted from the sale of Shares of Beneficial Interest and the reinvestment of dividends in new shares.
*	Liabilities of the Operating Partnership increased to $389,086,105 from $287,940,038 on April 30, 2000, and $191,229,475 as of April 30, 1999.  These increases resulted from increased mortgage loans to finance the acquisition of real estate properties.
*	Total assets of the Operating Partnership increased to $570,322,124 from $432,978,299 on April 30, 2000, and $291,493,311 as of April 30, 1999, again, as a result of investments in additional real estate properties.
*	Cash and marketable securities were $9,368,176, compared to $6,623,495 on April 30, 2000, and $7,412,236 on April 30, 1999.
*	In addition to its cash and marketable securities, IRET Properties has unsecured line of credit agreements with First International Bank & Trust, Bremer Bank, and First Western Bank & Trust, all of Minot, North Dakota, totaling $17,500,000, none of which were in use on April 30, 2001.  On April 30, 2000, $6,452,420 was in use. Credit lines in Fiscal 1999 totaling $11,500,000 were not in use at the end of 1999.

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Impact of Inflation
      In Fiscal 2001, IRET experienced a sharp increase in the cost of utilities (primarily natural gas) in its apartment communities.  Of the $3,839,420 total increase in utility and maintenance expense in Fiscal 2001 over the prior year, it is estimated that approximately $800,000 was increased natural gas and snow removal expense.  Since that time, natural gas prices have retreated, but it is possible that IRET's apartment communities will again experience a sharp increase in utility expenses which may not be recoverable in the form of increased rent.  Maintenance and other rental expenses also continue to increase at the general inflationary rate of 2-3%.  In most cases, IRET has been able to increase rental income sufficient to cover the normal inflationary increases in rental expenses, but did experience a substantial loss as a result of increased natural gas and snow removal expenses in Fiscal 2001.  With respect to IRET's commercial properties, in virtually all cases the tenant is responsible to pay utilities and most other rental expenses.  However, commercial leases tend to be of a longer term and IRET is precluded from increasing rent to compensate for inflationary changes in currency values.  In the case of residential properties, no leases are longer than one year and the majority are for six months or less and thus IRET may raise rent to cover inflationary changes in expenses and the value of its capital investment, subject to market conditions.

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GENERAL INFORMATION AS TO INVESTORS REAL ESTATE TRUST

Organization of IRET

      Investors Real Estate Trust is a registered real estate investment trust organized and governed under the laws of North Dakota. IRET has qualified as a real estate investment trust under Sections 856-858 of the Internal Revenue Code during all years of its existence.

Governing Instruments of IRET
      IRET was organized on July 31, 1970. IRET will continue, unless sooner terminated by a majority vote of the shareholders, until the expiration of 20 years after the death of the last survivor of the seven original trustees. All of the original Trustees are still living, the youngest being 65 years of age. The existence of IRET may be extended indefinitely by action of the Trustees approved by the vote of shareholders holding fifty per cent or more of the outstanding shares. IRET has 9 Trustees.

Independent Trustees
      IRET adheres to NASAA guidelines requiring a majority of the board to be composed of independent Trustees.  Pursuant to NASAA guidelines, IRET considers the following Trustees as independent:

      C. Morris Anderson has served as a trustee since 1970. He was a partner and founder of Magic City Realty, Ltd., the owner of rental properties now owned by IRET. He is also the President of North Hill Bowl, Inc., a business operating a bowling alley, restaurant and lounge in Minot. Mr. Anderson is a Director of International Inn, Inc., and Norwest Bank - Minot, N.A. Mr. Anderson has over 25 years experience dealing with multi-family and commercial real property.

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

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

      Steven B. Hoyt has served as an independent trustee since April, 2001.  Mr. Hoyt owns and operates a real estate development, construction and management company located in Minneapolis, Minnesota.

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

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

      Stephen L. Stenehjem has served as an independent trustee since 1999. He is the president and chief executive officer of Watford City BancShares, Inc.; owner of First International Insurance and president and chairman of First International Bank, Watford City, North Dakota.

Non-Independent Trustees
IRET considers the following trustees as non-independent:

      Timothy P. Mihalick has served as a trustee since 1999. He is a senior vice president and chief operating officer of IRET.

      Thomas A. Wentz, Jr. has served as a trustee since 1996. He is a vice president and general counsel of IRET.  Until December 31, 1999, Mr. Wentz was a partner in IRET's legal counsel, Pringle & Herigstad, P.C. Mr. Wentz is the general partner of WENCO, a North Dakota Limited Partnership, which owns commercial, multi-family and farm real estate.  He is also a director of SRT Communications, Inc.

Shareholder Meetings
      The governing provisions of IRET require the holding of annual meetings. It is the policy of the Board of Trustees to hold the annual meeting in Minot, North Dakota, during the month of September. All shareholders shall be given not less than 30 days prior written notice.

      Special meetings of the shareholders may be called by the chief executive officer, by a majority of the trustees or by a majority of the independent trustees, and shall be called by an officer of IRET upon written request of the shareholders holding in the aggregate of not less than 10% of the outstanding shares of IRET entitled to vote at such meeting.

      Upon receipt of a written request, either in person or by mail, stating the purpose or purposes of the meeting, IRET shall provide all shareholders within ten days after receipt of said request, written notice, either in person or by mail, of a meeting and the purpose of such meeting to be held on a date not less than fifteen nor more than sixty days after the distribution of such notice, at a time and place specified in the request, or if none if specified, at a time and place convenient to shareholders. The holders of a majority of shares in IRET, present in person or by proxy, shall constitute a quorum at any meeting.

Structure of IRET
IRET carries on its activities directly and through subsidiaries and an operating partnership. IRET Properties, a North Dakota Limited Partnership, was organized on January 31, 1997, and, since February 1, 1997, is the principle entity through which IRET operates. All assets (except for qualified REIT subsidiaries) and liabilities of IRET have been contributed to the operating partnership in exchange for a general partnership interest in the operating partnership. IRET, INC., a North Dakota corporation, and a wholly owned subsidiary of IRET acts as the general

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partner of the operating partnership. As the sole shareholder of IRET, INC., which in turn is the sole general partner of the operating partnership, IRET has the exclusive power under the Operating Partnership Agreement to manage and conduct the business of the operating partnership, subject to certain limitations contained in the Operating Partnership Agreement. See "Operating Partnership Agreement."

      IRET's interest in the operating partnership will entitle it to receive all quarterly or yearly cash distributions from the operating partnership and to be allocated its pro-rata share of the profits and losses of the operating partnership. IRET owned approximately 76% of the operating partnership as of April 30, 2001. It is expected that the operating partnership will merge with other partnerships or acquire real estate from other persons in exchange for limited partnership units. When certain properties were acquired by IRET, the lender financing the properties required, as a condition of the loan, that the properties be owned by a "single asset entity." Accordingly, IRET has organized two wholly owned subsidiary corporations and IRET Properties has organized several limited partnerships for the purpose of holding title to these investment properties in order to comply with the conditions of the lender. All financial statements of these subsidiaries are consolidated into the financial statements of IRET.
 
 

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POLICY WITH RESPECT TO CERTAIN ACTIVITIES

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

To Issue Senior Securities
      IRET has issued and outstanding investment certificates which are senior to the shares of beneficial interest being offered under this prospectus. The investment certificates are issued for a definite term and annual interest rate. In the event of dissolution of IRET, the investment certificates would be paid in preference to the shares of beneficial interest. Please see page 18 concerning the risks associated with the preference of the senior securities.

       The Trust does not plan on issuing other senior securities in the future. However, the organizational documents of IRET do not restrict IRET from issuing additional senior securities with liquidation preferences superior to the shares purchased under this offering. The decision on whether to issue additional senior securities may be made by the trustees at anytime without notice to or a vote of the shareholders. As of April 30, over the past three years IRET had outstanding the following senior securities:

Senior Securities Outstanding as of April 30
 

Due in Years Ending April 30	Fiscal 2001	Fiscal 2000	Fiscal 1999
6 month notes	$         800,206	$       2,762,960	$         842,174
1 year notes	4,805,206	330,000	2,446,566
3 year notes	2,369,328	1,574,669	1,651,865
5 year notes	3,899,807	5,419,627	6,829,531
Totals	$    11,874,416	$    10,087,256	$   11,770,136
Rate of interest paid on investment certificates as of April 30
6 month notes	6.50%	6.50%	6.00%
1 year notes	7.00%	7.00%	6.50%
3 year notes	7.50%	7.50%	7.00%
5 year notes	8.00%	8.00%	7.50%

To Borrow Money
      IRET plans to continue to borrow money on all new real estate acquired or developed. IRET's policy is to seek to borrow up to 70% of the cost a property. IRET relies on borrowed funds in pursuing its investment objectives and goals. The policy concerning borrowed funds is vested solely with the board of trustees, subject to the limitation in IRET's organizational documents that unless justified and approved by a majority of the trustees, IRET may not borrow more than 300% of the value of its total portfolio of assets. The organizational documents of IRET do not impose any limitation on the amount of money IRET may borrow against any one particular property.
 
 

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      The decision to borrow up to 70% of the acquisition or development cost of individual properties or to borrow up to or more than 300% of the total value of IRET's portfolio of assets may be changed by a majority of the trustees without notice to or a vote of the shareholders.

      IRET intends to continue borrowing funds in the future. Over the past three fiscal years, IRET has borrowed funds on new property acquisitions and developments as follows:
 
 

	Fiscal 2001	Fiscal 2000	Fiscal 1999
Cost of Property Acquired or developed	$   143,042,292	$   154,094,051	$    62,455,508
Net Increase in borrowings	$   103,900,163	$     89,985,698	$    41,011,095
Borrowing as a percentage of cost	73%	58%	66%

To Make Loans To Other Persons
      As part of IRET's business plan, trust funds have been loaned to third parties. The loans are in the form of mortgages secured by real estate. The decision to make loans is vested solely with the trustees and may be changed by a majority of the trustees without notice to or a vote of the shareholders.

Mortgage Loans Receivable

Location	Real Estate Security	6/30/01	4/30/01	4/30/00	4/30/99	Interest  Rate
Higley Heights - Phoenix, AZ	Orange Grove	$                0	$                0	$      598,843	$      742,811	8.00%
Great Plains Software - Fargo, ND	Campus/Office Facility	0	0	0	9,185,758	9.50%
Hausmann Rentals - Moorhead, MN	Apartment Building	277,019	278,527	287,115	294,968	9.00%
1516 N. Street -  Bismarck, ND	Apartment Building	0	0	0	159,965	10.25%
Scottsbluff Estates - Scottsbluff, NE	Apartment Building	106,608	106,926	108,752	110,437	8.00%
Fairfield Apts - Hutchinson, MN	Apartment Building	42,692	43,313	45,930	46,500	8.75%
1921 7th Street NW - Minot, ND	Rental House	745	954	2,269	3,282	7.00%
Inwards Building - Detroit Lakes, MN	Apartment Building	0	0	0	117,493	9.00%
Edgwood Vista - Norfolk, MN	Alzheimers Facility	477,375	477,375	477,375	0	11.00%
Mankato Heights Plaza - Mankota, MN	Strip Mall	3,200,000	0	0	0	10.00%
Other Mortgages		130,000	130,000	130,000	60,000	8.00%
Total		$  4,234,438	$   1,037,095	$   1,650,284	$ 10,721,213
Less:
Unearned Discounts		$                0	$                 0	$            -392	$         -1,898
Deferred gain from property dispositions		0	0	0	$         -1,000
Allowance for Losses		0	0	$    -120,314	$     -120,314
		$  4,234,438	$   1,037,095	$  1,529,578	$ 10,598,001

To Invest in the Securities of Other Companies for Purposes of Exercising Control
      Other than the formation of wholly owned subsidiaries to hold individual properties, IRET has not during the past three years invested in the securities of other issuers for the purpose of exercising control over such issuer and has no plans to do so. Over the past three years, IRET has created a number of subsidiary companies for the sole purpose of holding individual real estate properties. A list of those subsidiary companies is listed on pages 29 and 30 of this prospectus.
 
 

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       Even though IRET has not done so in the past, the organizational documents of IRET do not impose any limitations on IRET's ability to invest in the securities of other companies for the purpose of exercising control. Any decision to do so is vested solely in the trustees and may be changed without notice to or a vote of the shareholders.

To Underwrite Securities of Other Issuers
      Over the past three years IRET has engaged in the underwriting of securities of other issuers. Even though IRET has not done so in the past, the organizational documents of IRET do not impose any limitation on IRET's ability to underwrite the securities of other issuers. Any decision to do so is vested solely in the trustees and may be changed without notice to or a vote of the shareholders.

To Engage in the Purchase and Sale (Or Turnover) of Investments
      IRET has no plans to engage in the purchase and sale (or turnover) of investments. IRET's current policy is to acquire or develop which will be held for a period of at least 10 years. Even though IRET has not engage in the practice of purchasing and then selling the property shortly thereafter in hopes of making a profit at any time over the past three years, the organizational documents of IRET do not impose any limitation on IRET's ability to do so. Any decision to do so is vested solely in the trustees and may be changed without notice to or a vote of the shareholders.

To Offer Securities in Exchange for Property
      Commencing on February 1, 1997, IRET operates principally through IRET Properties, a North Dakota Limited Partnership, of which IRET is the sole general partner. Such a structure allows IRET to offer limited partnership units in exchange for real estate. IRET currently has plans to offer limited partnership units in exchange for real estate on a continuous and ongoing basis. The limited partnership units are convertible on a one to one basis into shares of IRET after at least a one year holding period. All limited partnership units receive the same dividend as paid on shares of IRET. Limited partners are not entitled to vote on any matters affecting the company until they convert their units to shares. For a complete description of the limited partnership units please see page 84.   All exchanges shall be subject to approval by the trustees on such terms and conditions that are deemed reasonable by the trustees.

       The organizational documents of IRET do not contain any restrictions of IRET's ability to offer its securities in exchange for property. As a result, any decision to do so is vested solely in the trustees. This policy may be changed at anytime without notice to or a vote of shareholders. Over the past three fiscal years ending April 30, IRET has issued the following limited partnership units in exchange for property:
 
 

	2001	2000	1999
Limited partnership units issued	2,968,030	2,709,253	858,843
Dollar value	$   25,344,059	$   21,602,838	$   6,485,927

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To Purchase or Otherwise Re-Acquire Its Shares or Other Securities
      As a "real estate investment trust" under federal income tax laws, IRET intends to invest only in real estate assets. The organizational documents of IRET do not prohibit IRET from acquiring or otherwise repurchasing its own securities so long as such activity does not prohibit IRET from operating as a real estate investment trust under the IRS code. Any decision to purchase or otherwise reacquire its share or other securities is vested solely in the trustees and may be changed without notice to or a vote of the shareholders.

      Over the past three years IRET has repurchased its shares under the terms of its dividend reinvestment plan for allocation to those existing shareholders who elect to reinvest their dividends into additional shares of IRET. Over the past three years IRET has repurchased the following number and amount of share:
 
 

For the period ending 4/30	2001	2000	1999
Number of shares	555,785	372,500	148,000
Total price paid by IRET	$   4,478,401	$   2,970,675	$   1,174,675
Average price per share	8.057	7.97	7.936

To Make Annual and Other Reports Available to Shareholders
      The organizational documents of IRET require that an annual report be provided to shareholders at least once a year. The report must be provided no later than 120 days from the end of IRET's most recent fiscal year ending April 30. The annual reports are generally mailed during the first few weeks of August. The annual report contains a financial statement certified by an independent public accountant. The requirement to provide an annual report to shareholders may only be changed by a vote of a majority of the shareholders.

      IRET also has a policy of providing quarterly reports to the shareholders during January, April, July and October. The quarterly reports do not contain a financial statement certified by an independent public accountant. The provision of a quarterly report to the shareholders is not required by IRET's organizational documents and may be changed by a majority of the trustees without notice to or a vote of the shareholders.
 
 

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INVESTMENT POLICIES OF IRET

Investments in Real Estate or Interests in Real Estate
      IRET currently owns real estate located in 13 states.  IRET's current portfolio is allocated among the various states and between apartments and commercial property:

      The company may invest in real estate or interests in real estate which are located anywhere in the United States, but plans to focus on those states where IRET already has property with a concentration on Minnesota, Montana, North Dakota and South Dakota.  Please see pages 8 to 10 for a breakdown of IRET's real estate ownership by state and between apartments and commercial.

     IRET may invest in any type of real estate or interest in real estate including, but not limited to, office buildings, apartment buildings, shopping centers, industrial and commercial properties, special purpose buildings and undeveloped acreage, except IRET may not invest more than 10% of net assets in unimproved real estate, excluding property being developed or property where development will be completed within a reasonable period.

     The method of operating IRET's real estate shall be delegated to a management company as it pertains to the day-to-day management. All major operating decisions concerning IRET's operation of its real estate shall be made by the trustees.

     The method of financing the purchase of real estate investments shall be primarily from borrowed funds and the sale of shares. The income generated from rental income and interest income is planned to be distributed to shareholders as dividends.

     There is no limitation on the number or amount of mortgages which may be placed on any one piece of property, provided that the overall ratio of liabilities to assets for IRET must not exceed 70%. As of April 30, 2001, the ratio of total liabilities ($287,940,038) to total assets ($432,978,299) was 66.5%.

     It is IRET's policy to not acquire assets primarily for possible capital gain. Rather, it is the policy of IRET to acquire assets primarily for income. IRET has no limitation on the amount or percentage of assets which will be invested in any specific property, except that not more than 10% of assets can consist of unimproved real estate. Any policy as it relates to investments in real estate or interests in real estate may be changed by the trustees at anytime without notice to or a vote of the shareholders.

Investments in Real Estate Mortgages
      While not IRET's primary business focus, IRET does make loans to others which are secured by mortgages, liens or deeds of trust covering real estate. Over the last three years IRET has made a number of mortgage loans, most of which are still outstanding. IRET has no restrictions on what type of property may be used as collateral for a mortgage loan. For a complete description of IRET's mortgage loan activity please see page 19 "Mortgage Loan Receivable."   IRET's policy as it relates to mortgage loans may be changed by the trustees at anytime without notice to or a vote of the shareholders.
 
 

Page 64

Investments in the Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Securities
      IRET is permitted to invest in the securities of other entities engaged in the ownership and operation of real estate. Over the past three years IRET has purchased United States guaranteed obligations and common shares of five other publicly traded real estate investment trusts.  These purchases are made solely for the purpose of holding cash until future real estate investments are identified. No further investments in other types of securities are planned.

       IRET has organized a number of wholly owned subsidiary limited partnerships and other wholly owned subsidiary companies for the sole purpose of conducting its real estate business activities. For a list of these subsidiary entities please see pages 29 and 30.

       While permitted to do so under its organizational documents, IRET has not invested in any other affiliated real estate investment trusts or entities organized for the purpose of operating as a real estate investment trust.

       Any Trust policy as it relates to investments in other securities may be changed by the trustees at anytime without notice to or a vote of the shareholders.

Description of Investments
 

Description (1)	Date Acquired	Purchase Price	Date Sold  and Price	Value as of 06/30/01
Archstone Communities Trust (ASN)	07/15/96	$112,517	n/a	$  133,859
Equity Residential Trust (EQR)	07/15/96	99,993	n/a	169,424
Meditrust Corp. (MT)	07/15/96	99,628	n/a	18,301
Meditrust Corp. (MT)	09/18/98	181,250	n/a	51,800
Post Properties, Inc. (PPS)	07/15/96	98,990	n/a	108,516
Simon Properties (SPG)	07/15/96	98,943	n/a	125,514
United Dominion Realty (UDR)	07/15/96	99,994	n/a	100,694
Total		$791,315		$  708,108

(1) All six REITs are listed on the New York Stock exchange and are equity REITs which invest in various types of real estate.

     The remainder of this page has been intentionally left blank.

Page 65

    As of each companies most recent annual report, the investment focus for each company is listed as follows:
 
 

Company	Primary real estate activity
Archstone Communities Trust	Multi-family Apartments
Equity Residential Trust	Multi-family Apartments
Meditrust Corp.	Hotels and Motels
Post Properties, Inc.	Multi-family Apartments
Simon Properties	Shopping Centers
United Dominion Reality	Multi-family Apartments

      The remainder of this page has been intentionally left blank.

Page 66

DESCRIPTION OF COMMERCIAL REAL ESTATE

     IRET owned the following commercial properties as of April 30, 2001:

 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Year of  Construction/ Remodel	Investment	Occupancy	Annualized Rental  Income	Monthly Avg.  Rent Per  Sq. Foot	Number  Units
Georgia
Lithia Springs
Wedgewood    1600 Lee Road	Assisted Living	Fee - 100%	29,408	1996	1996	$  3,971,878	100.00%	$   515,011	$        1.46	1
Georgia Totals			29,408			$ 3,971,878	100.00%	$ 515,011	$      1.46	1
Idaho
Boise
America's Best    8740 Fairview Avenue	Single Tenant Retail	Fee - 100%	69,599	1994	1992	$  4,788,294	32.50%	$              0	$        0.00	1
Idaho Totals			69,599			$ 4,788,294	32.50%	$             0	$       0.00	1
Michigan
Kentwood
Comp USA    2984 28th St. SE	Single Tenant Retail	Fee - 100%	16,000	1996	1995	$   2,121,474	100.00%	$   200,396	$      1.04	1
Michigan Totals			16,000			$ 2,121,474	100.00%	$ 200,396	$      1.04	1
Minnesota
Bloomington
Pillsbury Business Ctr.    8300 Pillsbury Ave.     South	Single Story Office	Fee - 100%	42,220	2001	1985	$    1,842,970	n/a	$   225,543	$        0.45	4
Burnsville
Burnsville Bluffs   11351 Rupp Dr.	Single Story Office	Fee - 100%	26,186	2001	1988	2,456,646	n/a	279,957	0.89	2
Nicollet VII    12150 Nicollet Avenue	Single Story Office	Fee - 100%	118,400	2001	1999	7,360,670	n/a	724,788	0.51	4

 

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 67

Description of Commercial Real Estate - continued
 
 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Year of  Construction/ Remodel	Investment	Occupancy	Annualized Rental  Income	Monthly Avg. Rent Per  Sq. Foot	Number Units
Duluth
Edgewood Vista    4195 Westberg Road	Assisted Living	Fee - 100%	57,187	2000	2000	$  4,241,450	100.00%	$     889,812	$      1.30	1
Edgewood Vista II	Assisted Living	Fee - 100%	26,412	2001	2001	1,439,737	100.00%	242,004	0.76	1
Eagan
2030 Cliff Road	Single Story Office	Fee - 100%	13,374	2001	1983	980,866	n/a	108,329	0.67	1
Lexington Commerce    3030 Lexington Ave.	Single Story Office	Fee - 100%	89,840	2000	1997	5,489,723	100.00%	574,175	0.53	5
S.E. Tech Center    3020 Denmarck Ave.	Single Story Office	Fee - 100%	58,300	2000	1998	6,115,517	100.00%	268,064	0.38	3
East Grand Forks
Corner Express    1010 Central Ave. NE	C-Store	Fee - 100%	14,490	2000	2000	1,392,251	100.00%	152,352	0.88	1
Edgewood Vista    608 5th Ave. NW	Assisted Living	Fee - 100%	10,778	1999	1999	899,821	100.00%	125,318	0.97	1
Edgewood Vista II	Assisted Living	Fee - 100%	5,100	2001	2001	516,700	100.00%	56,837	0.93	1
Eden Prairie
Flying Cloud Drive    7901 Flying Cloud Dr.	Multi-Story Office	Fee - 100%	61,217	2000	1977	5,074,810	99.18%	1,018,521	1.39	22
Lindberg Building    10150 Crosstown Circle	Office/Warehouse	Fee - 100%	40,941	1992	1979	1,608,535	100.00%	217,151	0.44	1
ViroMed    6101 Blue Circle Dr.	Office/Warehouse	Fee - 100%	48,700	1999	1994	4,863,634	100.00%	541,070	0.93	1
Edina
Dewey Hill Business Ctr    5555 West 78th St.	Single Story Office	Fee - 100%	73,338	2001	1986	4,492,381	100.00%	468,192	0.53	8
Southdale Medical Center   6545 France Ave. South	Multi-Story Office	Fee - 69%	195,983	2001	1958-1999	32,421,070	100.00%	3,420,000	1.45	1
Maple Grove
Northgate II    6420 Sycamore Lane	Single Story Office	Fee - 100%	25,999	2000	1997	2,348,979	100.00%	628,672	0.07	2

 

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 68

Description of Commercial Real Estate - continued
 
 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Year of  Construction/ Remodel	Investment	Occupancy	Annualized Rental  Income	Monthly Avg. Rent Per  Sq. Foot	Number Units
Maplewood
HealthEast I     1574 St. Johns Blvd.	Multi-Story Office	Fee - 100%	34,195	2000	2000	$ 6,266,915	100.00%	$    632,177	$     0.05	1
Woodbury
HealthEast II    1851 Weir Dr.	Multi-Story Office	Fee - 100%	80,021	2000	2000	14,334,084	100.00%	1,475,079	1.54	1
Minnetonka
Hospitality Associates    17800 Excelsior Blvd.	Multi-Story Office	Fee - 100%	4,000	2001	1985	400,898	n/a	42,000	0.88	1
Moorhead
Pioneer Seed Co.    1505 29th Ave. South	Office/Warehouse	Fee - 100%	13,600	1992	1979	$   653,876	100.00%	$       80,000	$     0.49	1
Plymouth
Plymouth Tech IV    5000 Chelshire Lane    North	Single Story Office	Fee - 100%	53,309	2001	2000	5,891,898	n/a	612,851	0.96	4
Plymouth Tech V    5010 Chelshire Lane North	Single Story Office	Fee - 100%	73,500	2001	2000	8,136,431	n/a	643,128	0.73	2
Rochester
Maplewood Square    3956 E Frontage Rd     Hwy 52 N	Multi-Tennant Retail	Fee - 100%	118,397	2000	1990	11,898,946	98.31%	1,160,094	0.82	11
St. Cloud
Cold Spring Center    4150 2nd St. South	Multi-Story Office	Fee - 100%	77,533	2001	1989	8,395,539	n/a	857,990	0.92	6
Waconia
Stone Container    888 Industrial Blvd.	Office/Warehouse	Fee - 100%	29,440	2001	1996	1,666,518	100.00%	181,371	0.51	1
Winsted
Sterner Lighting    351 Lewis Ave. West	Office/Warehouse	Fee - 100%	38,000	2001	1985	1,000,789	n/a	130,000	0.29	1
Total Minnesota			1,430,460			$143,191,654	99.73%	$15,755,475	$  20.27	90

 

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 69

Description of Commercial Real Estate - continued
 
 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Year of  Construction/ Remodel	Investment	Occupancy	Annualized Rental  Income	Monthly Avg. Rent Per  Sq. Foot	Number Units
Montana
Belgrade
Edgewood Vista    1101 Cardinal Dr.	Assisted Living	Fee - 100%	5,100	2000	2000	$    453,494	100.00%	$  1,875,000	$  30.64	1
Billings
Creekside Office Park    1001 S 24th St. W	Multi-Story Office	Fee - 100%	37,318	1992	1984	1,868,570	81.39%	415,602	0.93	20
Edgewood Vista    1225 Wicks Lane	Assisted Living	Fee - 100%	11,971	1999	1999	980,218	100.00%	125,318	0.87	1
Kalispell
Edgewood Vista     141 Interstate Lane	Assisted Living	Fee - 100%	5,895	2001	2001	568,150	100.00%	71,307	1.01	1
Missoula
Edgewood Vista    2815 Palmer	Assisted Living	Fee - 100%	10,314	1997	1997	$     962,428	100.00%	$     126,135	$   1.02	1
Total Montana			70,598			$  4,832,860	90.38%	$  2,613,362	$ 34.46	24
Nebraska
Columbus
Edgewood Vista    3386 53rd Avenue	Assisted Living	Fee - 100%	5,100	2000	2000	$     455,626	100.00%	$      57,197	$    0.93	1
Freemont
Edgewood Vista    2910 North Clarkson St.	Assisted Living	Fee - 100%	5,100	2000	2000	546,410	100.00%	68,177	1.11	1
Grand Island
Edgewood Vista    214 North Piper Street	Assisted Living	Fee - 100%	5,100	2000	2000	455,626	100.00%	57,197	0.93	1
Hastings
Edgewood Vista    2400 West 12th St.	Assisted Living	Fee - 100%	5,100	2000	2000	565,777	100.00%	7,122	0.12	1

