SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For The Quarterly Period Ended June 30, 2003

or

[  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 333-64391





|Maryland                                | 36-4246655               
|--------------------------------------- | -------------------------
|(State or other jurisdiction of         | (I.R.S. Employer         
|incorporation or organization)          | Identification Number)   
|2901 Butterfield Road,                  | Oak Brook, Illinois 60523
|(Address of principal executive office) | (Zip Code)               

Registrant's telephone number, including area code:  630-218-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X  No ___

Indicate by a checkmark whether the registrant is an accelerated filer (as defined in Securities Exchange Act Rule 12b-2)
          X  Yes          __ No

As of August 8 ,2003, there were 220,484,431 shares of common stock outstanding.



INLAND RETAIL REAL ESTATE TRUST, INC. 
(a Maryland corporation)
INDEX



|        |                                                 | Page No.
|------- | ----------------------------------------------- | --------
|        | PART I - FINANCIAL INFORMATION                  |         
|        |                                                 |         
|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS:              |         
|        | Consolidated Balance Sheets                     | 3       
|        | Consolidated Statements of Operations           | 5       
|        | Consolidated Statements of Stockholders' Equity | 6       
|        | Consolidated Statements of Cash Flows           | 7       
|        | Notes to Consolidated Financial Statements      | 9       
|        |                                                 |         
|ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF         |         
|        | FINANCIAL CONDITION AND RESULTS OF OPERATIONS   | 48      
|        |                                                 |         
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES        |         
|        | ABOUT MARKET RISK                               | 79      
|        |                                                 |         
|ITEM 4. | CONTROLS AND PROCEDURES                         | 75      
|        |                                                 |         
|        | PART II - OTHER INFORMATION                     |         
|        |                                                 |         
|ITEM 2. | CHANGES IN SECURITIES AND USE OF PROCEEDS       | 76      
|        |                                                 |         
|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K                | 78      
|        | (a) Exhibits                                    |         
|        | (b) Reports on From 8-K                         |         
|        |                                                 |         
|        | Signatures                                      |         



PART I - Financial Information

Item 1. Consolidated Financial Statements

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)

Consolidated Balance Sheets

June 30, 2003 and December 31, 2002Assets



|                                                                |   | June 30, 2003 (unaudited) |   | December 31, 2002
|--------------------------------------------------------------- | - | ------------------------- | - | -----------------
|Investment properties:                                          |   |                           |   |                  
|Land                                                            | $ | 712,361,998               | $ | 363,767,644      
|Building and other improvements                                 |   | 2,117,867,993             |   | 1,124,824,956    
|Construction in progress-land                                   |   | 8,042,676                 |   | 8,090,004        
|Construction in progress-buildings and other improvements       |   | 22,549,978                |   | 3,926,855        
|                                                                |   |                           |   |                  
|                                                                |   | 2,860,822,645             |   | 1,500,609,459    
|Less accumulated depreciation                                   |   | (69,542,651)              |   | (40,737,139)     
|                                                                |   |                           |   |                  
|Net investment properties                                       |   | 2,791,279,994             |   | 1,459,872,320    
|                                                                |   |                           |   |                  
|Mortgages receivable                                            |   | 34,511,687                |   | 100,975,017      
|Cash and cash equivalents                                       |   | 187,893,351               |   | 134,977,144      
|Restricted escrows                                              |   | 37,446,634                |   | 6,872,411        
|Restricted cash                                                 |   | 30,049,606                |   | 11,220,834       
|Investment in securities                                        |   | 8,445,327                 |   | 6,987,700        
|Accounts and rents receivable (net of allowance of $2,162,428   |   |                           |   |                  
|and $1,024,720 as of June 30, 2003 and December 31, 2002,       |   |                           |   |                  
|respectively)                                                   |   | 20,936,112                |   | 12,831,387       
|Acquired value of below market leasehold interest               |   | 11,000,000                |   | -                
|Acquired in-place lease intangibles (net of accumulated         |   |                           |   |                  
|amortization of $2,528,641 and $1,206,324 as of June 30,        |   |                           |   |                  
|2003 and December 31, 2002, respectively)                       |   | 25,264,218                |   | 13,344,182       
|Acquired above market lease intangibles (net of                 |   |                           |   |                  
|accumulated amortization of $2,337,196 and $953,493 as of       |   |                           |   |                  
|June 30, 2003 and December 31, 2002, respectively)              |   | 27,821,364                |   | 11,371,843       
|Leasing and loan fees and loan fee deposits (net of accumulated |   |                           |   |                  
|amortization of $3,309,589 and $2,053,066 as of June 30,        |   |                           |   |                  
|2003 and December 31, 2002, respectively)                       |   | 14,788,906                |   | 6,864,374        
|Other assets                                                    |   | 3,936,023                 |   | 2,371,147        
|                                                                |   |                           |   |                  
|Total assets                                                    | $ | 3,193,373,222             | $ | 1,767,688,359    
|                                                                |   | ============              |   | ==========       
|See accompanying notes to consolidated financial statements.   

INLAND RETAIL REAL ESTATE TRUST, INC.

Consolidated Balance Sheets
(continued)
June 30, 2003 and December 31, 2002

Liabilities and Stockholders' Equity



|                                                               |   | June 30, 2003 (unaudited) |   | December 31, 2002
|-------------------------------------------------------------- | - | ------------------------- | - | -----------------
|Liabilities:                                                   |   |                           |   |                  
|Accounts payable                                               | $ | 1,214,802                 | $ | 483,944          
|Development payables                                           |   | 5,130,809                 |   | 2,558,834        
|Accrued offering costs due to affiliates                       |   | 198,100                   |   | 1,309,885        
|Accrued offering costs due to non-affiliates                   |   | 298,646                   |   | 117,540          
|Accrued interest payable to non-affiliates                     |   | 2,633,251                 |   | 1,844,071        
|Real estate taxes payable                                      |   | 12,548,927                |   | 237,366          
|Distributions payable                                          |   | 14,578,151                |   | 8,281,370        
|Security deposits                                              |   | 4,407,589                 |   | 2,339,265        
|Mortgages payable                                              |   | 1,215,200,571             |   | 675,621,971      
|Prepaid rental and recovery income                             |   | 2,797,797                 |   | 1,762,106        
|Margin payable                                                 |   | 3,365,634                 |   | 3,402,071        
|Acquired below market lease intangibles (net of accumulated    |   |                           |   |                  
|amortization of $2,458,675 and $748,287 as of June 30,         |   |                           |   |                  
|2003 and December 31, 2002, respectively)                      |   | 28,751,054                |   | 9,946,024        
|Restricted cash liability                                      |   | 30