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 70

 Description of Commercial Real Estate - continued

 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Year of  Construction/ Remodel	Investment	Occupancy	Annualized Rental  Income	Monthly Avg. Rent Per  Sq. Foot	Number Units
Omaha
Ameritrade Headquarters    4211 South 102nd St.	Single Story Office	Fee - 100%	73,774	1999	1993/1997	$  8,306,535	100.00%	$     748,000	$      0.85	1
Barnes & Noble    3333 Oak Dr.	Single-Tennant Retail	Fee - 100%	27,500	1995	1995	3,699,197	100.00%	409,956	1.24	1
Edgewood Vista    17620 Poppleton Street	Assisted Living	Fee - 100%	5,100	2000	2000	611,370	100.00%	77,775	1.27	1
Total Nebraska			126,774			$14,640,541	100.00%	$  1,425,424	$   6.45	7
North Dakota
Bismarck
Lester Chiropractic Clinic    1122 West Divide Ave.	Single Story Office	Fee - 100%	5,400	1988	1974	$   268,917	100.00%	$      33,840	$    0.52	1
Fargo
Barnes & Noble    1201 42nd St. SW	Single-Tennant Retail	Fee - 100%	30,000	1994	1994	$  3,259,893	100.00%	$     396,750	$    1.10	1
Great Plains Software    3900 44th Ave. SW	2 Story Office	Fee - 100%	121,600	1999	1999	15,375,154	100.00%	1,875,000	1.28	1
Petco    1126 43rd St. SW	Single-Tennant Retail	Fee - 100%	18,000	1994	1994	1,278,934	100.00%	185,040	0.86	1
Stone Container    4637 16th Ave. NW	Office/Warehouse	Fee - 100%	193,350	1995	1995-2001	7,000,364	100.00%	884,793	0.38	1
Grand Forks
Carmike Theatre    2306 32nd Ave. South	Multi-Plex Theatre	Fee - 100%	28,300	1994	1986	2,545,737	100.00%	318,232	0.94	1
MedPark Mall    1375&1395 S Columbia Rd	Multi-Tennant Retail	Fee - 100%	45,328	2000	1989	5,642,950	97.31%	625,816	1.15	13

 

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 71

  Description of Commercial Real Estate  - continued
 
 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Year of  Construction/ Remodel	Investment	Occupancy	Annualized Rental  Income	Monthly Avg. Rent Per  Sq. Foot	Number Units
Minot
1st Avenue Building    13 1st Ave SW	Multi-Story Office	Fee - 100%	15,900	1981	1929-1993	$   533,765	58.82%	$     114,794	$    0.60	23
12 South Main	Multi-Story Office	Fee - 100%	11,300	2001	1905-1985	389,205	93.25%	47,979	0.35	9
17 South Main	Multi-Story Office	Fee - 100%	6,500	2001	1908-1990	90,000	100.00%	14,100	0.18	1
114 South Main	Single Tenant Retail	Fee - 100%	3,500	1978	1910-1985	111,996	0.00%	12,000	0.29	1
401 South Main	Multi-Story Office	Fee - 100%	11,200	1987	1956-1982	659,914	90.41%	74,503	0.55	10
Arrowhead Shopping Center    1600 2nd Ave. SW	Multi-Tennant Retail	Fee - 100%	80,000	1973	1961-1998	2,973,786	98.74%	372,782	0.39	26
Corner Express C-Store    3630 South Broadway	C-Store	Fee - 100%	4,674	1998	1998	1,581,260	100.00%	172,260	3.07	1
Edgewood Vista    706 16th Ave. SE	Assisted Living	Fee - 100%	97,821	1997	1997	6,270,707	100.00%	810,581	0.69	1
Minot Plaza    1930 South Broadway	Multi-Tennant Retail	Fee - 100%	10,020	1993	1983	509,954	100.00%	120,298	1.00	4
Total North Dakota			682,893			$48,492,536	98.52%	$  6,058,768	$  13.36	95
South Dakota
Rapid City
Conseco    900 Concourse Dr.	Single Story Office	Fee - 100%	75,815	2000	2000	$   7,044,870	100.00%	$     771,214	$   0.85	1
Sioux Falls
Edgewood Vista    3401 Ralph Rodgers Rd.	Assisted Living	Fee - 100%	11,971	1999	1999	974,739	100.00%	125,318	0.87	1
Total South Dakota			87,786			$  8,019,609	100.00%	$    896,532	$   1.72	2
Total Commercial     Properties			2,513,518			$230,058,846	90.32%	$ 27,464,968	$  78.76	221

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 72

DESCRIPTION OF RESIDENTIAL REAL ESTATE

       IRET owned the following residential properties as of April 30, 2001:

 

Unit Name	Property  Type	Ownership Interest	Square Feet	Year Acquired	Investment	Year of  Construction/  Remodel	Occupancy	Annualized Rental Income	Monthly Avg. Rent  Per Unit	Number Units
Colorado
Colorado Springs
Neighborhood    3502-3508 Van Teylingen Dr.	Multi-Family	Fee - 100%	204,480	1996	$11,422,781	1980-1985	96.27%	$ 1,787,824	$ 775.97	192
Ft. Collins
MiraMont    4900 Boardwalk Dr. Bldg A	Multi-Family	Fee - 100%	215,800	1996	14,363,539	1996	97.10%	2,145,632	851.44	210
Pine Cone    2212 Vermont Dr.	Multi-Family	Fee - 100%	197,135	1994	13,263,860	1994	96.71%	$ 1,924,155	8 22.29	195
Total Colorado			617,415		$39,050,180		96.88%	$ 5,857,611	$  816.57	597
Idaho
Boise
Clearwater    660 South Clearwater Lane	Multi-Family	Fee - 100%	57,000	1999	$  3,853,638	1995	92.14%	$    556,440	$   772.83	60
Total Idaho			57,000		$  3,853,638		92.14%	$    556,440	$    772.83	60
Iowa
Sioux City
Ridge Oaks    2300 Indian Hills Drive	Multi-Family	Fee - 100%	183,720	2001	$  4,281,967	1976-2001	n/a%	$    895,080	$   565.08	132
Total Iowa			183,720		$  4,281,967		n/a%	$    895,080	$   565.08	132
Kansas
Topeka
Crown Colony    900 SW Robinson	Multi-Family	Fee - 100%	208,864	2000	$10,817,090	1986	83.88%	$ 1,739,359	$658.85	220

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 73

          Description of Residential Real Estate - continued

 

Unit Name	Property  Type	Ownership Interest	Square Feet	Year Acquired	Investment	Year of  Construction/  Remodel	Occupancy	Annualized Rental Income	Monthly Avg.  Rent Per Unit	Number Units
Sherwood    2745 SW Villa W Drive	Multi-Family	Fee - 100%	200,390	2000	$16,001,205	1987	86.97%	$  2,471,037	$  686.40	300
Total Kansas			409,254		$ 26,818,295		86.98%	$  4,210,396	$ 672.62	520
Minnesota
Moorhead
Eastgate     1605 20th St. S	Multi-Family	Fee - 100%	129,504	1970	$ 2,425,737	1968-1997	90.25%	$    562,274	$ 403.93	116
Rochester
Heritage Manor    2409 Hwy 52 N	Multi-Family	Fee - 100%	173,634	1999	$ 7,697,780	1965-1999	99.41%	$ 1,270,490	$ 581.73	182
Woodridge    2804 2nd St. SW	Multi-Family	Fee - 100%	191,118	1996	6,775,134	1991	98.46%	1,237,638	954.97	108
Sunset Trail    3675 41st St. NW	Multi-Family	Fee - 100%	77,078	2,000	7,908,091	2000	n/a%	886,920	11.51	73
Sunset Trail II & III    3675 41st St. NW	Multi-Family	Fee - 100%	n/a	2001	4,006,932	2001	n/a%	n/a	n/a	n/a
St. Cloud
Lancaster Place    1100 East Division St.	Multi-Family	Fee - 100%	106,222	2000	3,226,626	1989	95.87%	575,016	570.45	84
Park Meadows    360 Park Meadows Dr.	Multi-Family	Fee - 100%	423,100	1997	11,673,583	1982-1989	97.72%	2,488,248	575.98	360
West Stonehill    625 10th Ave. S	Multi-Family	Fee - 100%	374,160	1995	11,771,140	1989-1991	99.64%	$  2,244,024	$  597.45	313
Total Minnesota			1,474,816		$55,485,023		97.10%	$  9,264,610	$ 528.00	1,236

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 74

  Description of Residential Real Estate - continued

 

Unit Name		Property  Type		Ownership Interest	Square Feet	Year Acquired	Investment	Year of  Construction/  Remodel	Occupancy	Annualized Rental Income	Monthly Avg.  Rent  Per Unit		Number Units
Montana
Billings
Castle Rock    1551 Nottingham Pl.		Multi-Family		Fee - 100%	174,604	1999	$   742,534	1979-1999	92.49%	$  1,083,846	$  547.40		165
Country Meadows I    1550 Country Manor Blvd.		Multi-Family		Fee - 100%	115,202	1996	4,361,135	1999	97.34%	588,156	731.54		67
Country Meadows II    1550 Country Manor Blvd.		Multi-Family		Fee - 100%	115,202	2000	4,359,718	2000	97.50%	588,156	731.54		67
Olympic Village    3900 Victory Circle		Multi-Family		Fee - 100%	319,312	2001	11,782,852	1983	n/a%	1,624,332	494.02		274
Rimrock    2220 St. Johns Ave. - A	Multi-Family		Fee - 100%		99,196	2000	3,899,680	1984	97.12%	551,386	589.09	78
Rocky Meadows    2440 Village Lane	Multi-Family		Fee - 100%		150,916	1996	6,737,109	1996-1997	96.93%	831,495	$ 707.05	98
Total Montana					974,432		$36,883,028		96.30%	$  267,371	$ 633.44	749
Nebraska
Lincoln
Thomasbrook    5900 Roose St.	Multi-Family		Fee - 100%		274,253	2000	$ 9,956,873	1974-2000	95.91%	$  1,717,838	$ 542.25	264
Total Nebraska					274,253		$ 9,956,873		95.91%	$  1,717,838	$ 542.25	264
North Dakota
Bismarck
Cottonwood Lake I & II 1045 Tacoma	Multi-Family		Fee - 100%		205,389	1997	$ 9,197,265	1997	88.36%	$  1,067,563	$ 663.91	134
Cottonwood III    1045 Tacoma	Multi-Family		Fee - 100%		102,695	2000	4,535,371	2000	n/a%	533,782	663.91	67
Crestview    1615 E Capitol Ave.	Multi-Family		Fee - 100%		176,320	1994	4,961,835	1983	94.30%	857,623	470.19	152

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 75

Description of Residential Real Estate - continued
 
 

Unit Name		Property  Type		Ownership Interest	Square Feet		Year Acquired	Investment	Year of Construction/  Remodel	Occupancy	Annualized Rental Income	Monthly Avg. Rent  Per Unit	Number Units
Kirkwood Manor    114 E Indiana Ave.		Multi-Family		Fee - 100%	135,244		1997	$  3,731,401	1983-1984	93.86%	$  657,872	$   507.62	108
North Pointe    1930 E Capitol Ave.		Multi-Family		Fee - 100%	83,250		1995	2,446,675	1995	97.99%	370,776	630.57	49
Pebble Creek    3110 N 19th St.		Multi-Family		Fee - 100%	22,400		2000	784,962	1993	98.04%	102,954	476.64	18
Westwood Park    1101 Westwood St. #100		Multi-Family		Fee - 100%	66,166		1999	2,205,488	1984	99.25%	395,621	515.13	64
Dickinson
Century    1156 W 2nd St. 101-124		Multi-Family		Fee - 100%	130,144		1986	2,321,814	1979-1998	88.09%	588,954	409.00	120
Eastwood    177 10th Ave. E		Multi-Family		Fee - 100%	23,945		1989	472,395	1968-1995	79.00%	132,492	290.55	38
Oak Manor    417 2nd St. E		Multi-Family		Fee - 100%	23,735		1989	374,730	1997	97.23%	106,902	329.94	27
Fargo
Candlelight    2200 21st Ave S		Multi-Family		Fee - 100%	54,765		1993	977,083	1985	97.21%	180,911	342.63	44
Park East    1 S 2nd St. Bldg. 1		Multi-Family		Fee - 100%	153,852		1997	5,136,953	1973-1997	98.75%	947,796	647.40	122
Prairiewood Meadows    137 Prairiewood Dr.		Multi-Family		Fee - 100%	118,652		2001	2,839,271	1985	n/a%	563,240	552.20	85
Sunchase    4301-4313 9th Ave. SE	Multi-Family		Fee - 100%			30,936	1988	1,042,210	1987	99.10%	177,678	411.29	36
Grand Forks
Forest Park Estates    3415 20th Ave. S	Multi-Family		Fee - 100%			265,175	1993	7,482,837	1978-1985-1996	94.70%	1,790,802	552.72	270
Jenner Properties    3624 Landeco Lane	Multi-Family		Fee - 100%			54,908	1996	2,231,184	1969-1997	94.10%	414,744	285.64	121

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 76

           Description of Residential Real Estate - continued
 
 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Investment	Year of Construction/  Remodel		Occupancy	Annualized Rental Income	Monthly Avg.  Rent  Per Unit	Number Units
Legacy    2600 34th Ave. S	Multi-Family	Fee - 100%	305,853	1996	$ 10,997,398	1997		95.42%	$   1,586,068	$ 722.25	183
Legacy IV    2600 34th Ave. S	Multi-Family	Fee - 100%	101,951	1997	7,031,125	1997		95.42%	528,690	657.57	67
Southwinds    2402 30th Ave. S	Multi-Family	Fee - 100%	176,789	1996	5,972,073	1982		90.77%	1,250,718	635.53	164
Valley Park Manor    2300 Library Lane	Multi-Family	Fee - 100%	153,005	2000	4,713,692	1970-2000		95.44%	775,403	384.62	168
Minot
Chateau    1725 2nd Ave. SW	Multi-Family	Fee - 100%	81,614	1997	2,468,984	1979-1996		96.86%	471,934	614.50	64
Colton Heights    707 6th Ave. NW	Multi-Family	Fee - 100%	28,432	1984	967,733	1984		93.85%	127,374	589.69	18
Dakota Arms    1112 32nd Ave. SW	Multi-Family	Fee - 100%	19,908	1996	625,487	1982		97.12%	109,608	507.44	18
Magic City    411 8th St. SW	Multi-Family	Fee - 100%	134,520	1997	5,257,208		1975-1996	96.62%	1,053,119	378.28	232
South Pointe    1201 31st Ave. SW	Multi-Family	Fee - 100%	305,184	1995	10,345,036		1995	97.01%	1,515,330	644.27	196
Southview    2800 7th St. SW	Multi-Family	Fee - 100%	21,344	1994	728,676		1981	93.24%	138,024	479.25	24
Williston
Century    1510 9th Ave. NW	Multi-Family	Fee - 100%	204,288	1986	4,125,747		1979-1996	71.35%	841,434	365.21	192
Other Communities
Beulah Condominiums - Beulah	Multi-Family	Fee - 100%	17,976	1983	483,155		1971-1998	55.44%	76,740	245.96	26

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

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Description of Residential Real Estate - continued
 
 

Unit Name	Property Type	Ownership Interest	Square Feet	Year Acquired	Investment	Year of  Construction/  Remodel	Occupancy	Annualized Rental Income	Monthly Avg. Rent Per Unit	Number Units
Parkway Apartments - Beulah    700 Parkway Dr.	Multi-Family	Fee - 100%	10,800	1988	$   150,912	1975-1996	56.99%	$  104,916	$   242.86	36
Bison Properties- Carrington & Cooperstown    806 13th St. NE	Multi-Family	Fee - 100%	21,868	1972	614,541	1969-1996	94.36%	112,500	267.86	35
Sweetwater Properties    Devils Lake & Grafton    1112 5th Ave. SE	Multi-Family	Fee - 100%	67,179	1972	1,626,298	1970-1999	76.79%	353,658	258.52	114
Lonetree Manor - Harvey    405 Grant Ave.	Multi-Family	Fee - 100%	8,956	1991	228,846	1969-1996	74.82%	$50,946	353.79	12
The Meadows I - Jamestown    615 10th St. NE	Multi-Family	Fee - 100%	29,240	2000	1,878,636	1999	98.40%	200,000	617.28	27
The Meadows II - Jamestown    615 10th St. NE	Multi-Family	Fee - 100%	29,240	2000	1,878,636	2000	97.54%	200,000	617.28	27
The Meadows III - Jamestown    615 10th St. NE	Multi-Family	Fee - 100%	29,196	2001	2,046,455	2001	n/a%	200,000	617.28	27
Total North Dakota			3,394,919		$112,882,092		91.99%	$  18,586,172	$ 1,647.61	3,085
South Dakota
Rapid City
Pointe West    3955 Pointe West Place	Multi-Family	Fee - 100%	77,062	1994	$   4,061,061	1985	94.59%	$      687,312	$  636.40	90
Sioux Falls
Oakwood Estates    3300 W 53rd	Multi-Family	Fee - 100%	157,720	1993	5,664,991	1988	96.47%	1,003,630	522.72	160

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

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 Description of Residential Real Estate - continued

 

Unit Name	Property Type	Ownership Interest			Square Feet	Year Acquired	Investment	Year of Construction/  Remodel	Occupancy	Annualized Rental Income	Monthly Avg. Rent Per Unit	Number Units
Oxbow    4701 S Oxbow Ave.	Multi-Family	Fee - 100%			$   172,404	1994	$  5,030,689	1994	99.53%	$    943,746	$    655.38	120
Prairie Winds    6000 W 43rd	Multi-Family	Fee - 100%			64,050	1993	2,013,055	1993	99.32%	358,044	621.60	48
Total South Dakota					471,236		$16,769,796		97.35%	$  2,992,732	$  609.03	418
Texas
Irving
Dakota Hill at Valley Ranch    7902 N MacArthur	Multi-Family		Fee - 100%	616,615		2000	$37,617,106	1998	92.84%	$  5,771,632	$  954.30	504
Total Texas				616,615			$37,617,106		92.84%	$ 5,771,632	$  954.30	504
Washington
Vancouver
Ivy Club    8701 NE 54th St.	Multi-Family		Fee - 100%	225,505		1999	$11,827,863	1988	94.19%	$ 1,712,580	$  699.58	204
Van Mall Woods    7609 NE Van Mall Dr.	Multi-Family		Fee - 100%	93,832		1999	6,151,761	1994	96.31%	886,024	738.35	100
Total Washington				319,337			$17,979,624		94.98%	2,598,604	$ 718.97	304
Total Apartment Communities				8,792,997			$361,577,622		93.96%	$4,939,327	$33,121.81	7,869

n/a	Property held less than 12 months
(1)	Investment is the actual cost paid for the property by IRET plus any capital improvements to the real property.

Page 79

Fiscal Year 2001 Property Sales & Acquisitions

      During Fiscal Year 2001, IRET made the following changes to it's real estate investment portfolio:

 

Property Sold	Sales Price	Book Value  & Sales Costs	Gain
Fiscal 2001
Evergreen Shopping Center, Evergreen, CO	$  1,450,000	$  1,448,310	$          1,689
Chalet Apartments, Minot, ND	390,000	366,566	23,434
Hill Park aka Garden Grove, Bismarck, ND	2,400,000	1,823,518	576,482
Total Fiscal 2001 Gain			$      601,605

Fiscal 2001 Property Acquisitions for year ended April 30, 2001

 

Commercial	Location	Property Type	Net Rentable Sq. Ft.	Purchase Price
12 South Main	Minot, ND	Office	11,300	$       385,000
17 South Main	Minot, ND	Office/Apartments	6,500	90,000
2030 Cliff Road	Eagan, MN	Office	13,374	950,000
Burnsville Bluffs	Burnsville, MN	Office	26,186	2,400,000
Cold Springs Center	St. Cloud, MN	Office	77,533	8,250,000
Conseco Financial Building	Rapid City, SD	Office	75,815	6,850,000
Dewey Hill Business Center	Edina, MN	Office	73,338	4,472,895
Edgewood Vista Addition	Duluth, MN	Assisted Living	26,412	2,200,000
Edgewood Vista Addition	East Grand Forks, MN	Assisted Living	5,100	516,700
Edgewood Vista	Fremont, NE	Assisted Living	5,100	535,550
Edgewood Vista	Hastings, NE	Assisted Living	5,100	550,800
Edgewood Vista	Kalispell, MT	Assisted Living	5,895	560,000
Edgewood Vista	Omaha, NE	Assisted Living	5,100	610,800
HealthEast I & II	Woodbury &    Maplewood, MN	Medical Office	114,216	21,588,498
Hospitality Associates	Minnetonka, MN	Office	4,000	400,000
Nicollet VII	Burnsville, MN	Office	118,400	7,200,000
Pillsbury Business Center	Bloomington, MN	Office	42,220	1,800,000
Plymouth IV & V	Plymouth, MN	Office	126,809	13,750,000
Sterner Lighting	Winsted, MN	Manufacturing	38,000	1,000,000
Stone Container Addition	Fargo, ND	Manufacturing	41,500	2,001,879
Stone Container	Waconia, MN	Warehouse	29,440	1,666,500
Southdale Medical Center   (60.31% part int.)	Edina, MN	Medical Office	195,983	32,421,070
			1,047,321	$110,199,692

Page 80

Residential		Units	Purchase Price
Cottonwood Phase III	Bismarck, ND***	67	$   1,854,800
Meadows, Phase III	Jamestown, ND***	27	1,865,182
Olympic Village	Billings, MT	274	11,616,500
Prairiewood Meadows	Fargo, ND	85	2,811,000
Ridge Oaks	Sioux City, IA	132	4,195,036
Sunset Trail, Phase I	Rochester, MN	73	6,493,150
Sunset Trail, Phase II	Rochester, MN**	n/a	4,006,932
		658	$  32,842,600
TOTAL			$143,042,292

 

**	Property not placed in service at April 30, 2001.  Additional costs are still to be incurred.
***	Represents costs to complete a project started in year ending April 30, 2000.

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

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

Planned Improvements
      There are no plans for material improvements to any of the above properties.

Occupancy and Leases
      Occupancy rates shown above are for the twelve months ended April 30, 1999. In the case of apartment properties, lease arrangements with individual tenants vary from month-to-month to one year leases, with the normal term being six months. Leases on commercial properties vary from one year to 20 years.
 
 

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Page 81

SHARES AVAILABLE FOR FUTURE SALE

      Pursuant to its organizational documents, IRET is authorized to issue an unlimited number of its shares.

      The shares of IRET issued in connection with this offering and six prior registrations of shares are freely transferable without restriction under the Securities Act of 1933, as amended, subject to those certain limitations on ownership imposed by IRET's organizational documents designed to insure that IRET may continue to qualify as a real estate investment trust under the IRS code. See Description of IRET's Restrictions on Transfer at page 102.

      Pursuant to the partnership agreement of IRET Properties, all limited partners of IRET properties have certain exchange rights. After at least a holding period of one year, a limited partner is entitled to convert their limited partnership units to share of IRET stock on a one for one basis. Shares of Beneficial Interest of IRET, other than those issued under this registration and the prior registrations which were effective July 9, 1996, March 14, 1997, December 15, 1998, June 4, 1999, September 1, 1999, December 14, 1999, and June 13, 2000, respectively, will be restricted securities under the meaning of Rule 144 of the Securities Act of 1933 and may not be sold in the absence of registration under the Securities Act of 1933 unless an exemption from registration is available, including exemptions contained in Rule 144.

      In general, under Rule 144 as currently in effect, if two years have elapsed since the later of the date of acquisition of restricted securities from IRET or any "affiliate"; of IRET, as that term is defined under the Securities Act of 1933, the acquirer or subsequent holder thereof is entitled to sell within any three month period a number of shares that does not exceed the greater of one percent (1%) of the then outstanding shares of Beneficial Interest or the average weekly trading volume of the shares of Beneficial Interest during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission. Sales under Rule 144 also are subject to certain manner of sale provisions, notice requirements and the availability of current public information about IRET. If three years have elapsed since the date of acquisition of restricted shares from IRET or from any affiliate of IRET and the holder thereof is deemed not to have been an affiliate of IRET at any time during the three months preceding a sale, such holder would be entitled to sell such shares in the public market under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements.

      IRET has agreed under the Operating Partnership Agreement that it will file with the Securities and Exchange Commission a shelf registration on Form S-3 under Rule 415 of the Securities Act or any similar rule adopted by the Commission with respect to any IRET shares that may be issued upon exchange of limited partnership units in the operating partnership, pursuant to Section 8.06 of the Operating Partnership Agreement and to use its best efforts to have such registration statement declared effective under the Securities Act of 1933.

Page 82

      No prediction can be made as to the effect, if any, that future sales of shares of IRET, or the availability of such shares for future sale, will have on the market price of the shares of IRET.

Sales of substantial amounts of shares of IRET, or the perception that such sales could occur, may adversely affect prevailing market prices of such shares. See Risk Factors - "Low Trading Volume of IRET" on page 21.

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Page 83

OPERATING PARTNERSHIP AGREEMENT

      IRET conducts all of its day-to-day real estate activities through it operating partnership IRET Properties, a North Dakota Limited Partnership (IRET Properties). The operation of IRET Properties is governed by the limited partnership agreement between IRET, Inc. and the individual limited partners. IRET, Inc. is 100% owned by Investors Real Estate Trust (IRET). IRET, Inc. as of April 30, 2001 owned 71% of IRET Properties. The material terms of the limited partnership agreement for IRET Properties are as follows:

IRET, Inc. is the Sole General Partner
      The IRET Properties has been organized as a North Dakota limited partnership pursuant to the terms of the Agreement of Limited Partnership dated January 31, 1997. Pursuant to the agreement of limited partnership, IRET, Inc., as the sole general partner, has full, exclusive and complete responsibility and discretion in the management and control of IRET Properties, and the limited partners have no authority in their capacity as limited partners to transact business for, or participate in the management activities or decisions of IRET Properties except as required by applicable law. However, any amendment to the limited partnership agreement that would (i) adversely affect the Exchange Rights as described below on page 86, (ii) adversely affect the limited partners' rights to receive cash distributions, (iii) alter the limited partnership's allocations of capital of the IRET Properties, requires the consent of the limited partners holding more than fifty percent (50%) of the limited partnership units held by such partners.

Transferability of Limited Partnership and General Partnership Interests
      As the general partner, IRET, Inc., may not voluntarily withdraw as the general partner of IRET Properties or transfer or assign its interest in IRET Properties unless the transaction in which such withdrawal or transfer occurs results in the limited partners receiving property in an amount equal to the amount they would have received had they exercised their Exchange Rights immediately prior to such transaction, or unless the successor to IRET, Inc. contributes substantially all of its assets to the IRET Properties in return for an interest in IRET Properties. With certain limited exceptions, the limited partners may not transfer their interests in IRET Properties, in whole or in part, without the written consent of IRET, Inc., which consent IRET, Inc. may withhold in its sole discretion. IRET, Inc. may not consent to any transfer that would cause IRET Properties to be treated as a corporation for federal income tax purposes.

      IRET Properties may not engage in any transaction resulting in a change of control Transaction unless in connection with the transaction the limited partners receive or have the right to receive cash or other property equal to the product of the number of shares of IRET into which each limited partnership unit of IRET Properties is then exchangeable and the greatest amount of cash, securities or other property paid in the transaction to the holder of one share of IRET in consideration of one such share.  If, in connection with the transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty percent (50%) of the outstanding shares of IRET, each holder of limited partnership units of IRET Properties will receive, or will have the right to elect to receive, the greatest amount of cash, securities, or other property which such holder would have received had it exercised its right to redemption and received shares of IRET in exchange for its limited partnership units of

Page 84

IRET Properties immediately prior to the expiration of such purchase, tender or exchange offer and had accepted such purchase, tender or exchange offer.

      Despite the foregoing paragraph, IRET may merge, or otherwise combine its assets, with another entity if, immediately after such merger or other combination, substantially all of the assets of the surviving entity, other than its ownership in IRET Properties, are contributed to IRET Properties as a capital contribution in exchange for general partnership units of IRET Properties with a fair market value, as reasonable determined by IRET, equal to the agreed value of the assets so contributed.

      For any transaction described in the preceding two paragraphs, IRET is required to use its commercially reasonable efforts to structure such transaction to avoid causing the limited partners to recognize gain for federal income tax purposes by virtue of the occurrence of or their participation in such transaction, provided such efforts are consistent with the exercise of the trustees' fiduciary duty under applicable law.

Proceeds of This Offering will be Capital Contributions to IRET Properties
      All assets of IRET will be held by IRET Properties or a subsidiary of IRET Properties, including the proceeds of this offering. Although IRET Properties will receive the net proceeds of the offering, IRET and the General Partner will be deemed to have made a capital contribution to the IRET Properties in the amount of the gross proceeds of the offering and IRET Properties will be deemed simultaneously to have paid the expenses paid or incurred in connection with the offering. Upon such contribution, IRET, Inc. or IRET, as applicable, will receive additional Units and the General Partner's or IRET's, as applicable, percentage interest in IRET Properties will be increased on a proportionate basis based upon the amount of such additional capital contributions.

       Conversely, the percentage interests of the limited partners will be decreased on a proportionate basis in the event of additional capital contributions by the IRET, Inc. or IRET. In addition, if the IRET, Inc. or IRET contributes additional capital to IRET Properties, IRET, Inc. will revalue the property of IRET Properties to its fair market value as determined by IRET, Inc. and the capital accounts of the partners will be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property which has not been reflected in the capital accounts previously would be allocated among the partners under the terms of the limited partnership agreement of IRET Properties if there were a taxable disposition of such property at fair market value on the date of the revaluation.

       The limited partnership agreement of IRET Properties provides that if IRET Properties requires additional funds at any time or from time to time in excess of funds available to IRET Properties from borrowing or capital contributions, IRET, Inc. or IRET may borrow such funds from a financial institution or other lender and lend such funds to IRET Properties on the same terms and conditions as are applicable to IRET, Inc.'s or IRET's, as applicable, borrowing of such funds.
 
 

Page 85

       IRET, Inc. is authorized to cause IRET Properties to issue partnership interests for less than fair market value if IRET (i) has concluded in good faith that such issuance is in the best interest of IRET and IRET Properties and (ii) IRET, Inc. makes a capital contribution in an amount equal to the proceeds of such issuance. Under the limited partnership agreement of IRET Properties, IRET, Inc. is obligated to contribute or cause IRET to contribute the proceeds of a share offering by IRET as additional capital to IRET Properties.

Exchange Rights of Limited Partners
      Pursuant to the limited partnership agreement of IRET Properties, the limited partners  have exchange rights that enable them to cause IRET Properties to exchange their limited partnership units for cash, or at the option of IRET, Inc., shares of IRET on a one-for-one basis.

       The exchange price will be paid in cash in the event that the issuance of shares of IRET to the exchanging limited partner would:
 
 

(i)	result in any person owning, directly or indirectly, IRET shares in excess of the ownership limitation of 50% of the outstanding shares of IRET;
(ii)	result in shares of beneficial interest of IRET being owned by fewer than 100 persons;
(iii)	result in IRET being "closely held" within the meaning of Section 856(h) of the IRS code;
(iv)	cause IRET to own, actually or constructively, 10% or more of the ownership interest in a tenant of IRET's or IRET Properties' real estate, within the meaning of Section 856(d)(2)(B) of the IRS code; or
(v)	cause the acquisition of IRET shares by such redeeming limited partner to be "integrated" with any other distribution of IRET shares for purposes of complying with the Securities Act.

       The exchange may be exercised by the limited partners at any time after the first anniversary of the date of their acquisition, provided that not more than two exchanges may occur during each calendar year and each limited partner may not exercise the exchange for less than 1,000 units or, if such limited partner holds less than 1,000 units all of the units held by such limited partner. See Federal Income Tax Considerations - Tax Aspects of the Operating Partnership at page 92.

       The number of IRET shares issuable upon an exchange will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro rata share transactions, which otherwise would have the effect of diluting the ownership interests of the limited partners or the shareholders IRET.
 
 

Page 86

Operation of IRET Properties and Payment of Expenses
      The limited partnership agreement of IRET Properties requires that the partnership be operated in a manner that will enable IRET to satisfy the requirements for being classified as a REIT for federal tax purposes, to avoid any federal income or excise tax liability imposed by the IRS code, and to ensure that IRET Properties will not be classified as a publicly  traded partnership for purposes of Section 7704 of the IRS code.

      In addition to the administrative and operating costs and expenses incurred by IRET Properties, it will pay all administrative costs and expenses of IRET and IRET, Inc. All expenses of IRET will be considered expenses of IRET Properties. IRET expenses generally will  include:

(i)	all expenses relating to the operation and continuity of existence of IRET and IRET, Inc.;
(ii)	all expenses relating to the public offering and registration of securities by IRET;
(iii)	all expenses associated with the preparation and filing of any periodic reports by IRET under federal, state or local laws or regulations;
(iv)	all expenses associated with compliance by IRET and IRET, Inc. with laws, rules and regulations promulgated by any regulatory body; and
(v)	all other operating or administrative costs of IRET, Inc. incurred in the ordinary course of its business on behalf of IRET Properties.

Distributions and Liquidation
      The limited partnership agreement of IRET Properties provides that it shall distribute cash from operations on a quarterly basis, in amounts determined by IRET, Inc. in its sole discretion, to the partners in accordance with their respective percentage interests in IRET Properties. Upon liquidation of the IRET Properties, and after payment of, or adequate provision for, debts and obligations of IRET Properties, any remaining assets will be distributed to all partners with positive capital accounts in accordance with their respective positive capital account balances. If IRET has a negative balance in its capital account following a liquidation, it will be obligated to contribute cash equal to the negative balance in its capital account.

Allocations
      Income, gain and loss of IRET Properties for each fiscal year is allocated among the partners in  accordance with their respective interests, subject to compliance with the provisions of IRS code sections 704(b) and 704(c) regulations issued thereunder.
 
 

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Page 87

Term
      IRET Properties shall continue until April 30, 2050, or until sooner dissolved upon
 

(i)	the bankruptcy, dissolution or withdrawal of IRET, Inc.;
(ii)	the sale or other disposition of all or substantially all of its assets;
(iii)	the redemption of all limited partnership interests; or
(iv)	the election by the General Partner.

 Fiduciary Duty
     Before becoming a limited partner, each limited partner must agree that in the event of any conflict in the fiduciary duties owed by IRET to its shareholders and by the General Partner to such Limited Partners, the General Partner will fulfill its fiduciary duties to such limited partnership by acting in the best interests of IRET's shareholders.

Tax Matters
      IRET, Inc. is the tax matters partner of IRET Properties and, as such, has authority to handle tax audits and to make tax elections under the IRS code on behalf of IRET Properties and the limited partners.
 
 

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Page 88

Tax Treatment of IRET and Its shareholders

Federal Income Tax
      Since its organization, IRET has operated in a manner to qualify as a real estate investment trust under Sections 856-858 of the IRS code. Under such sections a real estate investment trust which meets certain requirements will not be subject to Federal income tax with respect to income which it distributes to shareholders. Rather all earnings of the company will be taxed at the shareholder level

      To be considered a real estate investment trust for purposes of the Federal income tax laws, IRET must continue to meet the following requirements:

 

(1)	At the end of each fiscal quarter at least 75% of the total assets of IRET must consist of real estate, cash, cash items including receivables and government securities. As to non-real estate investments, which may not exceed 25% of the total assets of IRET, the securities of any one issuer acquired by IRET may not represent more than 5% of the value of IRET's assets or more than 10% of the outstanding voting securities of such issuer.
(2)	At least 75% of the gross income of IRET for the taxable year must be derived from real estate rents or mortgages or other real estate related activities
(3)	Gross income for the taxable year from sales or other disposition of stock or securities held for less than six months and of real property (or interests in real property) held for less than four years must be less than 30% of gross income.
(4)	Beneficial ownership of IRET must be held by 100 or more persons during at least 335 days of a taxable year of 12 months. More than 50% of the outstanding stock may not be owned, directly or indirectly, by or for, five or fewer individuals, at any time during the last half of the taxable year.

      As a real estate investment trust, IRET will not be taxed on that portion of its net income which is distributed to shareholders, if at least 90% of its net income is distributed. However, to the extent that there is undistributed net income or undistributed capital gain income, IRET will be taxed as a corporation at corporate income tax rates. IRET will not be entitled to carry back or carry forward any net operating losses.

      So long as IRET has met the statutory requirements for taxation as a real estate investment trust, distributions made to IRET's shareholders will be taxed to such shareholders as ordinary income or long term capital gain. Distributions will not be eligible for the dividend exclusion for individuals, or for the 85% dividends received deduction for corporations. IRET will notify each shareholder as to what portion of the distributions in the opinion of its counsel constitutes ordinary income or capital gain. The shareholders may not include in their individual income tax returns any operating or extraordinary losses of IRET, whether ordinary or capital losses.
 
 

Page 89

      If, in any taxable year, IRET should not qualify as a real estate investment trust, it would be taxed as a corporation and distributions to its shareholders would not be deductible by IRET in computing its taxable income. Such distributions, to the extent made out of IRET's current or accumulated earnings and profits, would be taxable to the shareholders as dividends, but would be eligible for the dividend exclusion, or the 85% dividends received deduction for corporations.

      In the opinion of the law firm of Pringle & Herigstad, P.C., IRET has conducted its operations in such a manner so as to qualify as a real estate investment trust. The regulations of the IRS require that the trustees have continuing exclusive authority over the management of IRET, the conduct of its affairs and, with certain limitations, the management and disposition of IRET property. It is the intention of the trustees to adopt any amendments to IRET's organizational documents that may be necessary for IRET to continue operation as a real estate investment trust. Any amendments to the organizational documents in order to remain qualified as a real estate investment trust may be done by the trustees without notice to or a vote of the shareholders.

State and Local Income Taxation
      Since IRET qualifies as a real estate investment trust for purposes of the Federal income tax laws, it will not be subject to state income tax on that portion of its taxable income which is distributed to shareholders. Distributions to IRET shareholders may be subject to taxation by the state or local jurisdiction of residence of the shareholder.
       Prospective shareholders should consult their tax advisors for an explanation of how state and local tax laws could affect their investment.

Taxation of IRET's Shareholders
      Distributions made to IRET's shareholders out of current or accumulated earnings and profits will be taxed as ordinary income. Distributions that are designated as capital gain dividends will be taxed as long-term capital gains to the extent they do not exceed IRET's actual net capital gain income for the taxable year, although corporate shareholders may be required to treat up to 20% of any such capital gain dividend as ordinary income. Distributions in excess of current or accumulated earnings and profits will not be taxable to a shareholder to the extent that they do not exceed the adjusted basis of the shareholder's shares of stock, but rather will reduce the adjusted basis of such shares of stock as a return of capital.

      To the extent that distributions exceed the adjusted basis of shareholder's shares of stock they will be included in income as long-term or short-term capital gain assuming the shares are held as a capital asset in the hands of the shareholder. IRET will notify shareholders at the end of each year as to the portions of the distributions which constitute ordinary income, net capital gain or return of capital.

      In addition, any dividend declared by IRET in October, November or December of any year payable to a shareholder of record on a specified date in any such month shall be treated as both paid by IRET and received by the shareholder on December 31 of such year, even though the dividend is actually paid by IRET during January of the following calendar year.
 
 

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      In general any gain or loss upon a sale or exchange of shares by a shareholder who has held such shares as a capital asset will be long-term or short-term depending on whether the stock was held for more than one year; provided, however, any loss on the sale or exchange of shares that have been held by such shareholder for six months or less will be treated as a long-term capital loss to the extent of distributions from IRET required to be treated by such shareholders as long-term capital gain.

Taxation of IRA's, 401K's, Pension Plans and Other Tax-exempted Shareholders
      The IRS has ruled that amounts distributed as dividends by a qualified REIT do not constitute unrelated business taxable income ("UBTI") when received by a tax-exempt entity. Based on that ruling the dividend income from IRET should not, subject to certain exceptions described below, be UBTI to a pension plan, 401k, IRA or other tax-exempt entity (a "Tax-Exempt Shareholder") provided that theTax-Exempt Shareholder has not held its shares as "debt financed property" within the meaning of the Code and the shares are not otherwise used in an unrelated trade or business of the Tax-Exempt Shareholder. Similarly, income from the sale of IRET shares should not, subject to certain exceptions described below, constitute UBTI unless the Tax-Exempt Shareholder has held such shares as a dealer (under Section 512(b)(5)(B) of the IRS code) or as "debt financed property" within the meaning of Section 514 of the IRS code.

      For Tax-Exempt Shareholders which are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from federal income taxation under sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the IRS code respectively, income from an investment in IRET will constitute UBTI unless the organization is able to deduct properly amounts set aside or placed in reserve for certain purposes so as to offset the income generated by its investment in IRET. Such prospective investors should consult their tax advisors concerning these "set-aside" and reserve requirements.

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

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TAX TREATMENT OF IRET PROPERTIES AND ITS LIMITED PARTNERS

      The following discussion summarizes certain federal income tax considerations applicable to IRET's investment in IRET Properties. The discussion does not cover state or local tax laws or any federal tax laws other than income tax laws.

Classification as a Partnership
      IRET will include in its income its share of IRET Properties income and deduct its share of the  losses only if IRET Properties is classified for federal income tax purposes as a partnership rather than as a corporation or an association taxable as a corporation.

      IRET has not requested, and does not intend to request, a ruling from the IRS that IRET Properties will be classified as a partnership for federal income tax purposes. Instead, Pringle & Herigstad, P.C., is of the opinion that, based on certain factual assumptions and representations, IRET Properties does not possess more than two corporate characteristics and will not be treated as a publicly traded partnership. Therefore, it will be treated for federal income tax purposes as a partnership and not as a corporation or an association taxable as a corporation, or a publicly traded partnership. Unlike a tax ruling, an opinion of counsel is not binding upon the IRS, and no assurance can be given that the IRS will not challenge the status of IRET Properties as a partnership for federal income tax purposes. If such a challenge was  sustained by a court, IRET Properties would be treated as a corporation for federal income tax purposes, as described below. In addition, the opinion of Pringle & Herigstad, P.C., is based on existing law, which is to a great extent the result of administrative and judicial interpretation. No assurance can be given that administrative or judicial changes would not modify the conclusions expressed in the opinion.

      If for any reason IRET Properties was taxable as a corporation, rather than a partnership, for federal income tax purposes, IRET would not be able to qualify as a REIT. In addition, any change in the Partnership's status for tax purposes might be treated as a taxable event, in which case IRET might incur a tax liability without any related cash distribution. Further, items of income and deduction of the Partnership would not pass through to its partners, and its partners would be treated as shareholders for tax purposes. Additionally, IRET Properties would be required to pay income tax at corporate tax rates on its net income, and distributions to its partners would constitute dividends that would not be deductible in computing IRET Properties' taxable income.
 
 

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INCOME TAXATION OF IRET PROPERTIES AND ITS PARTNERS

Partners and Not IRET Properties Subject to Tax
      A partnership is not a taxable entity for federal income tax purposes. Rather, IRET will be required to take into account is allocable share of IRET Properties' income, gains, losses, deductions, and credits for any taxable year ending within or with the taxable year of IRET, without regard to whether IRET has received or will receive any distributions.

Partnership Allocation Income, Losses and Capital Gain
      Although a partnership agreement generally will determine the allocation of income and losses among partners, such allocations will be disregarded for tax purposes under section 704(b) of the Code if they do not comply with the provisions of section 704(b) of the Code and the Treasury Regulations promulgated thereunder. If an allocation is not recognized for federal income tax purposes, the item subject to the allocation will be reallocated in accordance with the partners' interests in the partnership, which will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. The Operating Partnership's allocations of taxable income and loss are intended to comply with the requirements of Section 704(b) of the Code and the Treasury Regulations promulgated thereunder.

Tax Allocations with Respect to Contributed Property
      Pursuant to section 704(c) of the Code, income, gain, loss, and deductions attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership must be allocated for federal income tax purposes in a manner such that the contributor is charged with, or benefits from, the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of such unrealized gain or unrealized loss is generally equal to the difference between the fair market value of the contributed property at the time of contribution and the adjusted tax basis of such property at the time of contribution. The Treasury Department has issued regulations requiring partnerships to use a "reasonable method" for allocating items affected by section 704(c) of the Code and outlining several reasonable allocation methods. IRET Properties plans to elect to use the traditional method for allocating IRS code section 704(c) items with respect to the properties it acquires in exchange for limited partnership units.

      Under the limited partnership agreement of IRET Properties, depreciation or amortization deductions of will be allocated among the partners in accordance with their respective interests. In addition, gain on the sale of a property contributed to IRET Properties by a limited partner in exchange for limited partnership units will be specially allocated to such limited partner to the extent of any built-in gain with respect to the property. Depending on the allocation method elected under IRS code section 704(c), it is possible that IRET (i) may be allocated lower amounts of depreciation deductions for tax purposes with respect to contributed properties than would be allocated to IRET if such properties were to have a tax basis equal to their fair market value at the time of contribution and (ii) may be allocated taxable gain in the event of a sale of such contributed properties in excess of the economic profit allocated to IRET as a result of such sale. These allocations may cause IRET to recognize taxable income in excess of cash proceeds, which might adversely affect IRET's ability to comply with the REIT distribution requirements.

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This situation has not occurred to IRET in the past, nor does IRET have any reason to believe it will occur in the future.

      The allocation rules may also affect the calculation of IRET's earnings and profits for purposes of determining which portion of IRET's distributions is taxable as a dividend. The allocations described in this paragraph may result in a higher portion of IRET's distributions being taxed as a dividend than would have occurred had IRET purchased the Properties for cash.

Tax Basis in IRET Properties
      IRET's adjusted tax basis of its partnership interest in IRET properties is equal to (i) the amount of cash and the basis of any other property contributed to IRET Properties by IRET, (ii) increased by its share of income and its share of indebtedness, and (iii) reduced, but not below zero, by its share of the loss and the amount of cash distributed to IRET.

      If the allocation of IRET's share of loss would reduce the adjusted tax basis of IRET's partnership interest in below zero, the recognition of such loss will be deferred until such time as the recognition of such loss would not reduce IRET's adjusted tax basis below zero. To the extent that distributions, or any decrease in IRET's share of the indebtedness would reduce IRET's adjusted tax basis below zero, such distributions will constitute taxable income to IRET. Such distributions normally will be characterized as capital gain, and, if IRET's partnership interest has been held for longer than the long-term capital gain holding period, the distributions will constitute long-term capital gain.

Sale of Real Estate
      Generally, any gain realized by IRET Properties on the sale of property held for more than one year will be long-term capital gain, except for any portion of such gain that is treated as depreciation or cost recovery recapture.

      Any gain recognized on the disposition of a particular property contributed by a partner in exchange for limited partnership will be allocated first to such contributing partner under section 704(c) of the IRS code to the extent of such contributing partner's built-in. Any remaining gain will be allocated among the partners in accordance with their respective ownership percentage interests in IRET Properties
 
 

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ERISA AND PROHIBITED TRANSACTION CONSIDERATIONS

      The following is a discussion of material considerations arising under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the prohibited transaction provisions of section 4975 of the IRS code that may be relevant to a prospective purchaser. The discussion does not purport to deal with all aspects of ERISA or section 4975 of the IRS code that may be relevant to particular shareholders in light of their particular circumstances.

The discussion is based on current provisions of ERISA and the IRS code. Any change in the current law may render this discussion incorrect.

      A fiduciary of a pension, profit-sharing, other employee benefit plan, IRA or 401K plan subject to Title I of ERISA should consider carefully whether an investment in IRET shares is consistent with his fiduciary responsibilities under ERISA. In particular, the fiduciary requirements of Part 4 of Title I of ERISA require an ERISA Plan's investments to be (i) prudent and in the best interests of the ERISA Plan, its participants, and its beneficiaries, (ii) diversified in order to minimize the risk of large losses, unless it is clearly prudent not to do so, and (iii) authorized under the terms of the ERISA Plan's governing documents.

Status of IRET and IRET Properties under ERISA
      The following section discusses certain principles that apply in determining whether the fiduciary requirements of ERISA and the prohibited transaction provisions of ERISA and the IRS code apply to IRET or IRET Properties because one or more shareholders may be an ERISA Plan or is a Non-ERISA Plan or IRA subject to prohibited transactions section 4975 of the IRS code.

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

      Regulations of the Department of Labor (DOL) provide that the ERISA rules do not apply in the case of a security which is either a "publicly-offered security".

      The Plan Asset Regulations define a publicly-offered security as a security that is "widely-held," "freely transferable," and either part of a class of securities registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or sold pursuant to an effective
 
 

Page 95

registration statement under the Securities 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. As of 4/30/2001 IRET had in excess of 4,800 shareholders and is of the opinion that the Shares are now and will be "widely held."

      The Plan Asset Regulations provide that whether a security is "freely transferable" is a factual question to be determined on the basis of all relevant facts and circumstances. IRET currently imposes only the following restrictions on transfer:

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

       IRET is not aware of any other facts or circumstances limiting the transferability of its shares that are not enumerated in the Plan Asset Regulations as those not affecting free transferability.

      Assuming that IRET shares will be "widely held" and that no other facts and circumstances other than those referred to in the preceding paragraph exist that restrict transferability, it is IRET's opinion that it shares should be publicly offered securities and the assets of IRET should not be deemed to be "plan assets" of any ERISA Plan, IRA, or Non-ERISA Plan that invests in IRET shares.
 
 

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

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

Fiscal Quarter Ended	High	Low	Total Volume	Total Trades
*10-31-97	$ 7.125	$6.563	35,154	45
01-31-98	7.313	6.625	339,857	204
04-30-98	7.344	7.031	437,487	196
07-31-98	7.250	7.000	359,835	118
10-31-98	7.500	7.000	489,586	232
01-31-99	7.688	7.000	343,128	249
04-30-99	8.000	7.000	445,900	313
07-31-99	17.875	7.063	1,306,088	754
10-31-99	8.438	7.000	962,576	746
01-31-00	8.375	7.250	620,291	737
04-30-00	8.125	7.125	1,169,063	1,177
07-31-00	8.125	7.375	1,389,410	1,189
10-31-00	8.250	7.594	979,400	1,288
01-31-01	8.500	7.438	1,075,896	1,311
04-30-01	8.980	8.000	619,172	904
07-31-01	10.490	8.250	2,516,122	4,434

 *         from 10-20-97 - trading day

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      IRET also offered primary Shares of Beneficial Interest for sale to the public under Best Efforts offerings through various brokers registered with the National Association of Securities Dealers. Primary shares were sold as follows:

 

	Per Share
05/01/97 to 12/31/97	$7.20
01/05/98 to 11/20/98	$7.45
01/15/98 to 04/30/99	$7.85
06/04/99 to 07/20/99	$8.10
09/01/99 to 11/19/99	$8.25
12/14/99 to 05/01/00	$8.40
06/13/00 to 04/16/01	$8.60

      IRET also repurchased its shares during this period. Following is a summary, by quarter-year, of the sale of primary shares and repurchase of shares by IRET:
 
 

	Shares	Dollars
05/01/99 Beginning Balance	19,066,954	$   93,095,819
Quarter Ended 07/31/99
Shares Sold	856,738	$    7,172,603
Commissions Paid	_________	-466,368
	19,923,692	$  99,802,054
Quarter Ended 10/31/99
Shares Sold	1,216,465	$    9,789,966
Commissions Paid	_________	-497,488
	21,140,157	$109,094,532
Quarter Ended 01/31/00
Shares Sold	850,779	6,881,751
Commissions Paid	_________	-310,900
	21,990,936	$115,665,383
Quarter Ended 04/30/00
Shares Sold	461,133	$    3,887,039
Commissions Paid	_________	-319,252
	22,452,069	$119,233,170
Quarter Ended 07/31/00
Shares Sold	288,677	$2,437,091
Commissions Paid		-173,256
Dividend Reinvestment Plan	141,736	1,157,349
Shares Redeemed	-716	-5,470
	22,881,768	$122,648,884

 

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	Shares	Dollars
Quarter Ended 10/31/00
Shares Sold	158,248	$1,360,601
Commissions Paid		-99,949
Dividend Reinvestment Plan	40,603	330,957
Shares Redeemed	-289	-2,277
	23,080,328	$124,238,216
Quarter Ended 01/31/01
Shares Sold	286,868	$ 2,465,230
Commissions Paid		-193,123
Dividend Reinvestment Plan	12,813	103,169
Shares Redeemed	-39,561	-306,722
	23,340,448	$126,306,770
Quarter Ended 04/30/01
Shares Sold	610,833	$5,197,960
Commissions Paid		-312,251
Dividend Reinvestment Plan	117,286	958,177
Shares Redeemed	-221	-1,888
	24,068,346	$132,148,768

      As of April 30, 2001, IRET had 4,366 shareholder accounts. No shareholder held 5% or more of the 24,068,346 shares of beneficial interest outstanding on April 30, 2001. IRET has no other classes of stock and there were no warrants, stock options or other contractual arrangements requiring the issuance of its stock.

      IRET has paid quarterly distributions since July 1, 1971. Distributions are generally paid in January, April, July, and October of each year.  IRET's current dividend rate is .1450 cents per share per quarter payable on Dividends paid during the past three fiscal years and the current fiscal year to date were as follows:

 

	2001	2000	1999	1998	1997
January 15th	$  .1400	$  .1280	$  .1200	$  .10500	$  .0975
April 1st	.1425	.1300	.1225	.10700	.1000
July 1st	.14.50	.1240	.1100	.10125	.0925
October 1st	n/a	.1260	.1150	.10300	.0950
Total	n/a	$  .5080	$  .4675	$  .41625	$  .385

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      Over the past five fiscal years ending April 30, the annual distributions have been treated as follows for federal and state income tax purposes:

 

	2001 %	2000 %	1999 %	1998 %	1997 %
Ordinary Income	86.76%	69.70%	76.00%	97.10%	79.00%
Capital Gain	.72%	30.30%	6.30%	2.90%	21.00%
Return of Capital	12.52%	0.00%	17.70%	0.0%	0.00%
Total	100.00%	100.00%	100.00%	100.00%	100.00%

 

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DIVIDEND REINVESTMENT PLAN

      IRET currently offers its existing shareholders the option of reinvesting all or a portion of dividends into additional IRET shares.

      Pursuant to its dividend reinvestment plan, IRET may, from time to time, repurchase its shares on the open market for purposes of fulfilling its obligations under the Plan or, if sufficient shares are not available on the open market, IRET will issue additional shares.

      Each shareholder shall have the option to use cash dividends to purchase additional shares. In order to participate in the Dividend Reinvestment Plan, the shareholder must affirmatively elect to do so by notifying the Transfer Agent and Registrar, Investors Real Estate Trust, 12 South Main, Suite 100, Minot, ND 58701, (701) 837-4738. The shareholder may terminate participation at any time by notifying the Transfer Agent.

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

DESCRIPTION OF IRET'S SHARES OF BENEFICIAL INTEREST

The securities being offered pursuant to this prospectus are shares of beneficial interest of Investors Real Estate Trust. As of the effective date of this prospectus listed on the front cover, each share of beneficial interest has rights and benefits outlined below. None of the items listed may be changed by IRET or its trustees without notice to and the affirmative vote of those shareholder holding a majority of IRET's outstanding shares unless otherwise noted below:

       The shares of beneficial interest of IRET are of one class without par value.

       There is no limit on the number of shares that may be issued.

      All shares participate equally in dividends and distributions when and as declared by the trustees and in net assets upon liquidation.

     All shares of beneficial interests are fully paid and non-assessable by IRET upon issuance and will have no preference, conversion, exchange, pre-emptive or redemption rights.

       Annual meetings of shareholders shall be held no later than 120 days after April 30 of each year and special meetings may be called by the Chairman of the trustees or by a majority of the trustees or upon written request of shareholders holding not less than 10% of the issued and outstanding shares.

       At any meeting a shareholder is entitled to one vote for each share of IRET owned.

       All trustees must be elected or reelected annually by the shareholders holding a majority of the issued and outstanding shares of IRET. With respect to the election of trustees, the shares have cumulative voting rights which allow each shareholder one vote in person or by written
 
 

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proxy for each share registered in his name for as many persons as there are trustees to be elected. For example, if a shareholder owns 10 shares of IRET and there are 9 trustees, then the shareholder is entitled to cast a total of 90 votes for any particular or all trustees standing for election.

Ownership and Transfer Restrictions
      The shares of beneficial interests of IRET are fully transferable and alienable subject only to the following restrictions:

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

       Since its formation in 1970, IRET has never imposed the restrictions on transfer nor redeemed any of its shares pursuant to the restrictions listed in the preceding paragraph.
 

 

LEGAL PROCEEDING

      As of June 1, 2001, IRET was involved in one legal proceeding as a plaintiff and four as a defendant.  While the outcome of any particular action or proceeding cannot be predicted with certainty, there is no pending legal action or proceeding which, if adversely decided against IRET, would result in any material impact on IRET's business activities, earnings, or quarterly distributions.
 
 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

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

      The following tabulation shows the ownership of IRET shares and limited partnership units of IRET Properties by trustees and officers as of June 1, 2001.
 

Trustees & Officers	Shares of Beneficial  Interest (1)	Limited Partnership  Operating Units (2)	Total Shares     and Units	Percent    of Class
Jeffrey L. Miller, Trustee & Chairman	279,005	6,725	285,730	.9%
Daniel L. Feist, Trustee & Vice Chairman	712,703	1,856	714,559	2.26%
C. Morris Anderson, Trustee & Vice Chairman	4,187	171,170	175,357	.55%
John F. Decker, Trustee	47,050	0	47,050	.15%
Patrick G. Jones, Trustee	227,818	0	227,818	.72%
Stephen L. Stenehjem, Trustee	16,850	0	16,850	.05%
Steven B. Hoyt, Trustee	0	849,962	849,962	2.69%
Thomas A. Wentz, Sr., President & CEO	270,732	126,977	397,709	1.26%
Timothy P. Mihalick, Trustee,  Senior Vice President & COO	33,654	0	33,654	.11%
Thomas A. Wentz, Jr., Trustee,  Vice President & General Counsel	182,608	0	182,608	.58%
Diane K. Bryantt, Secretary & CFO	4,290	0	4,290	.013%

(1)	The amounts and percentages of shares beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities.  Except as otherwise indicated, each individual has sole voting and sole investment power with regard to the shares owned.
(2)	The units do not have voting rights but are exchangeable for shares at the option of the holder upon expiration of an initial mandatory holding period.

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Directors and Executive Officers
      The organizational documents of IRET provide that the company is to be supervised by a board of trustees consisting of no fewer than 5 nor more than 11 members.  As of June 15, 2001, IRET had 9 trustees.  The trustees delegate the day-to-day management of IRET to four executive officers.

       Trustees as of June 15, 2001, were:

Name	Title	Age	Principal Business Experience During Past Five Years
Jeffrey L. Miller	Trustee & Chairman	57	President of M&S Concessions, Inc.; Former President of Coca-Cola Bottling, Co.
C. Morris Anderson	Trustee &  Vice-Chairman	72	Director of Dakota Boys Ranch (26 yrs.); President of North Hill Bowl, Inc.; Chairman of the Board, International Inn, Inc.;  Director, Norwest Bank - Minot, N.A.
Daniel L. Feist	Trustee &  Vice-Chairman	69	President- Feist Construction & Realty; Former Director of First Bank - Minot, N.A.; Director ND Holdings, Inc. - Minot, ND
John F. Decker	Trustee	59	Financial Advisor/Senior Vice President, D.A. Davidson;
Steven B. Hoyt	Trustee	49	CEO of Hoyt Properties, Inc.; Board Member of Stonehaven Realty Trust; President of Complast, Inc.
Patrick G. Jones	Trustee	53	Investor
Timothy P. Mihalick	Trustee	42	Senior Vice President & Chief Operating Officer  of IRET
Stephen L. Stenehjem	Trustee	46	President & Chief Executive Officer of Watford City BancShares, Inc.; President & Chairman of First International Bank & Trust, Watford City, ND; Vice President & Director of First International  Bank & Trust, Scottsdale, AZ
Thomas A. Wentz, Jr.	Trustee	35	Vice President & General Counsel of IRET; Director of SRT Communications, Inc.; Sole General Partner of Wenco, Ltd.; Shareholder & Attorney with Pringle & Herigstad, P.C. until 12/31/99

 

(1) Thomas A. Wentz, Sr. is the father of Thomas A. Wentz, Jr.

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Trustee Compensation
      IRET pays an annual fee to its non-employee trustees.  Trustees who are employees of IRET are not paid any annual fees for serving as a trustee beyond their annual salary and other employee compensation.  IRET does not reimburse trustees for travel expenses incurred in connection with their activities on behalf of IRET.  IRET has no option or share grant plans for trustees.  For the past fiscal year, the compensation paid to each trustee was as follows:
 

Name	Title	Compensation for the past year 2001 ending April 30, 2001
Jeffrey L. Miller	Trustee & Chairman	$       17,958
C. Morris Anderson	Trustee & Vice Chairman	16,178
Daniel L. Feist	Trustee & Vice Chairman	16,078
Patrick G. Jones	Trustee	14,420
John F. Decker	Trustee	14,220
Stephen L. Stenehjem	Trustee	14,420
Steven B. Hoyt (1)	Trustee	0
Timothy P. Mihalick (2)	Trustee & COO	0
Thomas A. Wentz, Jr. (2)	Trustee & General Counsel	0

 

(1)	Mr. Hoyt was appointed to the board on April 1, 2001.  As a result, he has received no compensation for the past year.
(2)	Mr. Mihalick and Mr. Wentz, Jr. are employees of IRET Properties and are not awarded any additional compensation for serving on the Board of Trustees.

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Until July 1, 2000, IRET had no employees and contracted with Odell-Wentz & Associates, L.L.C., to provide all management services.  In addition to the advisory fee paid for these management services, IRET also incurs administrative expenses for Trustees' fees, accountants' fees, printing and postage, filing fees and other related expenses incurred in connection with administering IRET assets and its communications with its shareholders and regulatory authorities. During the past five fiscal years, the following is a summary of the administrative expenses IRET paid to Odell-Wentz, the Trustees and the other administrative expenses:
 
 

Fiscal Years Ended April 30	2001	2000	1999	1998	1997
Advisor's and Trustees' Compensation	$   423,227	$1,159,120	$   927,063	$    745,907	$  559,149
Advisory Investigation Fee	58,250	316,458	195,019	141,465	177,834
Other Administrative Expenses	1,057,469	633,692	320,479	271,738	158,627
Total Fees	$1,538,946	$2,109,270	$1,442,561	$1,159,110	$ 895,610
Fees as Percent of Net Invested     Assets of the Trust		.4%	0.5%	0.5%	0.05%

 

As of July 1, 2000, IRET has been internally managed and operated.

       The following tables set forth certain information concerning the compensation paid by IRET to its executive officers, who are also the four most highly compensated executive officers.

 Executive Compensation Table
 
 

Name and  Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compensation  ($) (3)	Restricted Stock Award(s)  ($)(4)	Securities Underlying  Options/SARs($)(4)	LTIP Payouts  ($)(4)	All Other  Compensation ($)
Thomas A. Wentz, Sr.President & CEO
	2000	71,500 (1)	0	5,220	0	0	0	0
	1999	(5)	(5)	(5)	(5)	(5)	(5)	(5)
	1998	(5)	(5)	(5)	(5)	(5)	(5)	(5)
Timothy P. Mihalick Senior Vice President & COO
	2000	78,000 (1)	0	12,312	0	0	0	0
	1999	(5)	(5)	(5)	(5)	(5)	(5)	(5)
	1998	(5)	(5)	(5)	(5)	(5)	(5)	(5)
Thomas A. Wentz, Jr. Vice President & General Counsel
	2000	65,000 (1)	0	10,557	0	0	0	0
	1999	(5)	(5)	(5)	(5)	(5)	(5)	(5)
	1998	(5)	(5)	(5)	(5)	(5)	(5)	(5)
Diane K. Bryantt Secretary & CFO
	2000	32,050 (1)	0	8,626	0	0	0	0
	1999	(5)	(5)	(5)	(5)	(5)	(5)	(5)
	1998	(5)	(5)	(5)	(5)	(5)	(5)	(5)

Page 106

 

(1)	Calendar year 2000 covers a 6 month compensation period of July 1st through December 31st.
(2)	IRET has no stock option plans or other stock based compensation plans which allocate, award or otherwise grant shares of IRET stock to any employees.
(3)	Consists of employee health, dental, disability and contributions to the company 401K plan on behalf of named executive officers.  Additionally, includes compensation of $751 annually for vehicle provided to Mr. Mihalick.
(4)	IRET has no long-term incentive plans, restricted stock award plans, option plans or share appreciation rights plans (SARs).
(5)	Until July 1st, 2000, Investor's Real Estate Trust had no employees and was externally advised by Odell-Wentz, & Associates, L.L.C

       Since the conversion from being managed by the external advisor to being internally managed, IRET has employed and paid its employees directly.  Going forward, IRET plans on paying its officers an annual salary and, depending upon IRET's performance, a bonus as determined annually by the trustees.   No employee has an employment contract, change in control payment plan, or guaranteed bonus plan.  All employees are employed at will and may be terminated by IRET at any time.

       As a result of the acquisition of the advisory company, IRET assumed a note receivable from Mr. Mihalick in the amount of $101,001.80.  Proceeds of the note were used to purchase IRET shares of beneficial interest.  The note bears interest at New York Prime less 1%.  The note is current and is repayable upon demand.
 
 

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Page 107

 
 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management Services
      Through June 30, 2000, the advisor to the Trust was Odell-Wentz & Associates, LLC.  Roger R. Odell and Thomas A. Wentz, Sr. were the owners of Odell-Wentz & Associates LLC and also officers and shareholders of the Trust.  Under the advisory contract between the Trust and Odell-Wentz & Associates, LLC, the Trust paid an advisor's fee based on the net assets of the Trust and a percentage fee for investigating and negotiating the acquisition of new investments. For the year ended April 30, 2001, Odell-Wentz & Associates, LLC received total fees under said agreement of $265,573. The fees for April 30, 2000, were $1,400,973 and for April 30, 1999, were $951,234.

 Acquisition of Odell-Wentz & Associates, L.L.C.
      On July 1, 2000, IRET Properties acquired assets from Odell-Wentz & Associates, LLC in exchange for operating partnership units at a total purchase price of $2,083,350.  This acquisition included real estate, furniture, fixtures, equipment and other assets of approximately $675,000, goodwill of approximately $1,645,000, and the assumption of mortgages and other liabilities of approximately $236,000.  Except for Roger R. Odell who retired, all officers and employees of Odell-Wentz & Associates, LLC were retained by IRET Properties.

       Odell-Wentz was owned equally by Thomas A. Wentz, Sr., who is currently IRET's President and Chief Executive Officer and Roger R. Odell, who as of the acquisition on July 1, 2000, was IRET's President.  Mr. Odell retired as an employee of IRET as of July, 2000, and he did not seek re-election to the Board of trustees in August of 2000.  Currently, Mr. Odell has no relationship with IRET as an employee, officer or trustee.

Property Management Services
      Investors Management and Marketing (IMM) provides property management services to the Trust. Roger R. Odell is a shareholder in IMM.  IMM received $114,421 for services rendered from May 1, 2000 through June 30, 2000,  IMM received $649,729, and $609,783 for services rendered for years ended April 30, 2000, and 1999, respectively.

      With the exception of Hoyt Properties, Inc., none of the firms engaged to provide property management services are affiliated with IRET, its officers or trustees. As it pertains to Hoyt Properties, it is owned by Steven B. Hoyt who is currently a trustee of IRET. Hoyt Properties manages the following commercial buildings for IRET pursuant to a written management contract:

 

Cold Spring Center	St. Cloud, MN
2030 Cliff Road	Eagan, MN
Plymouth IV & V	Plymouth, MN
Nicollet VII	Burnsville, MN
Burnsville Bluffs	Burnsville, MN
Pillsbury Business Center	Bloomington, MN

Page 108

       As compensation for its services, Hoyt properties receives a fee of 5% of the gross rental income provided such management fee is reimbursable by the building's tenants pursuant to the tenant's lease agreement. If the 5% fee is not payable by the tenant, but must be paid by IRET from rent proceeds, the annual fee is 3.5% of the gross rental proceeds.

      The management contract with Hoyt Properties commenced on April 1, 2001 and may be terminated by either party on 30 days written notice for any reason and without penalty. As of July 31, 2001, Hoyt Properties has received $70,296.12 as a management fee from IRET of which 100% has been recovered by IRET from the various building tenants. It is the opinion of IRET that all the other terms of the management contract are commercially reasonable and are on terms no less favorable to IRET than what could be obtained from an unrelated property management firm.

Security Sales Services
      Inland National Securities is a corporation that provides underwriting services in the sale of additional shares for the Trust. Roger R. Odell is also a shareholder in Inland National Securities. Fees for services from May 1, 2000 through June 30, 2000 were $6,861. Fees for services totaled $100,081, and $157,392, for the years ended April 30, 2000 and 1999, respectively.

 Legal Services
      The Trust paid fees and expense reimbursements to the law firm in which Thomas A. Wentz, Jr. was, until December 31, 1999, a partner totaling $89,497 and  $33,022 for the years ended April 30, 2000, and 1999, respectively. Thomas A. Wentz, Jr. is a trustee of the Trust.
 
 

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Page 109

SELECTION, MANAGEMENT AND CUSTODY OF IRET'S ASSETS

Real Estate Management
      Under the direction and supervision of IRET employees based in Minot, all of the day to day management of IRET's real estate assets is handled by third party professional real estate management companies, which includes the negotiation of potential leases, preparation of proposed operating budgets and supervision of routine maintenance and capital improvements authorized by IRET. All activities related to the purchase, sale, insurance coverage, capital improvements, approval of commercial leases and annual operating budgets and major renovations are made exclusively by IRET employees and then implemented by the third party property management companies.

      As it pertains to leases for its multi-tenant commercial properties, IRET relies almost exclusively on third party brokers to locate potential tenants. As compensation, most brokers receive a commission of up to 7% of the total rent to be paid over the term of the lease. This commission rate is the industry standard and in IRET's opinion commercially reasonable.

      As of June 1, 2001, IRET has property management contracts with the following companies:

 

Firm	Address
Bayport Properties	300 S. Hwy. 169, Suite 120, Minneapolis, MN 55426
Builder's Management & Investment Company	1445 1st Avenue North, Fargo, ND 58102
Coast Management	PO Box 2066, Boise, ID 83701-2066; 2610 Wetmore Avenue, Everett, WA 98206
Coldwell Banker First Realty	PO Box 9379, Fargo, ND 58106-9379
Dakota Commercial	1197B S. Columbia Rd., Grand Forks, ND 58201
Hoyt Properties, Inc.	708 S. 3rd St., Minneapolis, MN 55415
IMM	PO Box 2064, Minot, ND 58702-2064
Illies Nohave Heinen Property Management	300 E. Germain St., St. Cloud, MN 56304
Kahler Property Management	2020 W. Omaha, Rapid City, SD 57702
ConAm	2301 Ohio Dr., Suite 285, Plano, TX 75093; 10800 E. Bethany Dr., Aurora, Co 80014
Opus Northwest Management, L.L.C.	10350 Bren Rd. W., Minnetonka, MN 55343; PO Box 59110, Minneapolis, MN 55459-0110
Sand Companies, Inc.	PO Box 727, Waite Park, MN 56387-0727
Tamarack Property Management	2929 3rd Ave. N., Suite 538, Billings, MT 59101-1944
Weis Management	2227 7th St. NW, Rochester, MN 55901

Page 110

      All contracts may be terminated by IRET without cause or penalty on no more than a 60 day written notice. In IRET's opinion all property management companies listed above are properly licensed, insured and bonded to the extent required for each manager's particular duties.

      With the exception of Hoyt Properties, Inc., none of the firms listed above are currently affiliated with IRET, its officers or trustees. As it pertains to Hoyt Properties, it is owned by Steven B. Hoyt who is currently a trustee of IRET. Hoyt Properties manages the following buildings for IRET pursuant to a written management contract:  See page 108 for list.

      As compensation for its services, Hoyt properties receives a fee of 5% of the gross rental income provided such management fee is reimbursable by the building's tenants pursuant to the tenant's lease agreement. If the 5% fee is not payable by the tenant, but must be paid by IRET from rent proceeds, the annual fee is 3.5% of the gross rental proceeds.

      The management contract with Hoyt Properties commenced on April 1, 2001 and may be terminated by either party on 30 days written notice for any reason and without penalty. As of July 31, 2001, Hoyt Properties has received $70,296.12 as a management fee from IRET of which 100% has been recovered by IRET from the various building tenants. It is the opinion of IRET that all the other terms of the management contract are commercially reasonable and are on terms no less favorable to IRET than what could be obtained from an unrelated property management firm.
 

 

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Page 111

POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS

Selling To or Buying Property From IRET
During the past fiscal year, IRET did not sell or buy any property from a trustee, officer or employee or IRET. While not prohibited by IRET's organizational documents, there are certain requirements which must be satisfied before such a transaction may occur.

      Specifically, no trustee, officer or employee of IRET, or any person affiliated with any such persons directly or indirectly, may sell or buy any property or assets to IRET or purchase any property or assets from IRET, directly or indirectly, nor shall any such person receive any commission or other remuneration, directly or indirectly, in connection with the purchase or sale of IRET assets, except pursuant to transactions that are fair and reasonable to the IRET and that relate to:

 

a.	The acquisition of property or assets at the formation of IRET or shortly thereafter and fully disclosed in the prospectus filed with the North Dakota State Securities Commissioner;
b.	The acquisition of federally insured or guaranteed mortgages at prices not exceeding the currently quoted prices at which the Federal National Mortgage Association is purchasing comparable mortgages;
c.	The acquisition of other mortgages on terms not less favorable to IRET than similar transactions involving unaffiliated parties; or,
d.	The acquisition by IRET of other property at prices not exceeding, or disposition of other property at prices not less than, the fair value thereof as determined by independent appraisal.

      All such transactions and all other transactions in which trustee, officer or employee has any direct or indirect interest shall be approved by a majority of the trustees having no interest in the particular transaction. All brokerage commissions or remuneration received in connection with any transactions shall be no more than what IRET would pay to an unrelated party or company.

 Sales Commissions or Finder Fees
      The organizational documents of IRET prohibit any trustee or affiliate of the trustee from receiving a brokerage commission or other such remuneration in connection with the acquisition or disposition of IRET assets.

 Competition with IRET
The organizational documents of IRET do not preclude the trustees, officers or employees of IRET from engaging in other business activities which may complete directly with IRET. See the conflict of interest section on page 29 for a discussion of this potential competition.
 
 

Page 112

INTERESTS OF NAMED EXPERTS AND COUNSEL

      Pringle & Herigstad, P.C., is named counsel for the registrant.  Until December 31, 1999, Mr. Wentz, Jr., was a member of the law firm of Pringle & Herigstad, P.C., counsel for the Trust.  Mr. Wentz, Jr., as of the date of this registration statement, is a voting trustee and officer of the registrant.

LIMITATIONS OF LIABILITY

      Indemnification by IRET to trustees, employees or persons controlling IRET for liabilities arising under the Securities Act of 1933. IRET has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

Section 12 of the Declaration of Trust of IRET provides as follows:

A. Indemnification of Trustees

 

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

a.	The TRUSTEES, ADVISORS or AFFILIATES have determined, in good faith, that the course of conduct which caused the loss or liability was in the best interests of IRET.
b.	The TRUSTEES, ADVISORS or AFFILIATES were acting on behalf of or performing services for IRET.
c.	Such liability or loss was not the result of: i.  negligence or misconduct by the TRUSTEES, excluding the INDEPENDENT TRUSTEES, ADVISORS or AFFILIATES; or  ii. gross negligence or willful misconduct by the INDEPENDENT   TRUSTEES.
d.	Such indemnification or agreement to hold harmless is recoverable only out of IRET NET ASSETS and not from SHAREHOLDERS.

Page 113

 

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

 

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

 

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

 

a.	The legal action relates to acts or omissions with respect to the performance of duties or services on behalf of IRET.
b.	The legal action is initiated by a third party who is not a SHAREHOLDER or the legal action is initiated by a SHAREHOLDER acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement.
c.	The TRUSTEES, ADVISORS or AFFILIATES undertake to repay the advanced funds to IRET, together with the applicable legal rate of interest thereon, in cases in which such TRUSTEES, ADVISORS or AFFILIATES are found not to be entitled to indemnification.

Page 114

Quantitative & Qualitative Disclosures About Market Risk
      IRET's exposure to market risk is limited to fluctuationss in the general level of interest rates on its current and future fixed and variable rate debt obligations.  Even though IRET's philosophy is to maintain a fairly low exposure to interest rate fluctuation risk, IRET is still vulnerable to significant fluctuationss in interest rates on its variable rate debt, on any future repricing or refinancing of its fixed rate debt and on future debt.

       IRET primarily uses long-term and medium-term (more than 10 years) and medium-term debt as a source of capital.    IRET does not currently use derivative securities, or interest rate swaps or any other type of hedging activity to manage its costs of capital.  As of April 30, 2001, IRET had the following amount of future principal payments on mortgages secured by its real estate:

 

Long Term Debt	2002	2003	2004	2005	2006	Thereafter	Total
Fixed Rate	$13,209,699	$6,949,388	$7,482,220	$8,183,905	$10,998,715	$291,141,854	$337,364,781
Variable Rate	1,265,409	1,348,758	1,458,692	1,563,065	2,734,650	23,221,575	31,592,149
							$368,956,930
Average Interest Rate (%)	(1)	(1)	(1)	(1)	(1)	(1)

 

(1) The weighted average interest rate as of April 30, 2001, was 8.56%.  Any fluctuations on the variable interest rates could increase or decrease IRET's interest expenses.

Legal Matters
      The validity of the Shares of Beneficial Interest offered under the Prospectus, the federal and state tax aspects of the organization and operation of IRET and the Operating Partnership and other legal matters will be passed upon for IRET by Pringle & Herigstad, P.C., Minot, North Dakota.

Experts
The balance sheets of IRET as of April 30, 2000, and April 30, 2001, the statements of income, shareholders' equity, and cash flows for each of the three years in the period ended April 30, 2001, as listed on the Index to Financial Statements on page F-1, included in this Prospectus, have been included herein in reliance on the reports of Brady Martz & Associates, P.C., Minot, North Dakota, independent accountants, given on the authority of that firm as experts in accounting and auditing.
 
 

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Page 115

INVESTORS REAL ESTATE TRUST
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Consolidated Balance Sheet as of April 30, 2001 (unaudited)

      During the past fiscal year ending April 30, 2001, IRET acquired or constructed 26 new real estate properties.  See pages 50 and 51 for the complete list.  All of those properties are included in the audited balance sheet which is presented below.
 
 

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2001 (unaudited)

      The pro forma consolidated statement of operations (unaudited) for the year ended April 30, 2001, is presented as if real estate acquisition, development and the purchase of the Advisor, Odell-Wentz & Associates, L.L.C., had been completed at the beginning of the period May 1, 2000, rather than on the actual acquisition or closing date.  Please see pages 50 and 51 for the complete list of real estate acquisitions and developments completed during the last fiscal year of IRET from May 1, 2000, to April 30, 2001.

 

	Fiscal 2001	2001 IRET  Acquisitions  Pro Forma Adjustments	Total Consolidated Pro Forma (a)
REVENUE
Real estate rentals	$  74,800,722	$  10,607,327	$    85,408,049
Interest, discounts and fees	966,428	0	966,428
Total revenue	$  75,767,150	$  10,607,327	$  86,374,477
EXPENSES
Interest	$  25,231,398	$  3,822,466	$  29,053,864
Depreciation	12,299,532	701,137	13,000,669
Utilities and maintenance	11,546,566	871,155	12,417,721
Taxes	7,545,182	783,734	8,328,916
Insurance	831,963	261,245	1,093,208
Property management expenses	5,784,423	306,094	6,090,517
Loss on Impairment of Properties	0	0	0
Administrative Expenses	1,057,469	0	1,057,469
Advisory and trustee services	423,227	0	423,227
Operating expenses	431,390	0	431,390
Amortization	428,188	0	428,188
Total expenses	$  65,579,338	$  6,745,831	$  72,325,169
INCOME BEFORE GAIN/LOSS ON      PROPERTIES AND MINORITY INTEREST	$  10,187,812	$    3,861,496	$    14,049,308

Page 116

Pro-Forma - continued
 
 

	Fiscal 2001	2001 IRET  Acquisitions  Pro Forma Adjustments	Total Consolidated Pro Forma (a)
GAIN ON SALE OF PROPERTIES	601,605	0	601,605
MINORITY INTEREST PORTION OF    OPERATING PARTNERSHIP INCOME	-2,095,177	-888,144	- 2,982,321
NET INCOME	$    8,694,240	$    2,973,352	$      11,668,592
Net income per share (diluted)	$             .38	$              .12	$                 .50

 

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Page 117

TABLE OF CONTENTS

 

INDEPENDENT AUDITOR'S REPORT	F-1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets	F-2 to F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Shareholders' Equity	F-5
Consolidated Statements of Cash Flows	F-6 to F-7
Notes to Consolidated Financial Statements	F-8 to F-23
ADDITIONAL INFORMATION
Independent Auditor's Report on Additional Information.	F-24
Marketable Securities	F-25
Supplemental Income Statement Information	F-26
Real Estate and Accumulated Depreciation	F-27 to F35
Investments in Mortgage Loans on Real Estate	F-36
Selected Financial Data	F-37
Gain From Property Dispositions	F-28
Mortgage Loans Payable	F-39 to F-41
Significant Property Acquisitions	F-42
Quarterly Results of Consolidated Operations (unaudited)	F-43

Page 118

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended April 30, 2001, 2000 and 1999. These consolidated financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Investors Real Estate Trust and Subsidiaries as of April 30, 2001 and 2000, and the consolidated results of its operations and cash flows for the years ended April 30, 2001, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America.

/S/ Brady, Martz & Associates, P.C.

BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota, USA

May 23, 2001

F-1

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 2001 and 2000

ASSETS

	2001	2000
REAL ESTATE INVESTMENTS
Property owned	$591,636,468	$449,919,890
Less accumulated depreciation	- 44,093,145	- 33,232,952
	$547,543,323	$416,686,938
Mortgage loans receivable	1,037,095	1,529,578
Total real estate investments	$548,580,418	$418,216,516
OTHER ASSETS
Cash	$6,356,063	$3,449,264
Marketable securities -held-to-maturity	2,351,248	2,601,420
Marketable securities -available for sale	660,865	572,811
Rent receivable	1,925,429	1,055,922
Real estate deposits	522,500	768,850
Prepaid and other assets	799,973	577,624
Tax and insurance escrow	4,323,960	3,218,603
Furniture & Fixtures	187,313	0
Goodwill	1,550,246	0
Deferred charges and Leasing Costs	3,064,109	2,517,289
TOTAL ASSETS	$570,322,124	$432,978,299

F-2

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
April 30, 2001 and 2000

LIABILITIES AND SHAREHOLDERS' EQUITY

	2001	2000
LIABILITIES
Accounts payable and accrued expenses	$8,252,758	$ 6,343,595
Notes payable	0	6,452,420
Mortgages payable	368,956,930	265,056,767
Investment certificates issued	11,876,417	10,087,256
Total Liabilities	$ 389,086,105	$ 287,940,038
MINORITY INTEREST IN PARTNERSHIPS	$     3,287,665	$                 0
MINORITY INTEREST OF UNIT HOLDERS IN    OPERATING PARTNERSHIP	$   59,003,194	$  35,117,670
SHAREHOLDER'S EQUITY
Shares of beneficial interest (unlimited authorization, no par value, 24,068,346 shares outstanding in 2001 and 22,452,069 shares outstanding in 2000)	$ 132,148,768	$ 119,233,172
Accumulated distributions in excess of net income	-13,073,157	-9,094,076
Accumulated other comprehensive loss	-130,451	- 218,505
Total shareholders' equity	$ 118,945,160	$ 109,920,591
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 570,322,124	$ 432,978,299

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-3

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended April 30, 2001, 2000 and 1999

	2001	2000	1999
REVENUE
Real estate rentals	$74,800,722	$54,257,881	$38,785,287
Interest, discounts and fees	966,428	1,187,312	1,141,975
Total revenue	$75,767,150	$55,445,193	$39,927,262
EXPENSES
Interest	$25,231,398	$17,014,170	$12,101,981
Depreciation	12,299,532	8,460,112	5,966,874
Utilities and maintenance	11,546,566	8,044,530	6,356,483
Taxes	7,545,182	5,282,361	4,025,559
Insurance	831,963	476,962	384,203
Property management expenses	5,784,423	4,290,275	3,288,267
Loss on Impairment of Properties	0	1,319,316	0
Administrative Expenses	1,057,469	0	0
Advisory and trustee services	423,227	1,159,120	844,901
Operating expenses	431,390	633,692	402,641
Amortization	428,188	216,097	154,677
Total expenses	$65,579,338	$46,896,635	$33,525,586
INCOME BEFORE GAIN/LOSS ON  PROPERTIES AND MINORITY INTEREST	$10,187,812	$8,548,558	$  6,401,676
GAIN ON SALE OF PROPERTIES	601,605	1,754,496	1,947,184
MINORITY INTEREST PORTION OF OPERATING PARTNERSHIP INCOME	-2,095,177	-1,495,209	- 744,725
NET INCOME	$8,694,240	$8,807,845	$ 7,604,135
Net income per share (basic and diluted)	$          .38	$          .42	$          .44

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-4

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended April 30, 2001, 2000 and 1999

	NUMBER OF SHARES	SHARES OF BENEFICIAL INTEREST	DISTRIBUTIONS IN EXCESS OF NET INCOME	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	TOTAL SHAREHOLDER'S EQUITY
BALANCE APRIL 30, 1998	16,391,412	$ 74,708,559	$ -6,666,555	$110,622	$68,152,626
Comprehensive Income
Net income	0	0	7,604,135	0	7,604,135
Unrealized loss on   securities available for sale	0	0	0	-167,189	-167,189
Totalcomprehensive income					$7,436,946
Dividends distributed	0	0	-8,193,538	0	-8,193,538
Dividends reinvested	762,051	5,389,464	0	0	5,389,464
Sale of shares	2,368,504	16,284,684	0	0	16,284,684
Shares repurchased	-455,013	-3,286,888	0	0	_-3,286,888
BALANCE APRIL 30, 1999	19,066,954	$ 93,095,819	$ -7,255,958	$- 56,567	$85,783,294
Comprehensive income
Net income	0	0	8,807,845	0	8,807,845
Unrealized loss on securities available for sale	0	0	0	-161,938	-161,938
Total comprehensive income					$8,645,907
Dividends distributed	0	0	-10,645,963	0	-10,645,963
Dividend reinvestment plan	803,192	6,330,301	0	0	6,330,301
Sales of shares	3,115,789	24,022,246	0	0	24,022,246
Shares repurchased	-533,866	-4,215,194	0	0	-4,215,194
BALANCE APRIL 30, 2000	22,452,069	$ 119,233,172	$ -9,094,076	$-218,505	$109,920,591
Comprehensive Income
Net income	0	0	8,694,240	0	8,694,240
Unrealized gain on     securities available for sale	0	0	0	88,054	88,054
Totalcomprehensive income					$8,782,294
Dividends distributed	0	0	-12,673,321	0	-12,673,321
Dividend reinvestment plan	273,155	2,230,445	0	0	2,230,445
Sale of shares	1,383,908	11,001,509	0	0	11,001,509
Fractional Shares repurchased	-40,786	-316,358	0	0	- 316,358
BALANCE APRIL 30, 2001	24,068,346	$ 132,148,768	$-13,073,157	$-130,451	$118,945,160

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-5

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended April 30, 2001, 2000 and 1999

	2001	2000	1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$8,694,240	$8,807,845	$7,604,135
Adjustments to reconcile net income to net cash       provided by operating activities:
Depreciation and amortization	12,727,720	8,676,209	6,121,551
Minority interest portion of operating partnership        income	2,095,177	1,495,209	744,725
Accretion of discount on contracts	0	-1,506	-2,920
Gain on sale of properties	-601,605	-1,754,496	-1,947,184
Loss on impairment of properties	0	1,319,316	0
Interest reinvested in investment certificates	360,181	363,935	408,097
Effects on operating cash flows due to changes in:
Real estate deposits	246,350	-467,950	2,192,813
Rent receivable	-990,213	-1,055,922	0
Other assets	-201,547	-283,838	-11,884
Tax and insurance escrow	-1,105,357	-1,457,408	-507,127
Deferred charges	-805,364	-1,319,634	-480,413
Accounts payable and accrued expenses	1,909,163	1,955,325	1,541,190
Net cash provided from operating activities	$22,328,745	$16,277,085	$15,662,983
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable securities       held-to-maturity	$250,172	$363,014	$      572,104
Principal payments on mortgage loans receivable	613,934	492,547	372,155
Proceeds from sale of property	0	7,326,563	435,787
Payments for acquisitions and improvement  of       properties	-72,319,419	-121,931,571	-45,325,061
Purchase of marketable securities available-for-sale	0	0	-181,250
Investment in mortgage loans receivable	-4,709,838	- 6,291,617	-7,655,061
Net cash used for investing activities	$- 76,165,151	$ -120,041,064	$-51,781,326

F-6 

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended April 30, 2001, 2000 and 1999

	2001	2000	1999
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares, net of issue costs	$11,001,509	$24,022,246	$16,284,684
Proceeds from investment certificates issued	3,257,574	3,769,003	4,591,528
Proceeds from mortgages payable	79,369,000	93,969,098	32,326,973
Repurchase of shares and minority interest units	-5,497,952	-4,832,012	-3,534,813
Dividends paid	-5,963,290	-4,315,662	-2,804,074
Distributions paid to minority interest unitholders	-3,059,078	-1,846,104	-791,458
Redemption of investment certificates	-1,828,594	-5,815,818	-3,599,050
Principal payments on mortgage loans	-14,083,544	-7,902,981	-3,774,614
Net increase (decrease) in shor-tterm lines of credit	-6,452,420	6,452,420	- 1,000,000
Net cash provided from financing activities	$56,743,205	$103,500,190	$37,699,176
NET INCREASE (DECREASE) IN CASH	$2,906,799	$-263,789	$1,580,833
CASH AT BEGINNING OF YEAR	3,449,264	3,713,053	2,132,220
CASH AT END OF YEAR	$6,356,063	$3,449,264	$3,713,053
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Dividend reinvestment plan	$2,230,445	$6,330,301	$5,389,464
Real estate investment and mortgage loans receivable       acquired through assumption of mortgage loans payable        and accrual of costs	38,611,547	4,049,568	12,458,735
Mortgage loan receivable transferred to property owned	4,709,838	15,000,000	0
Proceeds from sale of properties deposited directly with        escrow agent	4,093,684	0	6,863,691
Properties and goodwill acquired through the issuance of       Minority interest units in the operating partnership	25,543,524	21,602,841	6,485,927
Minority partner interest in Southdale Medical Center	3,287,655	0	0
Interest reinvested directly in investment certificates	360,181	363,935	408,097
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION
Cash paid during the year for:
Interest paid on mortgages	$23,763,584	$15,670,488	$10,998,722
Interest paid on investment certificates	745,391	544,977	895,214
	$24,508,975	$16,215,465	$11,893,936

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-7

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2001, 2000 and 1999

NOTE 1  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS  Investors Real Estate Trust qualifies under Section 856 of the Internal Revenue Code as a real estate investment trust. The Trust has properties located primarily throughout the Upper Midwest, with principal offices located in Minot, North Dakota. The Company invests in commercial and residential real estate, real estate contracts, real estate related governmental backed securities (GNMA), and equity securities in other real estate investment trusts. Rental revenue from residential properties represents the major source of revenues for the Trust.

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

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

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

Effective July 1, 2000, the Trust became self-administered as a result of the acquisition of its former advisory company, Odell-Wentz & Associates, LLC.  Virtually all officers and employees of Odell-Wentz & Associates, LLC were retained by the Trust.  Please refer to Note 9 for information concerning the impact of this acquisition on the accompanying financial statements.

BASIS OF PRESENTATION  The consolidated financial statements include the accounts of Investors Real Estate Trust and all of its subsidiaries in which it maintains a controlling interest.  The Trust is the sole shareholder of IRET, Inc., which is the general partner of the operating partnership, IRET Properties. The trust is also the sole shareholder of Miramont  IRET Inc. and Pine Cone  IRET Inc., both of which are invested in real estate.

The Trust is the sole shareholder of the following entities:  Forest Park -IRET, Inc., Thomasbrook -IRET, Inc., Dakota -IRET, Inc., MedPark -IRET, Inc., Flying Cloud -IRET, Inc.,  Meadows 2 -IRET, Inc., and IRET -Ridge Oaks, LLC.  These entities are the sole general partners and IRET Properties is the sole limited partner for the following limited partnerships, respectively:  Forest Park Properties, a North Dakota Limited Partnership; Thomasbrook Properties, a Nebraska Limited Partnership; Dakota Hill Properties, a Texas Limited Partnership; MedPark Properties, a North Dakota Limited Partnership; and 7901 Properties L.P., a Minnesota

F-8

NOTE 1 -(continued)

Limited Partnership, Meadows 2 Properties, LP, a North Dakota Limited Partnership, and Ridge Oaks, LP an Iowa Limited Partnership.  IRET Properties is also the sole owner of Health Investors Business Trust.  These entities are all invested in real estate and are primarily formed and acquired for the beneficial ownership of certain properties that may be encumbered by mortgage indebtedness.

The consolidated financial statements also include the ownership of a controlling interest in Minnesota Medical Investors LLC, SMB Operating Company LLC, and SMB MM LLC, collectively known as Southdale Medical Center.  These companies are accounted for under the consolidation method of accounting with minority interests reflecting the minority partners' share of ownership and income and expenses being recorded on a 30-day lag basis.

All material inter-company transactions and balances have been eliminated in the consolidated financial statements.

ACCOUNTING POLICIES

NEW ACCOUNTING PRONOUNCEMENTS - The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements.  The Trust's accounting policies comply with SAB 101 in all material respects.

Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value.  The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.  Certain provisions of SFAS 133 were amended by SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities"  an amendment of Statement 133."  SFAS 133 has no impact as the Trust does not currently use derivatives.

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

PROPERTY OWNED  Real estate is stated at cost. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Interest, real estate taxes, and other development costs relating to the acquisition and development of certain qualifying properties are also capitalized. Expenditures for maintenance and repairs which do not add to the value or extend useful lives are charged to expense as incurred.

The Trust assesses whether there has been an impairment in the value of its real estate by comparing its carrying amount to the aggregate undiscounted future cash flows without interest charges.  Such cash flows consider factors such as expected future operating income, trends and prospects as well as the effects of demand, competition and other economic factors.  Such market factors include a lessee's ability to pay rent under the terms of the lease.  If a property is leased at a significantly lower rent, the Trust may recognize a loss if the income stream is not sufficient to recover its investment.  If impairment is determined to be present, the loss is measured as the amount by which the carrying value exceeds the property's fair value.

F-9

NOTE 1-(continued)

The fair value of the property is the amount which would be recoverable upon the disposition of the property.  Techniques used to establish fair value include present value of estimated expected future cash flows using a discount rate commensurate with the risks involved, or appraised value.

REAL ESTATE HELD FOR SALE is stated at the lower of its carrying amount or estimated fair value less disposal costs.  Depreciation is not recorded on assets classified as held for sale.

In the normal course of business the Trust will receive offers for sale of its properties, either solicited or unsolicited.  For those offers that are accepted, the prospective buyer will usually acquire a due diligence period before consummation of the transaction.  It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process.  As a result, real estate is not classified as "held for sale" until it is likely, in the opinion of management, that a property will be disposed of in the near term, even if sale negotiations for such property are currently under way.  There were no properties considered "held for sale" at April 30, 2001 or 2000.

FURNITURE AND FIXTURES consists of office furniture, fixtures, and equipment located at the Trust's operational head quarters and are stated at cost net of accumulated depreciation.  Accumulated depreciation was $215,757 and $0  at April 30, 2001 and 2000, respectively.

DEPRECIATION is provided to amortize the cost of individual assets over their estimated useful lives using principally the straight-line method. Useful lives range from 5 - 12 years for furniture and fixtures to 20 - 40 years for buildings and improvements.

MORTGAGE LOANS RECEIVABLE are shown at cost.  Interest income is accrued and reflected in the related balance.

ALLOWANCE FOR DOUBTFUL ACCOUNTS  The Trust evaluates the need for an allowance for doubtful accounts periodically. In performing its evaluation, management assesses the recoverability of individual real estate mortgage loans and rent receivables by a comparison of their carrying amount with their estimated net realizable value.

MARKETABLE SECURITIES  The Trust's investments in securities are classified as securities "held-to-maturity" and securities "available-for-sale."  The securities classified as "available-for-sale" consist of equity shares in other real estate investment trusts and are stated at fair value. Unrealized gains and losses on securities available-for-sale are recognized as direct increases or decreases in shareholders' equity. Cost of securities sold are recognized on the basis of specific identification. The securities classified as "held-to-maturity" consist of Government National Mortgage Association securities for which the Trust has positive intent and ability to hold to maturity. They are reported at cost, adjusted by amortization of premiums and accretion of discounts which are recognized in interest income using the straight-line method over the period to maturity which approximates the effective interest method.

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

F-10

NOTE 1 -(continued)

GOODWILL is amortized on a straight-line basis over a period of 15 years.  The Trust periodically reviews goodwill for impairment and if a permanent decline in value has occurred, the Trust will reduce its goodwill balance to fair value.  Accumulated amortization of goodwill was $91,191 and $0 at April 30, 2001 and 2000, respectively.

DEFERRED LEASING AND LOAN ACQUISITION COSTS -Costs and commissions incurred in obtaining tenant leases are amortized on the straight-line method over the terms of the related leases.  Costs incurred in obtaining long-term financing are amortized over the life of the loan and charged to amortization expense over the terms of the related debt agreements.

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

The Trust reflects minority interests in the Southdale Medical Center on the balance sheet for the portion of properties consolidated by the Trust that are not wholly owned by the Trust.  The earnings or losses from these properties attributable to the minority interests are reflected as limited partner minority interests in the consolidated statements of operations.

NET INCOME PER SHARE  Effective May 1, 1998, the Trust adopted Statement of Financial Accounting Standard No. 128, Earnings Per Share. Basic net income per share is computed using the weighted average number of shares outstanding. There is potential for dilution of net income per share due to the conversion option of operating partnership units. However, basic and diluted net income per share are the same. The computation of basic and diluted net income per share can be found in Note 12.

INCOME TAXES  The Trust intends to continue to qualify as a real estate investment trust as defined by the Internal Revenue Code and, as such, will not be taxed on the portion of the income that is distributed to the shareholders, provided at least 90% of its real estate investment trust taxable income is distributed and other requirements are met. The Trust intends to distribute all of its taxable income and realized capital gains from property dispositions within the prescribed time limits and, accordingly, there is no provision or liability for income taxes shown on the financial statements.

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

REVENUE RECOGNITION  Residential rental properties are leased under operating leases with terms generally of one year or less. Commercial properties are leased under operating leases to tenants for various terms exceeding one year. Lease terms often include renewal options. Rental revenue is recognized on the straight-line basis, which averages minimum required rents over the terms of the leases.  Rents recognized in advance of collection is reflected as rent receivable, net of allowance for doubtful accounts of $120,314 and $0 as of April 30, 2001 and 2000, respectively.

F-11

NOTE 1-(continued)

A number of the commercial leases provide for a base rent plus a percentage rent based on gross sales in excess of a stipulated amount. These percentage rents are recorded once the required sales level is achieved and are included in rental income at that time.  These leases also typically provide for tenant reimbursement of common area maintenance and other operating expenses.

Profit on sales of real estate shall be recognized in full when real estate is sold, provided the profit is determinable, that is, the collectibility of the sales price is reasonably assured or the amount that will be collectible can be estimated and the earnings process is virtually complete, that is, the seller is not obliged to perform significant activities after the sale to earn the profit.  Any gain or loss on the sale of disposition is recognized in accordance with accounting principles generally accepted in the United States of America.

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

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

THE DIVIDEND REINVESTMENT PLAN is available to all shareholders of the Trust. Under the Dividend Reinvestment Plan, shareholders may elect for their dividends to be used by the plan administrator to acquire additional shares on the NASDAQ Small Cap Market or, if not available, directly from the Trust.  Amounts are deposited with the plan administrator in advance of the dividend date to acquire shares for dividend reinvestment.

NOTE 2  OFF-BALANCE-SHEET RISK

The Trust had deposits at First Western Bank, Bremer Bank, and First International Bank which exceeded Federal Deposit Insurance Corporation limits by $3,844,663, $785,073 and $561,155, respectively, at April 30, 2001.

NOTE 3  PROPERTY OWNED UNDER LEASE

Property consisting principally of real estate owned under lease is stated at cost less accumulated depreciation and is summarized as follows:
 

	April 30, 2001	April 30, 2000
Residential	$   361,577,622	$   329,205,116
Less accumulated depreciation	-32,296,179	-25,029,645
	$   329,281,443	$   304,175,471
Commercial	$   230,058,846	$   120,714,774
Less accumulated depreciation	-11,796,966	-8,203,307
	$   218,261,880	$   112,511,467
Remaining Cost	$   547,543,323	$   416,686,938

There were no repossessions during the years ended April 30, 2001 and 2000.

F-12

NOTE 3-(continued)

The above cost of residential real estate owned included construction in progress of $6,307,018 and $6,190,287 as of April 30, 2001 and 2000, respectively. As of April 30, 2001, the trust expects to fund approximately $3,500,000 during the upcoming year to complete these construction projects. The Trust also has outstanding offers to purchase selected properties as part of their normal operations.  As of April 30, 2001, significant signed purchase commitments are estimated at $23,400,000 for the upcoming year.

Construction period interest of $316,644, $404,089 and $211,882 has been capitalized for the years ended April 30, 2001, 2000 and 1999, respectively.

Residential apartment units are rented to individual tenants with lease terms up to one year. Gross revenues from residential rentals totaled $55,806,712, $42,379,855 and $33,010,126 for the years ended April 20, 2001, 2000 and 1999, respectively.

Gross revenues from commercial property rentals totaled $18,994,010, $11,878,026 and $5,775,161 for the years ended April 30, 2001, 2000 and 1999, respectively. Commercial properties are leased to tenants under terms of leases expiring at various dates through 2024. Lease terms often include renewal options. In addition, a number of the commercial leases provide for a base rent plus a percentage rent based on gross sales in excess of a stipulated amount. Rents based on a percentage of sales totaled $124,092, $102,659 and $101,032 for the years ended April 30, 2001, 2000 and 1999, respectively.

The future minimum lease payments to be received under these operating leases for the commercial properties as of April 30, 2000, are as follows:

Year ending April 30,
2002	$    20,379,372
2003	19,239,427
2004	18,626,368
2005	17,681,872
2006	16,268,305
Thereafter	126,659,158
	$  218,854,502

Loss on impairment of two commercial properties totaled $1,319,316 for the year ended April 30, 2000.  Impairment losses were determined based on present value of estimated expected future cash flows from each property.  The carrying value of First Avenue Building, located in Minot, North Dakota, was reduced by $311,202.  The carrying value of a commercial building located in Boise, Idaho was reduced by $1,008,114.  There were no losses on impairment of properties for the years ended April 30, 2001 and 1999.

NOTE 4  MORTGAGE LOANS RECEIVABLE

Mortgage loans receivable consists of seven contracts which are collateralized by real estate. Contract terms call for monthly payments of principals and interest. Interest rates range from 7% to 11%. Mortgage loans receivable have been evaluated for possible losses considering repayment history, market value of underlying collateral, and economic conditions.

F-13

NOTE 4-(continued)

Future principal payments due under the mortgage loans contracts as of April 30, 2001, are as follows:

Year ending April 30,
2002	$    765,530
2003	98,252
2004	43,313
2005	0
2006	0
Later years	130,000
	$  1,037,095

There were no significant non-performing mortgage loans receivable as of April 30, 2001 and 2000. Non-performing loans are recognized as impaired in conformity with FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan. The average balance of impaired loans for the years ended April 30, 2001 and 2000 was not significant. For impairment recognized in conformity with FASB Statement No. 114, the entire change in present value of expected cash flows is reported as bad debt expense in the same manner in which impairment initially was recognized or as a reduction in the amount of bad debt expense that otherwise would be reported. Additional interest income that would have been earned on loans if they had not been non-performing was not significant in 2001, 2000, or 1999. There was no interest income on non-performing loans recognized on a cash basis for 2001, 2000, and 1999.

NOTE 5  MARKETABLE SECURITIES

The amortized cost and estimated market values of marketable securities held-to-maturity at April 30, 2001 and 2000 are as follows:
 

2001	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
ISSUER GNMA	$    2,351,248	$        80,159	$        77,389	$   2,354,018
2000
ISSUER GNMA	$    2,601,420	$        34,608	$      159,785	$   2,476,243

 The remainder of this page has been intentionally left blank.

F-14

NOTE 5 -(continued)

The amortized cost and estimated market values of marketable securities available-for-sale at April 30, 2001 and 2000 are as follows:
 

2001	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Equity shares in other REIT's	$   791,316	$     97,209	$   227,660	$   660,865
2000
Equity shares in other REIT's	$   791,316	$     65,338	$   283,843	$   572,811

There were no realized gains or losses on sales of securities for the years ended April 30, 2001, 2000 and 1999.

Marketable securities held-to-maturity consists of Governmental National Mortgage Association (GNMA) securities bearing interest from 6.5% to 9.5% with maturity dates ranging from May 15, 2016, to September 15, 2023. The following is a summary of the maturities of securities held-to-maturity at April 30, 2001 and 2000:
 
 

	2001		2000
	Amortized Cost	Fair Value	Amortized Cost	Fair Value
Due After 10 years	$  2,351,248	$  2,354,018	$  2,601,420	$  2,476,243

NOTE 6  NOTES PAYABLE

As of April 30, 2001, the trust had lines of credit available from three financial institutions. An unsecured line of credit was issued by First Western Bank & Trust in the amount of $4,000,000 carrying an interest rate equal to prime and maturing August 15, 2002, the weighted average interest rate for year ended April 30, 2001 was 9.46%.  A second unsecured line of credit from First International Bank & Trust was issued in the amount of $3,500,000 carrying an interest rate equal to prime and maturing October 15, 2002, the weighted average interest rate for year ended April 30, 2001 was 8.15%.  A third unsecured line of credit from Bremer Bank was issued in the amount of $10,000,000 carrying an interest rate equal to Bremer Financial Corp.'s reference rate and maturing August 1, 2002, the weighted average interest rate for year ended April 30, 2001 was 8.99%. Interest payments are due monthly on all three notes. As of April 30, 2001, the Trust had no unpaid balances on any of their lines of credit. As of April 30, 2000, the trust had an unpaid balance of $6,452,420 on the line of credit at Bremer Bank.

NOTE 7  MORTGAGES PAYABLE

Mortgages payable as of April 30, 2001, included mortgages on properties owned totaling $368,956,930. The carrying value of the related real estate owned was $577,045,712.

Mortgages payable as of April 30, 2000, included mortgages on properties owned totaling $265,054,767. The carrying value of the related real estate owned was $410,776,553.

F-15

NOTE 7-(continued)

Monthly installments are due on the mortgages with interest rates ranging from 6.47% to 9.75% and with varying maturity dates through November 30, 2036.

Of the mortgages payable, the balances of fixed rate mortgages totaled $337,364,781 and $232,919,354, and the balances of variable rate mortgages totaled $31,592,149 and $32,137,413 as of April 30, 2001 and 2000, respectively.

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

Year ending April 30,
2002	$     14,474,108
2003	8,298,146
2004	8,940,912
2005	9,746,970
2006	13,133,365
Later years	314,363,429
Total payments	$ 368,956,930

NOTE 8  INVESTMENT CERTIFICATES ISSUED

The Trust has placed investment certificates with the public. The interest rates vary from 6% to 9% per annum, depending on the term of the security. Total securities maturing within fiscal years ending April 30, are shown below. Interest is paid annually, semiannually, or quarterly on the anniversary date of the security.

Year ending April 30,
2002	$    5,820,502
2003	1,326,062
2004	1,932,291
2005	669,657
2006	2,116,601
Thereafter	11,304
	$  11,876,417

NOTE 9  TRANSACTIONS WITH RELATED PARTIES

Through June 30, 2000, the advisor to the Trust was Odell-Wentz & Associates, LLC.  Roger R. Odell and Thomas A. Wentz, Sr. were the owners of Odell-Wentz & Associates LLC and also officers and shareholders of the Trust.  Under the advisory contract between the Trust and Odell-Wentz & Associates, LLC, the Trust paid an advisor's fee based on the net assets of the Trust and a percentage fee for investigating and negotiating the acquisition of new investments. For the year ended April 30, 2001, Odell-Wentz & Associates, LLC received total fees under said agreement of $265,573. The fees for April 30, 2000, were $1,400,973 and for April 30, 1999, were $951,234.

F-16

NOTE 9 -(continued)

For the years ended April 30, 2001, 2000 and 1999, the Trust has capitalized $58,250, $316,458, and $195,019 respectively, of these fees, with the remainder of 207,323, $1,084,515, and $756,215, respectively, expensed as advisory fees on the statement of operations. The advisor was obligated to provide office space, staff, office equipment, computer services and other services necessary to conduct the business affairs of the Trust.

On July 1, 2000, IRET Properties acquired assets from Odell-Wentz & Associates, LLC in exchange for operating partnership units at a total purchase price of $2,083,350.  This acquisition included real estate, furniture, fixtures, equipment and other assets of approximately $675,000, goodwill of approximately $1,645,000, and the assumption of mortgages and other liabilities of approximately $236,000.  Except for Roger R. Odell who retired, all officers and employees of Odell-Wentz & Associates, LLC were retained by IRET Properties.

As part of the acquisition of Odell-Wentz & Associates, LLC, IRET Properties acquired a note receivable due from Timothy P. Mihalick of approximately $100,000.   Timothy P. Mihalick was an officer of Odell Wentz & Associates, LLC and is currently an officer of the Trust.

Investors Management and Marketing (IMM) provides property management services to the Trust. Roger R. Odell is a shareholder in IMM.  IMM received $114,421 for services rendered from May 1, 2000 through June 30, 2000,  IMM received $649,729, and $609,783 for services rendered for years ended April 30, 2000, and 1999, respectively.

Inland National Securities is a corporation that provides underwriting services in the sale of additional shares for the Trust. Roger R. Odell is also a shareholder in Inland National Securities. Fees for services from May 1, 2000 through June 30, 2000 were $6,861. Fees for services totaled $100,081, and $157,392, for the years ended April 30, 2000 and 1999, respectively.

The Trust paid fees and expense reimbursements to the law firm in which Thomas A. Wentz, Jr. was, until December 31, 1999, a partner totaling $89,497 and  $33,022 for the years ended April 30, 2000, and 1999, respectively. Thomas A. Wentz, Jr. is a trustee of the Trust.

Investment certificates issued by the Trust to officers and trustees totaled $80,000, $200,000, and $2,138,758 at April 30, 2001, 2000 and 1999, respectively.

Management believes that all activity with related parties were transacted at amounts consistent with current fair market prices.

NOTE 10  MARKET PRICE RANGE OF SHARES

For the year ended April 30, 2001, a total of 3,668,819 shares were traded in 4,692 separate trades.  The high trade price during the period was 8.980, low was 7.375, and the closing price on April 30, 2001 was 8.770. For the year ended April 30, 2000, a total of 4,058,018 shares were traded in 3,414 separate trades.  The high trade price during the period was 17.875, low was 7.681, and the closing price on April 30, 2000 was 7.875. For the year ended April 30, 1999, a total of 1,862,187 shares were traded in 1,017 separate trades. The high trade price during the period was 14.00, low was 6.50, and the closing price on April 30, 1999 was 7.50.

F-17

NOTE 11 -OPERATING SEGMENTS

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief decision makers in deciding how to allocate resources and in assessing performance. Operating segments of the Trust are determined to be commercial and residential rental operations. All properties falling into these categories have similar economic characteristics, as well as similar production processes, type of customers, distribution methods, and regulatory environments.  Although information is available on a property-by-property basis, including rental income and operating expenses, analysis and decisions are primarily made based on residential and commercial segments.  Generally, segmental information follows the same accounting policies utilized for consolidated reporting, except, certain expenses, such as depreciation, are not allocated to segments for management purposes.

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

YEAR ENDING APRIL 30, 2001

	Commercial	Residential	Total
Segment Revenue
Rental revenue	$    18,994,010	$    55,806,712	$    74,800,722
Segment Expenses
Mortgage interest	8,043,382	16,398,046	24,441,428
Utilities and maintenance	1,012,658	10,533,905	11,546,563
Taxes	1,083,759	6,461,423	7,545,182
Insurance	161,941	670,022	831,963
Property management	347,748	5,436,675	5,784,423
Total Segment Expense	$    10,649,488	$    39,500,071	$    50,149,559
Segment Gross Profit	$      8,344,522	$    16,306,641	$    24,651,163

Reconciliation to consolidated operations:
Interest discounts and fee revenue	966,428
Other interest expense	-789,973
Depreciation	-12,299,532
Advisory and trust fees	-1,480,696
Operating expenses	-431,390
Amortization	-428,188
Consolidated income before gain/loss on properties and minority interest	$   10,187,812

F-18

NOTE 11 -(continued)
 

APRIL 30, 2001

	Commercial	Residential	Total
Segment Assets
Property owned	$   230,058,846	$   361,577,622	$   591,636,468
Less accumulated depreciation	-11,796,966	-32,296,179	-44,093,145
Total consolidated property owned	$  218,216,880	$   329,281,443	$   547,543,323

YEAR ENDING APRIL 30, 2000

	Commercial	Residential	Total
Segment Revenue
Rental revenue	$   11,878,026	$   42,379,855	$   54,257,881
Segment Expenses
Mortgage interest	3,980,450	12,312,038	16,292,488
Utilities and maintenance	452,229	7,592,301	8,044,530
Taxes	481,191	4,801,170	5,282,361
Insurance	52,288	424,674	476,962
Property management	132,435	4,157,840	4,290,275
Loss on impairment of properties	1,319,316	0	1,319,316
Total Segment Expense	$    6,417,909	$   29,288,023	$   35,705,932
Segment Gross Profit	$    5,460,117	$   13,091,832	$   18,551,949

Reconciliation to consolidated operations:
Interest discounts and fee revenue	1,187,312
Other interest expense	-721,682
Depreciation	-8,460,112
Advisory and trust fees	-1,159,120
Operating expenses	-633,692
Amortization	-216,097
Consolidated income before gain/loss on properties and minority interest	$    8,548,558

 F-19

NOTE 11 -(continued)
 

APRIL 30, 2000

	Commercial	Residential	Total
Segment Assets
Property owned	$  120,714,774	$   329,205,116	$   449,919,890
Less accumulated depreciation	-8,203,307	-25,029,645	-33,232,952
Total consolidated property owned	$  112,511,467	$   304,175,471	$   416,686,938

YEAR ENDING APRIL 30, 1999

	Commercial	Residential	Total
Segment Revenue
Rental revenue	$     5,775,161	$  33,010,126	$  38,785,287
Segment Expenses
Mortgage interest	2,417,316	8,782,600	11,199,916
Utilities and maintenance	113,374	6,243,109	6,356,483
Taxes	192,930	3,832,629	4,025,559
Insurance	30,067	354,136	384,203
Property management	60,612	3,227,655	3,288,267
Total Segment Expense	$    2,814,299	$  22,440,129	$ 25,254,428
Segment Gross Profit	$    2,960,862	$  10,569,997	$ 13,530,859

Reconciliation to consolidated operations:
Interest discounts and fee revenue	1,141,975
Other interest expense	-902,065
Depreciation	-5,966,874
Advisory and trust fees	-927,063
Operating expenses	-320,479
Amortization	-154,677
Consolidated income before gain/loss on properties and minority interest	$    6,401,676

F-20

NOTE 11 -(continued)
 

APRIL 30, 1999

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

NOTE 12  EARNINGS PER SHARE

Basic earnings per share are computed by dividing the earnings available to stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect per share amounts that would have resulted if potential dilutive securities had been converted to shares. Operating partnership units can be exchanged for shares on a one for one basis. The following tables reconciles amounts reported in the consolidated financial statements for the years ended April 30, 2001, 2000, and 1999:

	2001	2000	1999
NUMERATOR
Net income applicable to shares	$    8,694,240	$    8,807,845	$    7,604,135
Numerator for basic earnings per share	8,694,240	8,807,845	7,604,135
Minority interest portion of operating  partnership income	2,095,177	1,495,209	744,725
Numerator for diluted earnings per share	$ 10,789,417	$ 10,303,054	$   8,348,860
DENOMINATOR
Denominator for basic earnings per share  Weighted average shares	23,071,500	20,899,848	17,441,976
Effect of dilutive securities        Convertible operating partnership units	5,506,200	3,577,136	1,662,489
Denominator for diluted earnings per share	28,577,700	24,476,984	19,104,465
Basic earnings per share	$              .38	$              .42	$            0.44
Diluted earnings per share	$              .38	$              .42	$            0.44

NOTE 13 -RETIREMENT PLAN

As part of the acquisition on July 1, 2000 of Odell-Wentz & Associates, LLC, the Trust assumed a defined contribution profit sharing retirement plan and a defined contribution 401K retirement plan.  Employees over the age of 21 and after completion of one year of service are eligible to participate in the profit sharing plan.  Contributions to the profit sharing plan are at the discretion of the management. All employees are immediately eligible to participate in the 401K plan and may contribute up to 15% of their compensation subject to maximum levels.  The Trust matches up to 3% of participating employees' wages.  Pension expense of the Trust for the year ended April 30, 2001 was $45,301.

F-21

NOTE 14 -COMMITMENTS AND CONTINGENCIES

The Trust, as an owner of real estate, is subject to various environmental laws of Federal and local governments.  Compliance by the Trust with existing laws has not had a material adverse effect on the Trust's financial condition and results of operations.  However, the Trust cannot predict the impact of new or changed laws or regulations on its current properties or on properties that it may acquire in the future.

NOTE 15  FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Mortgage loans receivable - Fair values are based on the discounted value of future cash flows expected to be received for a loan using current rates at which similar loans would be made to borrowers with similar credit risk and the same remaining maturities.

Cash - The carrying amount approximates fair value because of the short maturity of those instruments.

Marketable securities - The fair values of these instruments are estimated based on quoted market prices for these instruments.

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

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

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

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

This remainder of this page has been intentionally left blank.

F-22

NOTE 15-(continued)

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

	2001		2000
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
FINANCIAL ASSETS
Mortgage loan receivable	$      1,037,095	$       1,037,095	$      1,650,284	$      1,650,284
Cash	6,356,063	6,356,063	3,449,264	3,449,264
Marketable securities    held-to-maturity	2,351,248	2,354,018	2,601,420	2,476,243
Marketable securities    available-for-sale	660,865	660,865	572,811	572,811
FINANCIAL LIABILITIES
Notes payable	$                    0	$                     0	$      6,452,420	$      6,452,420
Mortgages payable	368,956,930	356,434,028	265,057,767	250,897,221
Investment certificates issued	11,876,417	11,804,535	10,087,256	10,810,160
Accrued interest payable	2,369,454	2,369,454	1,679,000	1,679,000

This remainder of this page has been intentionally left blank.

F-23

INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION

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

Our report on our audit of the basic consolidated financial statements of Investors Real Estate Trust and Subsidiaries for the years ended April 30, 2001, 2000 and 1999, appears on page 1. Those audits were made for the purpose of forming an opinion on such consolidated financial statements taken as a whole. The information on pages 26 through 43 related to the 2001, 2000 and 1999 consolidated financial statements is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information, except for information on page 44 that is marked "unaudited" on which we express no opinion, has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements, and, in our opinion, the information is fairly stated in all material respects in relation to the basic consolidated financial statements for the years ended April 30, 2001, 2000 and 1999, taken as a whole.

We also have previously audited, in accordance with auditing standards generally accepted in the United State of America, the consolidated balance sheets of Investors Real Estate Trust and Subsidiaries as of April 30, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the two years ended April 30, 1998 and 1997, none of which is presented herein, and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information on page 38 relating to the 1998 and 1997 consolidated financial statements is fairly stated in all material respects in relation to the basic consolidated financial statements from which has been derived.

 /S/ Brady, Martz & Associates, P.C.

BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota, USA

May 23, 2001

F-24

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001 and 2000

Schedule I

MARKETABLE SECURITIES

	April 30, 2001		April 30, 2000
	Principal Amount	Fair Value	Principal Amount	Fair Value
GNMA Pools	$   2,351,248	$   2,354,018	$   2,601,420	$   2,476,243
	Cost	Fair Value	Cost	Fair Value
Equity shares in other REIT's	$      791,316	$     660,865	$      791,316	$      572,811

F-25

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
for the years ended April 30, 2001, 2000 and 1999

Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION

	Charges to Costs and Expenses
	2001	2000	1999
ITEM
Maintenance and repairs	$  6,436,205	$  4,564,693	$  3,470,202
Taxes, other than payroll and income taxes	$  7,545,182	$  5,282,361	$  4,025,560
Royalties	*	*	*
Advertising costs	*	*	*

*Less than 1 percent of total revenues

F-26

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION

		INITIAL COST TO TRUST				COST CAPITALIZATION SUBSEQUENT TO ACQUISITION
APARTMENTS	ENCUMBRANCES		LAND	BUILDINGS &  IMPROVEMENTS	IMPROVEMENTS		CARRYING COSTS
BEULAH CONDOS - BEULAH, ND	$                         0		$                  6,360	$              468,620	$                   8,154		$                         0
BISON PROPERTIES - CARRINGTON, ND	0		100,210	508,151	6,180		0
CANDLELIGHT APTS - FARGO, ND	411,529		80,040	852,030	45,013		0
CASTLE ROCK - BILLINGS, MT	3,857,473		736,000	4,973,639	32,895		0
CENTURY APTS. - DICKINSON, ND	1,393,489		100,000	2,105,494	116,320		0
CENTURY APTS. - WILLISTON, ND	2,358,883		200,000	3,754,445	171,302		0
CHATEAU APTS. - MINOT, ND	1,528,906		122,000	2,322,200	24,785		0
CLEARWATER - BOISE, ID	2,589,905		585,000	3,245,486	20,151		0
COLTON HEIGHTS - MINOT, ND	256,077		80,000	877,199	10,354		0
COTTONWOOD LAKE - BISMARCK, ND	5,540,374		1,055,862	10,644,946	1,917,474		114,353
COUNTRY MEADOWS PHASE I - BILLINGS, MT	2,522,888		245,624	3,990,795	3,895		120,821
COUNTRY MEADOWS PHASE II - BILLINGS, MT	2,564,285		245,624	4,086,664	27,430		0
CRESTVIEW APTS. - BISMARCK, ND	3,245,760		235,000	4,569,503	157,332		0
CROWN COLONY - TOPEKA, KS	7,253,424		620,000	10,023,038	174,052		0
DAKOTA ARMS - MINOT, ND	309,303		50,000	571,189	4,298		0
DAKOTA HILL AT VALLEY RANCH - IRVING, TX	25,293,305		3,650,000	33,823,258	143,849		0
EASTGATE PROPERTIES - MOORHEAD, MN	1,601,726		23,917	2,099,972	301,848		0
EASTWOOD - DICKINSON, ND	210,961		40,000	405,272	27,122		0
FOREST PARK ESTATES. - GRAND FORKS, ND	7,386,895		810,000	6,494,715	178,122		0
HERITAGE MANOR - ROCHESTER, MN	4,749,593		403,256	7,194,917	99,608		0
IVY CLUB - VANCOUVER, WA	6,910,101		1,274,000	10,463,597	90,266		0
JENNER PROPERTIES - GRAND FORKS, ND	1,103,784		220,000	1,971,033	40,151		0
KIRKWOOD APTS. - BISMARCK, ND	2,267,110		449,290	3,171,933	110,178		0
LANCASTER APTS. - ST. CLOUD, MN	1,716,664		289,000	2,899,120	38,506		0
LEGACY APTS. - GRAND FORKS, ND	6,171,186		1,361,855	9,307,090	104,274		224,180
LEGACY IV  - GRAND FORKS, ND	2,958,788		725,277	6,119,239	186,610		0
LONETREE APTS. - HARVEY, ND	0		13,584	213,792	1,471		0
MAGIC CITY APTS. - MINOT, ND	1,879,730		532,000	4,627,059	98,148		0
MEADOWS PHASE I & II - JAMESTOWN, ND	1,965,867		111,550	3,607,059	38,663		0
MEADOWS PHASE III - JAMESTOWN, ND	0		55,775	1,990,680	0		0
MIRAMONT - FORT COLLINS, CO	11,381,741		1,470,000	12,845,599	47,939		0
NEIGHBORHOOD APTS. - CO. SPRINGS, CO	7,044,910		1,033,592	10,258,092	131,097		0
NORTH POINTE  - BISMARCK, ND	1,640,483		143,500	2,151,277	28,211		123,687
OAK MANOR APTS.  - DICKINSON, ND	0		25,000	336,033	13,697		0
OAKWOOD ESTATES - SIOUX FALLS, SD	1,965,736		342,800	3,257,671	116,585		0
OLYMPIC VILLAGE - BILLINGS, MT	8,377,235		1,164,000	10,618,852	0		0
OXBOW - SIOUX FALLS, SD	3,114,600		404,072	4,606,469	20,148		0
PARK EAST APTS. - FARGO, ND	3,385,258		83,000	4,983,651	70,302		0
PARK MEADOWS - WAITE PARK, MN	8,081,923		1,143,450	10,257,185	272,948		0
PARKWAY APTS. - BEULAH, ND	0		7,000	136,980	6,932		0

F-27

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)

		INITIAL COST TO TRUST				COST CAPITALIZATION SUBSEQUENT TO ACQUISITION
APARTMENTS	ENCUMBRANCES		LAND	BUILDINGS &  IMPROVEMENTS	IMPROVEMENTS		CARRYING COSTS
PEBBLE CREEK - BISMARCK, ND	$            448,744		$                7,200	$            749,493	$              28,269		$                      0
PINE CONE APTS. - FORT COLLINS, CO	10,315,861		904,545	12,325,605	33,711		0
POINTE WEST APTS. - MINOT, ND	2,291,125		240,000	3,757,816	63,245		0
PRAIRIE WINDS APTS. - SIOUX FALLS, SD	1,300,993		144,097	1,858,747	10,212		0
PRAIRIEWOOD MEADOWS - FARGO, ND	2,059,583		280,000	2,559,271	0		0
RIDGE OAKS APTS. - SIOUX CITY, IA	2,895,279		178,100	4,103,867	0		0
RIMROCK APTS. - BILLINGS, MT	2,599,093		329,708	3,537,917	32,055		0
ROCKY MEADOWS 96 - BILLINGS, MT	3,693,447		655,985	5,956,386	21,360		103,378
ROSEWOOD/OAKWOOD - SIOUX FALLS, SD	1,172,698		200,000	1,747,935	0		0
SHERWOOD APTS. - TOPEKA, KS	10,880,136		1,150,000	14,748,882	102,324		0
SOUTH POINTE - MINOT, ND	6,272,436		550,000	9,358,131	34,233		402,672
SOUTHVIEW APTS. - MINOT, ND	0		185,000	539,212	4,464		0
SOUTHWIND APTS. - GRAND FORKS, ND	3,956,460		400,000	5,378,731	193,342		0
SUNCHASE - FARGO, ND	309,623		52,870	986,975	2,365		0
SUNSET TRAIL PHASE I - ROCHESTER, MN	4,346,961		168,188	7,403,527	0		0
SUNSET TRAIL PHASE II & III - ROCHESTER, MN	0		336,376	4,006,932	0		0
SWEETWATER PROPERTIES - DEVILS LAKE, ND	87,079		90,767	1,183,071	52,460		0
THOMASBROOK - LINCOLN, NE	6,070,287		600,000	8,972,130	384,743		0
VALLEY PARK MANOR - GRAND FORKS, ND	2,990,184		293,500	4,226,508	193,684		0
VAN MALL WOODS - VANCOUVER, WA	3,858,149		600,000	5,518,313	33,449		0
WEST STONEHILL - ST. CLOUD, MN	7,544,370		939,000	10,710,087	122,053		0
WESTWOOD PARK - BISMARCK, ND	1,180,304		161,114	2,011,049	33,325		0
WOODRIDGE APTS. - ROCHESTER, MN	3,941,271		370,000	6,353,956	51,178		0
	$     221,253,971		$      29,074,087	$      325,131,485	$        6,282,959		$         1,089,091

F-28

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
 
 

			INITIAL COST TO TRUST				COST CAPITALIZATION  SUBSEQUENT TO ACQUISITION
OFFICE BUILDINGS	ENCUMBRANCES		LAND		BUILDINGS &  IMPROVEMENTS		IMPROVEMENTS		CARRYING  COSTS
1ST AVENUE BUILDING  - MINOT, ND	$                        0	$                 30,000		$              500,462		$                      3,303		$                            0
12 SOUTH MAIN  - MINOT, ND	0	29,000		360,205		0		0
17 SOUTH MAIN  - MINOT, ND	0	15,000		75,000		0		0
401 SOUTH MAIN  - MINOT, ND	0	70,600		542,707		0		0
408 1ST STREET SE  - MINOT, ND	0	10,000		36,907		0		0
2030 CLIFF ROAD  - EAGAN, MN	650,000	145,900		834,966		0		0
7901 FLYING CLOUD DR - EDEN PRAIRIE, MN	3,812,804	1,062,000		3,859,181		153,629		0
BURNSVILLE BLUFFS - BURNSVILLE, MN	1,641,798	300,300		2,156,349		0		0
COLD SPRING CENTER  - ST. CLOUD, MN	5,250,000	588,000		7,807,539		0		0
CREEKSIDE OFF BLDG.  - BILLINGS, MT	1,106,166	311,310		1,427,832		129,428		0
LESTER CHIROPRACTIC CLINIC  - BISMARCK, ND	0	25,000		243,917		300		0
LEXINGTON COMMERCE CENTER - EAGAN, MN	3,379,724	453,400		5,035,922		401		0
NICOLLETT VII  - BURNSVILLE, MN	4,779,722	429,400		6,931,270		0		0
NORTHGATE II  - MAPLE GROVE, MN	1,552,846	357,800		1,982,264		8,915		0
PILLSBURY BUSINESS CENTER - EDINA, MN	1,260,000	284,400		1,558,570		0		0
PLYMOUTH IV & V  - PLYMOUTH, MN	9,271,270	640,500		13,387,829		0		0
SOUTHDALE MEDICAL CENTER - EDINA, MN	23,949,215	3,500,000		28,921,070		0		0
SOUTHEAST TECH CENTER - EAGAN, MN	4,201,819	559,500		5,551,871		4,146		0
WALTERS 214 SO MAIN - MINOT, ND	0	27,055		84,941		0		0
	$        60,855,364	$          8,839,165		$       81,298,798		$             299,523		$                           0
COMMERCIAL
AMERICA'S BEST WAREHOUSE  - BOISE, ID	$          3,303,018	$              765,000		$         4,023,094		$                    200		$                           0
AMERITRADE   - OMAHA, NE	5,854,994	326,500		7,980,035		0		0
ARROWHEAD SHOPPING CENTER - MINOT, ND	1,290,671	100,359		2,812,463		60,965		0
BARNES & NOBLE - FARGO, ND	1,800,608	540,000		2,752,012		32,119		0
BARNES & NOBLE - OMAHA, NE	1,950,659	600,000		3,099,197		0		0
CARMIKE THEATRE - GRAND FORKS, ND	1,845,233	183,515		2,295,154		0		67,068
COMPUSA  - KENTWOOD, MI	1,365,519	225,000		1,888,574		7,900		0
CONSECO BLDG - RAPID CITY, SD	4,682,203	285,000		6,759,870		0		0
CORNER EXPRESS - MINOT, ND	798,550	195,000		1,386,260		0		0
DEWEY HILL BUSINESS CENTER - EDINA, MN	3,114,964	985,000		3,507,381		0		0
EAST GRAND STATION - EAST GRAND FORKS, ND	948,989	150,000		1,235,315		6,936		0
EDGEWOOD VISTA  - BELGRADE, MT	0	14,300		434,596		4,598		0
EDGEWOOD VISTA   - BILLINGS, MT	645,737	130,000		850,218		0		0
EDGEWOOD VISTA  - COLUMBUS, NE	304,367	14,300		434,480		6,846		0
EDGEWOOD VISTA   - DULUTH, MN	2,719,619	390,000		3,822,400		1,468,787		0
EDGEWOOD VISTA  - EAST GRAND FORKS, MN	549,604	25,000		874,821		516,700		0
EDGEWOOD VISTA  - FREMONT, ND	0	56,000		490,410		0		0
EDGEWOOD VISTA  - GRAND ISLAND, NE	304,367	14,300		434,480		6,846		0
EDGEWOOD VISTA - HASTINGS, NE	0	13,971		551,805		0		0
EDGEWOOD VISTA - KALISPELL, MT	0	70,000		498,150		0		0

F-29

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)
 
 

			INITIAL COST TO TRUST				COST CAPITALIZATION  SUBSEQUENT TO ACQUISITION
OFFICE BUILDINGS	ENCUMBRANCES		LAND		BUILDINGS &  IMPROVEMENTS		IMPROVEMENTS		CARRYING  COSTS
COMMERCIAL continued
EDGEWOOD VISTA - MINOT, ND	$        3,815,498	$          260,000		$       6,010,707		$                        0		$                        0
EDGEWOOD VISTA  - MISSOULA, MT	917,342	108,900		853,528		0		0
EDGEWOOD VISTA  - OMAHA, NE	0	88,567		522,803		0		0
EDGEWOOD VISTA   - SIOUX FALLS, SD	649,494	130,000		844,739		0		0
HEALTHEAST MED CTR -WDBRY & ST JHNS, MN	19,176,624	3,238,275		18,362,724		0		0
HOSPITALITY ASSOCIATES - MINNETONKA, MN	280,000	40,000		360,898		0		0
GREAT PLAINS SOFTWARE  - FARGO, ND	8,870,861	125,501		15,249,652		0		0
LINDBERG BLDG. - EDEN PRAIRIE, MN	1,140,863	198,000		1,410,535		0		0
MAPLEWOOD SQUARE - ROCHESTER, MN	7,154,199	3,275,000		8,623,946		0		0
MED PARK MALL - GRAND FORKS, ND	3,381,663	680,500		4,811,862		150,587		0
MINOT PLAZA  - MINOT, ND	0	50,000		459,079		0		0
PETCO WAREHOUSE - FARGO, ND	901,454	324,148		927,541		0		27,245
PIONEER SEED - MOORHEAD, MN	221,367	56,925		596,951		0		0
STERNER LIGHTING - WINSTED, MN	700,000	100,000		900,789
STONE CONTAINER -FARGO, ND	2,567,688	440,251		4,469,078		2,001,878		89,156
STONE CONTAINER - WACONIA, MN	1,303,763	165,000		1,501,518		0		0
VIROMED  - EDEN PRAIRIE, MN	2,866,820	666,000		4,197,634		0		0
WEDGEWOOD - SWEETWATER, GA	1,420,859	334,346		3,637,532		0		0
	$        86,847,595	$       15,364,658		$     119,873,108		$          4,200,125		$              183,469
	$      368,956,930	$       53,277,910		$     526,303,391		$         10,782,607		$           1,272,560

F-30

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
 
 

APARTMENTS	LAND	BUILDING &  IMPROVEMENTS	TOTAL	ACCUMULATED  DEPRECIATION	DATE  ACQUIRED	LIFE ON WHICH  LATEST INCOME  STATEMENT IS  COMPUTED
BEULAH CONDOS - BEULAH, ND	$      6,360	$            476,774	$       483,134	$             329,273	1983	15-40 years
BISON PROPERTIES - CARRINGTON, ND	100,210	514,331	614,541	364,035	1972	25-40 years
CANDLELIGHT APTS. - FARGO, ND	80,040	897,043	977,083	179,684	1993	24-40 years
CASTLE ROCK  - BILLINGS, MT	736,000	5,006,534	5,742,534	304,436	1999	40 years
CENTURY APTS. - DICKINSON, ND	100,000	2,221,814	2,321,814	757,085	1986	35-40 years
CENTURY APTS. - WILLISTON, ND	200,000	3,295,747	4,125,747	1,488,381	1986	35-40 years
CHATEAU APTS. - MINOT, ND	122,000	2,346,984	2,468,984	187,074	1997	12-40 years
CLEARWATER - BOISE, ID	585,000	3,268,838	3,853,638	217,307	1999	40 years
COUNTRY MEADOWS PHASE I - BILLINGS, MT	245,624	4,115,511	4,361,135	249,483	1996	40 years
COUNTRY MEADOWS PHASE II   - BILLINGS, MT	245,623	4,114,095	4,359,718	249,483	1999	40 years
COLTON HEIGHTS - MINOT, ND	80,000	887,773	967,733	415,053	1984	33-40 years
COTTONWOOD LAKE - BISMARCK, ND	1,055,862	12,676,773	13,732,636	696,954	1997	40 years
CRESTVIEW APTS. - BISMARCK, ND	235,000	4,726,835	4,961,835	853,823	1994	24-40 years
CROWN COLONY - TOPEKA, KS	620,000	10,197,090	10,817,090	402,287	2000	40 years
DAKOTA ARMS - MINOT, ND	50,000	575,487	625,487	80,729	1996	24-40 years
DAKOTA HILLS - IRVING, TX	3,650,000	33,967,106	37,617,106	1,035,419	2000	40 years
EASTGATE PROPERTIES - MOORHEAD, MN	23,917	2,401,820	2,425,737	1,529,752	1970	33-40 years
EASTWOOD - DICKINSON, ND	40,000	432,394	472,394	112,860	1989	24-40 years
FOREST PARK ESTATES - GRAND FORKS, ND	810,000	6,672,837	7,482,837	1,341,702	1993	24-40 years
HERITAGE MANOR - ROCHESTER, MN	403,256	7,294,524	7,697,780	499,892	1999	40 years
IVY CLUB - VANCOUVER, WA	1,274,000	10,553,863	11,827,863	591,803	1999	40 years
JENNER PROPERTIES - GRAND FORKS, ND	220,000	2,011,184	2,231,184	193,431	1996	40 years
KIRKWOOD APTS. - BISMARCK, ND	449,290	3,282,111	3,731,401	311,091	1997	12-40 years
LANCASTER APTS. - ST. CLOUD, MN	289,000	2,937,626	3,226,626	80,316	2000	40 years
LEGACY APTS. - GRAND FORKS, ND	1,361,855	9,635,543	10,997,398	1,031,588	1996	24-40 years
LEGACY IV  - GRAND FORKS, ND	725,277	6,305,848	7,031,125	228,341	2000	40 years
LONETREE APTS. - HARVEY, ND	13,584	215,262	228,846	49,155	1991	24-40 years
MAGIC CITY APTS. - MINOT, ND	532,000	4,725,208	5,257,208	442,011	1997	12-40 years
MEADOWS PHASE I & II - JAMESTOWN, ND	111,550	3,645,722	3,757,272	136,508	2000	40 years
MEADOWS PHASE III - JAMESTOWN, ND	55,775	1,990,680	2,046,455	1,595	2001	N/A -construction  in progress
MIRAMONT - FT. COLLINS, CO	1,470,000	12,893,539	14,363,529	1,457,970	1996	40 years
NEIGHBORHOOD APTS. - COLORADO SPRINGS, CO	1,033,592	10,389,189	11,422,781	1,206,581	1996	40 years
NORTH POINTE  - BISMARCK, ND	143,500	2,303,175	2,446,675	310,289	1995	24-40 years
OAK MANOR APTS. - DICKINSON, ND	25,000	349,730	374,730	84,069	1989	24-40 years
OAKWOOD ESTATES - SIOUX FALLS, SD	342,800	3,374,256	3,717,056	688,361	1993	24-40 years

F-31

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION(continued)
 

APARTMENTS	LAND	BUILDING &  IMPROVEMENTS	TOTAL	ACCUMULATED  DEPRECIATION	DATE  ACQUIRED	LIFE ON WHICH  LATEST INCOME  STATEMENT IS  COMPUTED
OLYMPIC VILLAGE - BILLINGS, MT	$  1,164,000	$    10,618,852	$  11,782,852	$          175,258	2001	40 years
OXBOW - SIOUX FALLS, SD	404,072	4,626,617	5,030,689	750,715	1994	24-40 years
PARK EAST APTS. - FARGO, ND	83,000	5,053,953	5,136,953	381,418	1997	12-40 years
PARK MEADOWS - WAITE PARK, MN	1,143,450	10,530,133	11,673,583	1,293,868	1997	40 years
PARKWAY APTS. - BEULAH, ND	7,000	143,912	150,912	27,623	1988	540 years
PEBBLE CREEK - BISMARCK, ND	7,200	777,792	784,962	31,282	2000	40 years
PINE CONE APTS. - FT. COLLINS, CO	904,545	12,359,315	1,860,234	1,539,847	1994	40 years
POINTE WEST APTS. - MINOT, ND	240,000	3,821,061	4,061,061	714,954	1994	24-40 years
PRAIRIE WINDS APTS. - SIOUX FALLS, SD	144,097	1,868,958	2,013,055	393,585	1993	24-40 years
PRAIRIEWOOD MEADOWS - FARGO, ND	280,000	2,559,271	2,839,271	47,763	2001	40 years
RIDGE OAKS APTS. - SIOUX CITY, IA	178,100	4,103,867	4,281,967	105,045	2001	40 years
RIMROCK APTS. - BILLINGS, MT	329,708	3,569,972	3,899,680	162,211	2000	40 years
ROCKY MEADOWS 96 - BILLINGS, MT	655,985	6,081,124	6,737,109	697,830	1996	40 years
ROSEWOOD/OAKWOOD - SIOUX FALLS, SD	200,000	1,747,935	1,947,935	196,245	1996	40 years
SHERWOOD APTS. - TOPEKA, KS	1,150,000	14,851,205	16,001,205	587,097	2000	40 years
SOUTH POINTE - MINOT, ND	550,000	9,795,036	10,345,036	1,220,817	1995	24-40 years
SOUTHVIEW APTS. - MINOT, ND	185,000	543,676	728,676	94,340	1994	24-40 years
SOUTHWIND APTS  - GRAND FORKS, ND	400,000	5,572,073	5,972,073	749,522	1996	24-40 years
SUNCHASE  - FARGO, ND	52,870	989,340	1,042,210	304,382	1988	5-40 years
SUNSET TRAIL PHS I  - ROCHESTER, MN	168,188	7,403,527	7,571,715	106,602	2001	40 years
SUNSET TRAIL - PHS II & III ROCHESTER, MN	336,376	4,006,932	4,343,308	0	N/a	N/A -construction  in progress
SWEETWATER PROP. - DEVILS LAKE, ND	90,767	1,535,531	1,626,298	907,394	1972	5-40 years
THOMASBROOK APTS. - LINCOLN, NE	600,000	9,356,873	9,956,873	411,582	2000	40 years
VALLEY PARK MANOR - GRAND FORKS, ND	293,500	4,420,192	4,713,692	210,317	2000	40 years
VAN MALL WOODS  - VANCOUVER -WA	600,000	5,551,761	6,151,761	354,296	1999	40 years
WEST STONEHILL  - ST CLOUD, MN	939,000	10,832,140	11,771,140	1,523,900	1995	40 years
WESTWOOD PARK - BISMARCK, ND	161,114	2,044,374	2,205,488	151,269	1999	40 years
WOODRIDGE APTS. - ROCHESTER, MN	370,000	6,405,134	6,775,134	728,810	1996	40 years
	$ 29,074,087	$   332,503,535	$ 361,577,622	$     32,296,179

 F-32

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
 
 

OFFICE BUILDINGS	LAND	BUILDING &  IMPROVEMENTS	TOTAL	ACCUMULATED  DEPRECIATION	DATE ACQUIRED	LIFE ON WHICH  LATEST INCOME  STATEMENT IS  COMPUTED
1ST AVENUE BUILDING - MINOT, ND	$       30,000	$               503,765	$     533,765	$            386,191	1981	33-40 years
12 SOUTH MAIN - MINOT, ND	29,000	360,205	389,205	7,618	2001	40 years
17 SOUTH MAIN - MINOT, ND	15,000	75,000	90,000	1,484	2001	40 years
401 SOUTH MAIN - MINOT, ND	70,600	542,707	613,307	167,206	1987	24-40 years
2030 CLIFF ROAD - EAGAN, MN	145,900	834,966	980,866	870	2001	40 years
408 1ST STREET SE - MINOT, ND	10,000	36,907	46,907	27,691	1986	19-40 years
7901 FLYING CLOUD DR - EDEN PRAIRIE, MN	1,062,000	4,012,810	5,074,810	140,051	2000	40 years
BURNSVILLE BLUFFS - BURNSVILLE, MN	300,300	2,156,346	2,456,646	2,246	2001	40 years
COLD SPRINGS CENTER  - ST. CLOUD, MN	588,000	7,807,539	8,395,539	8,133	2001	40 years
CREEKSIDE OFF BLDG. - BILLINGS, MT	311,310	1,557,260	1,868,570	319,016	1992	40 years
LESTER CHIROPRACTIC CLINIC - BISMARCK, ND	25,000	243,917	268,617	76,401	1988	40 years
LEXINGTON COMMERCE CENTER - EAGAN, MN	453,400	5,036,323	5,489,723	171,926	2000	40 years
NICOLLETT VII - BURNSVILLE, MN	429,400	6,931,270	7,360,670	7,220	2001	40 years
NORTHGATE II - MAPLE GROVE, MN	357,800	1,991,179	2,348,979	68,024	2000	40 years
PILLSBURY BUSINESS CENTER - EDINA, MN	284,400	1,558,570	1,842,970	1,624	2001	40 years
PLYMOUTH IV & V  - PLYMOUTH, MN	640,500	13,387,829	14,028,329	13,221	2001	40 years
SOUTHDALE MEDICAL CENTER - EDINA, MN	3,500,000	28,921,070	32,421,070	191,582	2001	40 years
SOUTHEAST TECH CENTER - EAGAN, MN	559,500	5,556,017	6,115,517	191,582	2000	40 years
WALTERS 214 SO MAIN - MINOT, ND	27,055	84,941	111,996	76,960	1978	20-40 years
	$   8,839,165	$        81,598,321	$ 90,437,486	$          1,878,349
COMMERCIAL
AMERICA'S BEST WAREHOUSE - BOISE, ID	$      765,000	$           4,023,294	$   4,788,294	$             924,442	1994	40 years
AMERITRADE - OMAHA, NE	326,500	7,980,035	8,306,535	407,220	1999	40 years
ARROWHEAD SHOPPING CENTER - MINOT, ND	100,359	2,873,427	2,973,786	2,216,168	1973	15 1/2-40 years
BARNES & NOBLE - FARGO, ND	540,000	2,719,893	3,259,893	447,202	1994	40 years
BARNES & NOBLE - OMAHA, NE	600,000	3,099,197	3,699,197	426,131	1995	40 years
CARMIKE THEATRE - GRAND FORKS, ND	183,515	2,362,222	2,545,737	383,798	1994	40 years
COMPUSA  - KENTWOOD, MI	225,000	1,896,474	2,121,474	212,473	1996	40 years
CONSECO - RAPID CITY, SD	285,000	6,759,870	7,044,870	133,740	2001	40 years
CORNER EXPRESS - MINOT, ND	195,000	1,386,260	1,581,260	88,411	1999	40 years
DEWEY HILL BUSINESS CENTER - EDINA, MN	985,000	3,507,381	4,492,381	32,882	2001	40 years
EAST GRAND STATION  - EAST GRAND FORKS, ND	150,000	1,242,251	1,392,251	45,160	2000	40 years
EDGEWOOD VISTA  - BELGRADE, MT	14,300	439,194	453,494	19,462	2000	40 years
EDGEWOOD VISTA  - BILLINGS, MT	130,000	850,218	980,218	61,015	1999	40 years
EDGEWOOD VISTA  - COLUMBUS, NE	14,300	441,326	455,626	19,456	2000	40 years
EDGEWOOD VISTA  - DULUTH, MN	390,000	5,291,187	5,681,187	115,553	2000	40 years
EDGEWOOD VISTA  - EAST GRAND FORKS, MN	25,000	1,391,521	1,416,521	85,608	1997	40 years
EDGEWOOD VISTA  - FREMONT, NE	56,000	490,410	546,410	4,598	2001	40 years
EDGEWOOD VISTA  - GRAND ISLAND, NE	14,300	441,326	455,626	19,456	2000	40 years
EDGEWOOD VISTA  - HASTINGS, NE	13,971	551,805	565,777	5,677	2001	40 years

F-33

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION(continued)
 

OFFICE BUILDINGS	LAND	BUILDING &  IMPROVEMENTS	TOTAL	ACCUMULATED  DEPRECIATION	DATE ACQUIRED	LIFE ON WHICH  LATEST INCOME  STATEMENT IS  COMPUTED
COMMERCIAL continued
EDGEWOOD VISTA - KALISPELL, MT	$        70,000	$          498,150	$      568,150	$                2,578	2001	40 years
EDGEWOOD VISTA  - MINOT, ND	260,000	6,010,707	6,270,707	528,442	1997	40 years
EDGEWOOD VISTA  - MISSOULA, MT	108,900	853,528	962,428	96,022	1997	40 years
EDGEWOOD VISTA  - OMAHA, NE	88,567	522,803	611,370	3,812	2001	40 years
EDGEWOOD VISTA  - SIOUX FALLS, SD	130,000	844,739	974,739	60,674	1999	40 years
HEALTHEAST MED CNTR - WDBRY & ST. JHNS, MN	3,238,275	18,362,724	21,600,999	439,868	2001	40 years
HOSPITALITY ASSOCIATES - MINNETONKA, MN	40,000	360,898	400,898	1,671	2001	40 years
GREAT PLAINS SOFTWARE - FARGO, ND	125,501	15,249,652	15,375,154	651,141	2000	40 years
LINDBERG BLDG.  - EDEN PRAIRIE, MN	198,000	1,410,535	1,608,535	293,633	1992	40 years
MAPLEWOOD SQUARE - ROCHESTER, MN	3,275,000	8,623,946	11,898,946	386,937	2000	40 years
MEDPARK MALL  - GRAND FORKS, ND	680,500	4,962,450	5,642,950	149,361	2000	40 years
MINOT PLAZA  - MINOT, ND	50,000	459,954	509,954	97,496	1993	40 years
PETCO - FARGO, ND	324,148	954,786	1,278,934	154,418	1994	40 years
PIONEER SEED - MOORHEAD, MN	56,925	596,951	653,876	136,955	1992	40 years
STERNER LIGHTING - WINSTED, MN	100,000	900,789	1,000,789	3,208	2001	40 years
STONE CONTAINER - FARGO, ND	440,251	6,560,113	7,000,364	624,306	1995	40 years
STONE CONTAINER - WACONIA, MN	165,000	1,501,518	1,666,518	26,589	2001	40 years
VIROMED - EDEN PRAIRIE, MN	666,000	4,197,634	4,863,634	231,669	1999	40 years
WEDGEWOOD - SWEETWATER, GA	334,346	3,637,532	3,971,878	381,386	1996	40 years
	$15,364,658	$       4,256,702	$139,621,360	$        9,918,617
	$ 53,277,910	$   538,358,558	$591,636,468	$      44,093,145

F-34

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION

Reconciliations of total real estate carrying value for the three years ending April 30, 2001, 2000 and 1999 are as follows:
 

	2001	2000	1999
Balance at beginning of year	$   449,919,890	$   295,825,839	$   231,416,322
Additions during year
acquisitions	141,040,413	155,284,745	62,455,508
improvements and other	5,583,148	7,041,248	4,780,853
	$   596,543,451	$   458,151,832	$   298,652,683
Deduction during year
cost of real estate sold	-4,906,983	-6,912,626	-2,826,844
impairment valuation	0	-1,319,316	0
Balance at close of year	$    591,636,468	$    449,919,890	$    295,825,839

Reconciliations of accumulated depreciation for the three years ended April 30, 2001, 2000 and 1999 are as follows:

	2001	2000	1999
Balance at beginning of year	$ 33,232,952	$ 26,112,399	$ 21,516,129
Additions during year
provisions for depreciation	12,299,532	8,460,112	5,966,874
Deduction during year
accumulated depreciation on real estate sold	-1,439,339	-1,339,559	-1,370,604
Balance at close of year	$ 44,093,145	$ 33,232,952	$ 26,112,399

F-35

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

Schedule XII
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE
 

	Interest  Rate	Final  Maturity Date	Payment  Terms	Prior  Liens	Face  Amt. of Mortgages	Carrying Amt. of Mortgages	Prin. Amt of  Loans Subject to Delinquent Prin.  or Int.
RESIDENTIAL
Fricke	7.00%	01/01/02	Monthly		$         7,470	$           954	$                       0
Rolland Hausmann	9.00%	02/01/16	Monthly		315,659	278,527	0
Diamond T -Scottsbluff, NE	8.00%	11/01/02	Monthly /Balloon		115,000	106,926	0
KMOX -Prior Lake, MN	8.00%	01/01/04	Monthly /Balloon		46,500	43,313	0
Duane Peterson	Variable		Quarterly		130,000	130,000	0
Edgewood Norfolk, NE	11.00%	04/01/01	Balloon		477,375	477,375	0
					$    1,092,004	$   1,037,095	$                       0

 
 

	2001	2000
MORTGAGE LOANS RECEIVABLE, BEGINNING OF YEAR	$        1,650,284	$       10,721,214
New participations in and advances on mortgage loans	0	607 ,375
	$        1,650,284	$       11,328,589
Collections	-613,189	-9,678,305
MORTGAGE LOANS RECEIVABLE, END OF YEAR	$       1,037,095	$        1,650,284

F-36

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

SELECTED FINANCIAL DATA

	2001	2000	1999	1998	1997
Consolidated Income Statement Data
Revenue	$   75,767,150	$   55,445,193	$   39,927,262	$   32,407,545	$   23,833,981
Income before gain/loss on properties and minority interest	10,187,812	9,867,874	6,401,676	4,691,198	3,499,443
Gain on repossession/ Sale of properties	601,605	1,754,496	1,947,184	465,499	398,424
Loss on Impairment of Properties	0	1,319,316	0	0	0
Minority interest of portion of operating              partnership income	-2,095,177	-1,495,209	-744,725	-141,788	-18
Net income	8,694,240	8,807,845	7,604,135	5,014,909	3,897,849
Consolidated Balance Sheet Data
Total real estate investments	$ 548,580,418	$ 418,216,516	$ 280,311,442	$ 213,211,369	$ 177,891,168
Total assets	570,322,124	432,978,299	291,493,311	224,718,514	186,993,943
Shareholders' equity	118,945,160	109,920,591	85,783,294	68,152,626	59,997,619
Consolidated Per Share Data       (basic and diluted)
Income before gain/loss on properties             and minority interest	$                .44	$                .47	$                .37	$                .30	$                .25
Net Income	.38	.42	.44	.32	.28
Dividends	.55	.51	.47	.42	.39
CALENDAR YEAR	2001	2000	1999	1998	1997
Tax status of dividend
Capital gain	.72%	30.3%	6.3%	2.9%	21.0%
Ordinary income	86.76%	69.7%	76.0%	97.1%	79.0%
Return of capital	12.52%	0%	17.7%	0.0%	0.0%

F-37

INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS
April 30, 2001, 2000 and 1999

GAIN FROM PROPERTY DISPOSITIONS
 

	Total Original Gain(Loss)	Unrealized 04/30/01	Realized 04/30/01	Realized 04/30/00	Realized 04/30/99
Brooklyn Addition - Minot, ND	$       25,000	$                0	$                0	$         1,000	$         1,000
Superpumper - Grand Forks, ND	86,479	0	0	86,479	0
Superpumper - Crookston, ND	89,903	0	0	89,903	0
Superpumper - Langdon, ND	64,352	0	0	64,352	0
Superpumper - Sidney, MT	17,161	0	0	17,161	0
Mandan Apartments - Mandan, ND	75,612	0	0	75,612	0
Sweetwater Apts. - Devils Lake, ND	335,303	0	0	335,303	0
Hutchinson Technology  - Hutchinson, MN	1,109,003	0	0	1,109,003	0
Jenner 18-Plex  - Devils Lake, ND	14,009	0	0	14,009	0
Virginia Apartments  - Minot, ND	10,308	0	0	10,308	0
Fairfield Apts - Marshall, MN	80,121	0	0	0	80,121
Superpumper - Emerado, ND	158,146	0	0	0	158,146
Park Place Apts - Waseca, MN	366,018	0	0	0	366,018
Bison Properties - Jamestown, ND	1,341,899	0	0	0	1,341,899
Evergreen Shopping Center - Evergreen, CO	1,690	0	1,690	0	0
Chalet Apartments - Minot, ND	23,434	0	23,434	0	0
Hill Park Apts - Bismarck, ND	576,482	0	576,482	0	0
		$                 0	$       601,605	$  1,754,496	$  1,947,184

F-38

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

MORTGAGE LOANS PAYABLE
 

	Interest Rate	Final Maturity Date	Periodic Payment Terms	Face Amount of Mortgage	Carrying Amount of Mortgage	Delinquent Principal or Interest
1112 32nd Ave SW - Minot, ND	7.50%	07/20/10	Monthly	$        425,000	$       309,303	$               0
177 10th Ave East - Dickinson, ND	9.00%	11/01/18	Monthly	250,963	210,961	0
2030 Cliff Road - Eagan, MN	7.40%	04/01/11	Monthly	650,000	650,000	0
4301 9th Ave Sunchase II - Fargo, ND	9.04%	09/01/02	Monthly	364,765	32,534	0
4313 9th Ave Sunchase II - Fargo, ND	8.706%	02/01/14	Monthly	370,000	277,089	0
America's Best Furniture - Boise, ID	9.75%	03/29/03	Monthly	3,750,000	3,303,018	0
Ameritrade - Omaha, NE	7.25%	050/1/19	Monthly	6,150,000	5,854,993	0
Arrowhead Shopping Center - Minot, ND	8.25%	01/01/20	Monthly	1,325,000	1,290,671	0
Barnes & Noble Stores - ND & NE	7.98%	12/01/10	Monthly	4,900,000	3,751,267	0
Burnsville Bluffs - Burnsville, MN	8.25%	01/01/21	Monthly	1,644,551	1,641,798	0
Candlelight Apts. - Fargo, ND	7.50%	12/01/99	Monthly	578,000	411,529	0
Carmike - Grand Forks, ND	7.75%	020/1/07	Monthly	2,000,000	1,845,233	0
Castle Rock - Billings, ND	6.66%	030/1/09	Monthly	3,950,000	3,857,473	0
Century Apts. - Dickinson, ND	7.003%	03/01/06	Monthly	1,595,000	1,393,489	0
Century Apts.  - Williston, ND	7.003%	03/01/06	Monthly	2,700,000	2,358,883	0
Chateau Apts.   - Minot, ND	7.003%	03/01/06	Monthly	1,674,350	1,528,906	0
Clearwater Apts.  - Boise, ID	6.47%	01/01/09	Monthly	2,660,000	2,589,905	0
Cold Springs Center -St. Cloud, MN	7.40%	04/01/11	Monthly	5,250,000	5,250,000	0
Colton Heights - Minot, ND	8.35%	03/01/07	Monthly	730,000	256,077	0
Cottonwood Phase I - Bismarck, ND	6.59%	01/01/09	Monthly	2,800,000	2,727,822	0
Cottonwood Phase II - Bismarck, ND	7.55%	11/01/09	Monthly	2,850,000	2,812,552	0
Country Meadows Phase I - Billings, MT	7.51%	01/01/08	Monthly	2,660,000	2,522,888	0
Country Meadows Phase II - Billings, MT	8.10%	01/01/08	Monthly	2,600,000	2,564,285	0
Creekside - Billings, MT	7.375%	06/01/13	Monthly	1,250,000	1,106,166	0
Crestview Apts. - Bismarck, ND	6.91%	070/1/08	Monthly	3,400,000	3,245,760	0
CompUSA - Kentwood, MI	7.75%	02/01/11	Monthly	1,565,361	1,365,519	0
Conseco Bldg - Rapid City, SD	8.07%	08/01/15	Monthly	4,795,000	4,682,203	0
Corner Express - East Grand Forks, MN	7.52%	10/01/13	Monthly	885,000	798,550	0
Crown Colony Apts. - Topeka, KS	7.55%	08/01/09	Monthly	7,350,000	7,253,424	0
Dakota Hill - Irving TX	7.88%	01/01/10	Monthly	25,550,000	25,293,305	0
Dewey Hill Business Center - Edina, MN	7.93%	12/01/10	Monthly	3,125,000	3,114,964	0
East Grand Station - East Grand Forks, ND	8.60%	08/1/15	Monthly	970,000	948,989	0
Eastgate - Moorhead, MN	7.19%	090/1/09	Monthly	1,627,500	1,601,726	0
Edgewood Vista  - Missoula, MT	8.65%	04/15/12	Monthly	945,000	917,342	0
Edgewood Vista - East Grand Forks, MN	8.88%	07/05/12	Monthly	650,000	549,604	0
Edgewood Vista - Minot, ND	7.52%	08/01/12	Monthly	4,510,000	3,815,498	0
Edgewood Vista  - Sioux Falls, SD	7.52%	070/1/13	Monthly	720,000	649,494	0
Edgewood Vista  - Billings, MT	7.13%	10/01/13	Monthly	720,000	645,737	0
Edgewood Vista - Columbus & G. I., NE	8.65%	07/01/15	Monthly	624,000	608,733	0
Edgewood Vista - Duluth, MN	8.86%	05/01/15	Monthly	3,600,000	2,719,619	0
Flying Cloud - Eden Prairie, MN	8.61%	07/01/09	Monthly	3,830,000	3,812,804	0
Forest Park Estates - Grand Forks, ND	7.33%	080/1/09	Monthly	7,560,000	7,386,895	0

 F-39

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

MORTGAGE LOANS PAYABLE (continued)
 

	Interest Rate	Final Maturity Date	Periodic Payment Terms	Face Amount of Mortgage	Carrying Amount of Mortgage		Delinquent Principal or Interest
Great Plains Software - Fargo, ND	7.08%	10/01/13	Monthly	9,500,000	8,870,861	0
Health Investors Business Trust	7.94%	02/01/19	Monthly	19,482,851	19,176,624	0
Heritage Manor - Rochester, MN	6.80%	10/01/18	Monthly	5,075,000	4,749,593	0
Hospitality Associates - Minnetonka, MN	7.50%	04/01/06	Monthly	280,000	280,000	0
Ivy Club Apts.  - Vancouver, WA	7.355%	12/01/01	Monthly	7,092,443	6,910,101	0
Jenner Properties - Grand Forks, ND	9.50%	11/01/04	Monthly	1,391,585	1,103,784	0
Kirkwood Manor - Bismarck, ND	8.15%	05/01/10	Monthly	2,293,900	2,267,110	0
Lancaster Apts.  - St. Cloud, MN	7.04%	08/01/18	Monthly	1,769,568	1,716,664	0
Legacy Apts. Phase I - Grand Forks, ND	7.07%	01/01/05	Monthly	4,000,000	3,714,145	0
Legacy Apts. Phase II - Grand Forks, ND	7.07%	05/29/08	Monthly	2,575,000	2,457,041	0
Legacy Apts. Phase IV - Grand Forks, ND	8.10%	07/31/20	Monthly	3,000,000	2,958,788	0
Lexington Commerce Center - Eagan, MN	8.09%	02/01/10	Monthly	3,431,750	3,379,724	0
Lindberg Bldg. - Eden Prairie, MN	7.625%	02/01/07	Monthly	1,200,000	1,140,863	0
Magic City Apts. - Minot, ND	7.50%	10/10/10	Monthly	2,794,299	1,879,730		0
Maplewood Square - Rochester, MN	6.90%	08/01/09	Monthly	7,670,000	7,154,199		0
Meadows I & II - Jamestown, ND	8.155%	07/01/10	Monthly	1,975,000	1,965,867		0
MedPark Mall - Grand Forks, ND	8.075%	02/01/10	Monthly	3,425,000	3,381,663		0
Miramont  Apts. - Ft. Collins, CO	8.25%	08/01/36	Monthly	11,582,472	11,381,741		0
Neighborhood Apts. - Colorado Springs, CO	7.98%	0101/07	Monthly	7,525,000	7,044,910		0
Nicollett VII - Burnsville, MN	8.05%	11/29/10	Monthly	4,784,880	4,779,772		0
NorthGate II - Maple Grove, MN	8.09%	02/01/10	Monthly	1,576,750	1,552,846		0
North Pointe - Bismarck, ND	7.12%	02/01/07	Monthly	1,700,000	1,640,483		0
Oakwood Estates - Sioux Falls, SD	7.003%	03/01/06	Monthly	2,250,000	1,965,736		0
Olympic Village - Billings, MT	7.62%	11/01/10	Monthly	8,400,000	8,377,235		0
Oxbow - Sioux Falls, SD	7.003%	030/1/06	Monthly	3,565,000	3,114,600		0
Park East Apts. - Fargo, ND	6.82%	050/1/08	Monthly	3,500,000	3,385,258		0
Park Meadows Phase I - Waite Park, MN	7.19%	10/01/13	Monthly	3,022,500	2,974,635		0
Park Meadows Phase II - Waite Park, MN	7.899%	10/01/05	Monthly	2,214,851	2,052,288		0
Park Meadows Phase III - Waite Park, MN	4.00%	30 yr bond	Monthly	3,235,000	3,055,000		0
Pebblecreek - Bismarck, ND	8.10%	07/30/20	Monthly	455,000	448,744		0
PETCO Warehouse - Fargo, ND	7.28%	09/01/08	Monthly	1,100,000	901,454		0
Pillsbury Business Center - Bloomington, MN	7.40%	04/01/11	Monthly	1,260,000	1,260,000		0
Pinecone - Ft. Collins, CO	7.125%	12/01/33	Monthly	10,685,215	10,315,861		0
Pioneer Building - Fargo, ND	8.00%	12/01/06	Monthly	425,000	221,367		0
Plymouth IV & V - Plymouth, MN	8.17%	01/01/11	Monthly	9,280,912	9,271,270		0
Pointe West Apts. - Minot, ND	6.91%	07/01/08	Monthly	2,400,000	2,291,125		0
Prairie Winds Apts. - Sioux Falls, SD	7.04%	07/01/09	Monthly	1,325,000	1,300,993		0
Prairiewood Meadows - Fargo, ND	7.70%	11/01/20	Monthly	2,088,973	2,059,583		0
Ridge Oaks Apts. - Sioux City, IA	7.05%	01/01/31	Monthly	2,900,000	2,895,279		0
Rimrock Apts. - Billing, MT	7.33%	08/01/09	Monthly	2,660,000	2,599,093		0
Rocky Meadows - Billings, MT	7.33%	08/01/09	Monthly	3,780,000	3,693,447		0

F-40

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

MORTGAGE LOANS PAYABLE (continued)
 

	Interest Rate	Final Maturity Date	Periodic Payment Terms	Face Amount of Mortgage	Carrying Amount of Mortgage	Delinquent Principal or Interest
RoseWood/Oakwood - Sioux Falls, SD	8.85%	09/01/96	Monthly	1,323,000	1,172,698	0
Southdale Medical Center - Edina, MN	7.80%	01/01/11	Monthly	24,000,000	23,949,215	0
Sherwood Apts. - Topeka, KS	7.55%	08/01/09	Monthly	11,025,000	10,880,136	0
SouthEast Tech Center - Eagan, MN	8.09%	02/01/10	Monthly	4,266,500	4,201,819	0
South Pointe - Minot, ND	7.12%	02/01/07	Monthly	6,500,000	6,272,436	0
Southwind Apts. - Grand Forks, ND	7.12%	02/01/07	Monthly	4,100,000	3,956,460	0
Sunset Trail Phase I - Rochester, MN	7.80%	03/01/11	Monthly	4,350,000	4,346,961	0
Sterner Lighting - Winsted, MN	7.50%	04/01/06	Monthly	700,000	700,000	0
Stone Container - Fargo, ND	8.25%	02/01/11	Monthly	3,300,000	2,567,688	0
Stone Container - Waconia, MN	8.79%	10/15/06	Monthly	1,329,381	1,303,763	0
Sweetwater 24-Plex - Grafton, ND	9.75%	02/01/03	Monthly	270,000	36,840	0
Sweetwater 18-Plex - Grafton, ND	9.75%	020/1/03	Monthly	198,000	50,240	0
Thomasbrook - Lincoln, NE	7.22%	10/01/09	Monthly	6,200,000	6,070,287	0
Valley Park Manor - Grand Forks, ND	8.375%	10/01/01	Monthly	3,000,000	2,990,184	0
Van Mall Woods - Vancouver, WA	6.86%	12/01/03	Monthly	4,070,426	3,858,149	0
VIROMED  - Eden Prairie, MN	6.98%	040/1/14	Monthly	3,120,000	2,866,820	0
Wedgewood Retirement -Sweetwater, GA	9.17%	05/01/17	Monthly	1,566,720	1,420,809	0
West Stonehill - St. Cloud, MN	7.93%	06/01/17	Monthly	8,232,569	7,544,371	0
Westwood Park - Bismarck, ND	7.88%	12/01/09	Monthly	1,200,000	1,180,304	0
Woodridge Apts. - Rochester, MN	7.85%	010/1/17	Monthly	4,410,000	3,941,271	0
TOTALS				$       387,389,035	$    368,956,930	$                     0

 F-41

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
April 30, 2001

SIGNIFICANT PROPERTY ACQUISITIONS

Acquisitions for cash, assumptions of mortgages, and issuance of units in the operating partnership
 

COMMERCIAL
Healtheast Medical Center - Woodbury & St. Johns, MN	$     21,588,498
Conseco Financial Bldg. - Rapid City, SD	6,850,000
12 South Main - Minot, ND	385,000
17 South Main - Minot, ND	90,000
Stone Container - Waconia, MN	1,666,500
Dewey Hill Business Center - Edina, MN	4,472,895
Edgewood Vista - Fremont, NE	535,550
Edgewood Vista - Hastings, NE	550,800
Edgewood Vista   Omaha, NE	610,800
Edgewood Vista Alzheimer Addition - East Grand Forks,  MN	516,700
Edgewood Vista Addition - Duluth, MN	2,200,000
Edgewood Vista - Kalispell, MT	560,000
Southdale Medical Center (60.31% partnership interest) - Edina, MN	32,421,070
Hospitality Associates - Minnetonka, MN	400,000
Sterner Lighting - Winsted, MN	1,000,000
2030 Cliff Road - Eagan, MN	950,000
Burnsville Bluffs - Burnsville, MN	2,400,000
Cold Springs Center - St. Cloud, MN	8,250,000
Nicollett VII - Burnsville, MN	7,200,000
Pillsbury Business Center - Bloomington, MN	1,800,000
Plymouth IV & V - Plymouth, MN	13,750,000
	$   108,197,813
RESIDENTIAL
Olympic Village - Billings, MT	11,616,500
Prairiewood Meadows - Fargo, ND	2,811,000
Sunset Trail, Phase I - Rochester, MN	6,493,150
Cottonwood Phase III - Bismarck, ND***	1,854,800
Ridge Oaks - Sioux City, IA	4,195,036
Meadows Phase III - Jamestown, ND***	1,865,182
Sunset Trail, Phase II - Rochester, MN**	4,006,932
	$     32,842,600
TOTAL	$   141,040,413

 **Property not placed in service at April 30, 2001. Additional costs are still to be incurred.
***Represents costs to complete a project started in year ending April 30, 2000.

F-42

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)
 

QUARTER ENDED
	07-31-00	10-31-00	01-31-01	04-30-01
Revenues	$ 17,431,644	$ 18,404,260	$ 19,004,737	$ 20,926,509
Income before gain on properties and minority interest	2,565,131	2,707,811	2,719,679	2,195,191
Net gain on sale of properties	0	0	25,124	576,481
Minority interest of unitholders in operating partnership	-425,667	-538,618	-426,316	-704,576
Net Income	2,139,464	2,169,193	2,327,262	2,058,321
Per share
Income before gain/loss on properties and minority interest	.11	.12	.12	.09
Net Income	.09	.10	.10	.09

QUARTER ENDED
	07-31-99	10-31-99	01-31-00	04-30-00
Revenues	$ 11,201,913	$ 12,900,697	$ 14,054,660	$ 17,287,923
Income before gain(loss) on properties and minority interest	1,801,322	2,478,912	2,390,868	3,196,772
Net gain(loss) on sale of properties	257,895	1,519,918	0	-23,317
Loss on Impairment of Properties	0	0	0	-1,319,316
Minority interest of unitholders in operating partnership	-235,935	-579,625	-369,028	-310,621
Net Income	1,823,282	3,419,205	2,021,840	1,543,518
Per share
Income before gain/loss on properties and minority interest	.10	.12	.11	.14
Net Income	.09	.16	.11	.06

 
 

QUARTER ENDED
	7-31-98	10-31-98	01-31-99	04-30-99
Revenues	$ 9,102,179	$ 9,836,370	$10,236,797	$10,151,916
Income before gain on properties and minority interest	1,327,851	1,760,067	1,732,928	1,580,830
Net gain on sale of properties	366,017	1,341,899	80,122	158,146
Minority interest of unitholders in operating partnership	-133,863	-287,579	-158,820	-164,463
Net Income	1,560,005	2,814,387	1,654,228	1,575,515
Per share
Income before gain/loss on properties and minority interest	.07	.09	.09	.08
Net Income	.09	.17	.09	.09

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

F-43
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

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

Selling Commission	$1,750,000
Legal	7,500
Advertising, Printing & Promotion Expenses	40,000
Accounting	10,000
Registration Fees	10,000
Registration Fees	$1,807,500

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

      The Trust has a policy allowing its trustees and employees and their spouses to purchase its shares of beneficial interest at a 5% discount to the registration price of $8.75.  No commissions or other discounts were paid or given in connection with such sales. As a result of this policy, trustees and employees of IRET may purchase shares registered under this S-11 for $8.31 per share.  IRET pays no commissions of the sale of shares to trustees and employees.  All shares purchased under this plan must be held for one full year before they can be sold.

Recent Sales of Unregistered Securities
      None.

Indemnification of Trustees and Officers
      The governing provisions of the Trust provide non-liability of and indemnification to the Board of Trustees and officers except for willful misfeasance, bad faith, gross negligence, or any liability imposed by the Securities Act of 1933. The Trust currently provides insurance coverage for the errors or omissions of Board members and Officers.

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

ii-1

FINANCIAL STATEMENTS AND EXHIBITS

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

Financial Statement Filed	Included in Prospectus
Financial Statement by Investors Real  Estate Trust for the period ended April 30,  2001, prepared by Brady Martz &  Associates, P.C., Certified Public Accountants	See F-1 through F-43

b) Exhibit Index
 

Description of Exhibit	Location in Form S-11 Filing
(1)        Security Sales Agreement	Ex-1(i), Pages ii-10 - ii-11
(2)        Plan of acquisition, reorganization, arrangement,             liquidation or succession	Not Applicable
(3)
(i)         Second Restated Declaration of Trust                          Dated February 10, 1999	Filed as Ex-3(i) to Form S-11 filed by the Registrant on May 11, 1999, (File No. O-14851) and incorporated by reference herein
(ii)        IRET Properties Partnership Agreement	IRET Properties Partnership Agreement dated January 31, 1997, filed as Ex-3(ii) to Form S-11 filed by the Registrant on November 28, 1997, (File No. 0-14851) and Incorporated herein by reference
(4)  Instruments defining the rights of security holders, including indentures	See #3
(5)  Opinion re legality	Ex-5, Pages ii-12 ii-13
(6)  Opinion re discount on capital shares	Not Applicable
(7)  Opinion re liquidation preference	Not Applicable
(8)  Opinion re tax matters	Ex-8, Page ii-14
(9)  Voting trust agreement	Not Applicable
(10) Material Contracts	Not Applicable

ii-2

 

Description of Exhibit	Location in Form S-11 Filing
(11) Statement re computation of per share earnings	Not Applicable
(12) Statement re computation of ratios	Not Applicable
(15) Letter re unaudited interim financial information	Not Applicable
(16) Letter re change in certifying accountant	Not Applicable
(21) Subsidiaries of the Registrant	List of affiliated partnerships filed as Item 7 of Form S-11 filed for the Registrant (File No. 0-14851) and incorporated herein by reference
(23) Consent of experts and counsel          (i)  Pringle & Herigstad, P.C.	Ex-23(i), Page ii-15
(ii) Brady Martz & Associates, P.C.	Ex-23(ii), Page ii-16
(24) Power of Attorney	Not Applicable
(25) Statement of eligibility of trustee	Not Applicable
(27) Financial Data Schedule	Not Applicable
(99) Additional Exhibits
(i) Subscription Agreement	(i) Ex-99 Page ii-17

 ii-3

UNDERTAKINGS

The undersigned registrant hereby undertakes:

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

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

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

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

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

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

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

ii-4

The undersigned registrant hereby undertakes that:

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

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

ii-5

SIGNATURES

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

INVESTORS REAL ESTATE TRUST

Dated:  August 13, 2001
 
 

By:  /S/ Thomas A. Wentz, Sr.
        Thomas A. Wentz, Sr.
        Its:  President & Chief Executive Officer

ii-6

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

 

Signature	Title	Date
/S/ Jeffrey L. Miller  Jeffrey L. Miller	Trustee & Chairman	August 13, 2001
/S/ Daniel L. Feist  Daniel L. Feist	Trustee & Vice Chairman	August 13, 2001
/S/ C. Morris Anderson  C. Morris Anderson	Trustee & Vice Chairman	August 13, 2001
/S/ John F. Decker  John F. Decker	Trustee	August 13, 2001
/S/ Patrick G. Jones  Patrick G. Jones	Trustee	August 13, 2001
/S/ Stephen L. Stenehjem  Stephen L. Stenehjem	Trustee	August 13, 2001
/S/ Steven B. Hoyt  Steven B. Hoyt	Trustee	August 13, 2001
/S/ Thomas A. Wentz, Jr.  Thomas A. Wentz, Jr	Trustee, Vice President & General Counsel	August 13, 2001
/S/ Timothy P. Mihalick  Timothy P. Mihalick	Trustee, Senior Vice President & Chief Operating Officer	August 13, 2001
/S/ Thomas A. Wentz, Sr.  Thomas A. Wentz, Sr.	President & Chief Executive Officer	August 13, 2001
/S/ Diane K. Bryant  Diane K. Bryantt	Secretary & Chief Financial Officer	August 13, 2001

ii-7

INDEX OF EXHIBITS

	Description of Exhibit	Location in Form S-11 Filing
(1)	Security Sales Agreements	Ex-1(i), Pages ii-10 - ii-11
(2)	Plan of acquisition, reorganization, arrangement, liquidation or succession	Not Applicable
(3)	(i)         Second Restated Declaration Trust                          dated February 10, 1999	Filed as Ex-3(i) to Form S-11 of  filed by the Registrant on May 11, 1999 (File No. 0-14581) and incorporated by reference  herein
	(ii)        IRET Properties Partnership IRET                                Properties Partnership Agreement	Agreement dated January 31, 1997, filed as Ex-3 (ii) to Form  S-11 filed by the Registrant on November 28,  1997,  (File No. 0-14851) and  Incorporated herein by reference
(4)	Instruments defining the rights of security holders,  including indentures	See #3
(5)	Opinion re legality	Ex-5, Pages ii-12 - ii-13
(6)	Opinion re discount on capital shares	Not Applicable
(7)	Opinion re liquidation preference	Not Applicable
(8)	Opinion re tax matters	Ex-8, Page ii-14
(9)	Voting trust agreement	Not Applicable
(10)	Material Contracts	Not Applicable
(11)	Statement re computation of per share earnings	Not Applicable
(12)	Statement re computation	Not Applicable
(15)	Letter re unaudited interim financial information	Not Applicable
(16)	Letter re change in certifying accountant	Not Applicable
	Subsidiaries of the Registrant	List of affiliated partnerships  filed as Item 7 of Form  S-11 filed for the  Registrant (File No.  0-14851) and incorporated  herein by reference
(23)	Consent of experts and counsel

ii-8

 

	Description of Exhibit	Location in Form S-11 Filing
	(i)         Pringle & Herigstad, P.C.	Ex-23 (i), Page ii-15
	(ii)        Brady Martz & Associates,  P.C.	Ex-23 (ii), Page ii-16
(24)	Power of Attorney	Not Applicable
25)	Statement of eligibility of trustee	Not Applicable
(27)	Financial Data Schedule	Not Applicable
(99)	Additional Exhibits
	(i)         Subscription Agreement	(i) Ex-99, Page ii-17

ii-9

EX-1(i)

SECURITY SALES AGREEMENT

THIS AGREEMENT, made this ______ day of _______________, 2001, between INVESTORS REAL ESTATE TRUST, a North Dakota Business Trust, 12 South Main, Suite 100, Minot, North Dakota 58701 (hereinafter "IRET"), and ____________(hereinafter "BROKER").

WHEREAS, IRET intends to file a Form S-11 with the Securities and Exchange Commission to register for sale to the public 1,000,000 shares of its shares of Beneficial Interest (hereinafter "SHARES"); and,

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

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

1. IRET hereby employs BROKER as a Broker to offer said SHARES for sale for $8.75 per SHARE with a minimum purchase of 100 SHARES. BROKER agrees to use its best efforts to conduct the sales effort necessary to market said securities subject to the terms and conditions of this agreement. This agreement shall become effective only upon the effectiveness of the registration of said securities by the Securities and Exchange Commission and the applicable state Securities Commissioners and shall terminate contemporaneously with the termination or completion of said registration.

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

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

4. As compensation for its services hereunder, BROKER shall receive 8% of the proceeds of all of the securities sold by it and paid for.  All commissions shall be rounded down to the nearest penny.  Assuming a sale at $8.75, the commission would be $.70.

5.  BROKER or its fulltime employees shall be allowed to purchase SHARES, provided that any SHARES so purchased shall be held and not resold or otherwise transferred by the purchasing BROKER or employee of BROKER for a period of one year.  The one-year holding period shall be calculated in accordance with Rule 144(d) of Securities Act of 1933.  Additionally, any such purchase shall be at $8.75 per SHARE.

ii-10

6.  Any notice to be given under this Agreement shall be deemed properly given three days after the same is deposited postage prepaid with the United States Postal Service for First Class or Priority Delivery to the following:
 

If to IRET: Michael J. Hale, Asst. VP
Investors Real Estate Trust 
 12 South Main Street, Suite 100
PO Box 1988
Minot, ND 58702-1988
Telephone: (701) 837.4738
Fax: (701) 838.7785 If to BROKER: ________________________________
________________________________
________________________________
________________________________
________________________________
Telephone:_______________________
Fax: ____________________________

7. IRET represents and warrants to BROKER as follows:
 

*	IRET is a North Dakota Business Trust duly organized and in good standing under the laws of the State of North Dakota and duly authorized to conduct its business in the states in which it operates.
*	The SHARES of Beneficial Interest described in the Prospectus filed in connection with the above described Offering have the characteristics set forth in said Prospectus and IRET is authorized to issue an unlimited number of its SHARES of Beneficial Interest under its trust powers.
*	The Financial Statements and all other material contained in the Prospectus and by reference incorporated herein are true, correct and complete, and no material, adverse changes have occurred since the issuance of such statement.

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

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

INVESTORS REAL ESTATE TRUST
By___________________________________
     Thomas A. Wentz, Jr.
     Vice President 

Broker/Dealer

By___________________________________
Its___________________________________ 

ii-11

EXHIBIT EX-5

OPINION RE LEGALITY

August 13, 2001
 
 

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11/A DATED August 13, 2001

In connection with the filing of Form S-11 by Investors Real Estate Trust, we advise you that we have examined and are familiar with the originals of all documents, trust records and other instruments relating to the organization of Investors Real Estate Trust, the authorization and issuance of the shares of Beneficial Interest described in said application, including the following:

1.             Second Restated Declaration of Trust of Investors Real Estate Trust dated February 10, 1999.

2.             Registration Statement (Form S-11).

From our examination of said documents and records, it is our opinion:

1.             Investors Real Estate Trust has been duly organized and is a validly existing business trust under the laws of the State of North Dakota.

2.             Investors Real Estate Trust has the power under North Dakota law to conduct the business activities described in the Trust Agreement and said Prospectus.

3.            Investors Real Estate Trust is authorized to issue an unlimited number of its shares of Beneficial Interest as set forth in its Trust Agreement and such shares conform to the statements made about them in said Form S-11/A and Prospectus.

4.         Said shares of Beneficial Interest have been duly and validly authorized and issued.  Said shares, when sold, will be legally issued, fully paid, and non-assessable.
 

 

ii-12

EXHIBIT EX-5 (continued)

Securities and Exchange Commission

Page 2

5.          We are not aware, and Investors Real Estate Trust has advised us that it is not aware of any legal or governmental proceedings pending or threatened to which Investors Real Estate Trust is a party or which the property thereof is the subject; and it and we do not know of any contracts of a character to be disclosed on said application or prospectus which are not disclosed, filed and properly summarized therein.

6..         Said Form S-11/A and the Prospectus and other exhibits attached thereto are in the form required and have been examined by us; we have no reason to believe that any of said documents contain any untrue statement of material fact or omits to state any material fact the statements therein not misleading. We have reviewed said documents and to the best of our knowledge, information and belief, the statements contained therein are correct.

PRINGLE & HERIGSTAD, P.C.
 
 

By  /S/ Michael A. Bosh
     Michael A. Bosh

ii-13

EXHIBIT EX-8
 
 

OPINION RE TAX MATTERS

August 13, 2001

Securities and Exchange Commission
Washington, D.C. 20549

INVESTORS REAL ESTATE TRUST - FORM S-11 DATED August 13, 2001

In connection with the filing of the above described Form S-11 by Investors Real Estate Trust, we advise you that we have prepared the section of the Prospectus entitled "Tax Treatments of the Trust and Its Security Holders", including the following subcategories: Federal Income Tax, State and Local Income Taxation; Taxation of the IRET's Shareholders, Taxation of IRA's, 401K's, Pension Plans and Other Tax-Exempted Shareholders; and IRET Reporting to the IRS and Backup Withholding.  We also advise you that we have prepared the section of the Prospectus entitled "Tax Treatment of IRET Properties and its Limited Partners," including the subcategory Classification as a Partnership.  We also advise you that we have prepared the section of the Prospectus entitled "Income Taxation of IRET Properties and its Partners," including the following subcategories:  Partners Not IRET Properties Subject to Tax; Partnership Allocation Income, Losses and Capital Gain; Tax Allocations with Respect to Contributed Property; Tax Basis in IRET Properties; and Sale of Real Estate.

In connection with the preparation of said portion of the filing, we have examined and are familiar with the originals of all documents, trust records and other instruments relating to the organization and operation of Investors Real Estate Trust, IRET Properties, a North Dakota Limited Partnership, and all other related entities described in the filing.

In addition, we have reviewed all applicable provisions of the Internal Revenue Code, the regulations issued thereunder and, where appropriate, revenue rulings, federal and state court decisions and such other materials as we deemed necessary and relevant to the matters being opined upon.

The conclusions and statements made in the above described portions of the S-11/A filing represent our opinions on such matters and have been set forth with our knowledge and consent. The above portions of the Prospectus are hereby incorporated by reference.

PRINGLE & HERIGSTAD, P.C.

By /S/ Michael A. Bosh
     Michael A. Bosh

ii-14

EX-23(i)

August 13, 2001
 
 

UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONER
WASHINGTON DC 20549

FORM S-11 REGISTRATION STATEMENTI
NVESTORS REAL ESTATE TRUST

TO WHOM IT MAY CONCERN:

We consent to the incorporation directly or by reference in this Registration Statement of Investors Real Estate Trust, on Form S-11 dated August  13, 2001, of our Legality and Tax Matters opinion letters dated April 2001.  We also consent to the reference to us under the heading "Experts" in the Prospectus, which is also part of this Registration Statement.

PRINGLE & HERIGSTAD, P.C.
 
 

By /S/ Michael A. Bosh
Michael A. Bosh

ii-15

EX-23(ii)

BRADY MARTZ

CERTIFIED PUBLIC ACCOUNTANTS
 
 

August 13, 2001

UNITED STATES SECURITIES AND
   EXCHANGE COMMISSIONER
WASHINGTON DC 20549

RE:     FORM S-11 REGISTRATION STATEMENT
INVESTORS REAL ESTATE TRUST

TO WHOM IT MAY CONCERN:

We hereby consent to the incorporation directly or by reference in the Registration Statement of Investors Real Estate Trust on Form S-11/A, of the consolidated financial statements and additional information of Investors Real Estate Trust and Affiliated Partnerships as of April 30, 2001, as well as our Independent Auditor's Report dated May 25, 2001.  We also consent to the reference to us under the heading "Experts" in the Prospectus, which is part of the Registration Statement.

We also acknowledge that we are aware that said Form S-11 Filing includes unaudited pro forma financial statements of the Registrant for the year ending April 30, 2001.

/S/ Brady Martz & Associates, P.C.

BRADY, MARTZ & ASSOCIATES, P.C.

ii-16

 
 

EX-99
INVESTORS REAL ESTATE TRUST
Subscription Agreement

 

OWNERSHIP
REGISTRATION: $ Amt._____________ # of Common Shares____________ Price Per Share___________ Acct. No.______________
Name(s)_______________________________________________________________________________________
investor(s) names
1st Person SSN ______ - ______ - ______ or Tax I.D. # _______ - _______ Date of Birth _______/_______/_______
2nd Person SSN ______ - ______ - ______ or Tax I.D. # _______ - _______ Date of Birth _______/_______/_______
Address_______________________________________________________________________________________
City______________________________________________State____________________ Zip_________________

Under penalties of perjury, the undersigned certified (1) that the number shown as his taxpayer identification number is his correct taxpayer identification number and (2) that he is not subject to 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 and dividends or because the Internal Revenue Service has notified him that he is no longer subject to backup withholding.
 

MAILING ADDRESS FOR CORRESPONDENCE & CASH DISTRIBUTIONS: (if different from above)	Name(s)_________________________________________________________________________________________________ ________________________________________________________________________________________________________ Address__________________________________________________________________________________________________ City___________________________________________State__________________________________Zip_________________
TITLE TO BE HELD:	_____    Individual _____    Joint Tenants/                 Rights of                 Survivorship	_____Tenants in Common _____Corporation _____Transfer on Death	_____IRA _____Trust _____Custodian	_____Partnership _____Pension Plan/           Profit Sharing _____UTMA/UGMA
SIGNATURES:	I hereby certify as follows: That a copy of the Prospectus, including the Subscription Agreement attached thereto, as amended and/or supplemented to date, has been delivered to me, and I acknowledge that such Prospectus was received. Executed this _________ day of ___________,  ________, at _________________(city) ____________(state) Signature (investor's, otherwise Trustee of IRA, Pension Plan, etc.)______________________________________  Additional Signature (if joint tenant)___________________________________________________________

The undersigned hereby represents that it has reasonable grounds to believe on the basis of information obtained from the above-named investor concerning his-her investment objectives, other investment, financial situation and needs, and any other information known by it that:
 

A.		The above-named investor is or will be in a financial position appropriate to enable him-her to realize, to a significant extent, the benefits discussed in the Prospectus
B.		The above-names investor has a fair market net worth sufficient to sustain the risks inherent in the Shares, including loss of investment and lack of liquidity; and
C.		The Shares are otherwise suitable for the above-named investor.  I further represent that prior to executing this purchase transaction, I informed the above-named investor of all pertinent facts relating to the liquidity of the Shares.
SOLICITING DEALER ENDORSEMENT:			Firm________________________________________________________________________________________ Registered Representative___________________________________________ Phone _____________________ Address_____________________________________________________________________________________ Dealer Authorized Signature_____________________________________________________________________
NOTE:			Make checks payable to:  Investors Real Estate Trust, PO Box 1988, Minot, ND 58702-1988
ACCEPTED BY:			INVESTORS REAL ESTATE TRUST (Transfer Agent/Registrar)                    Date______________________
	Reinvest Dividends (circle one)			YES               NO
	Issue Certificate (circle one)			YES               NO

ii-17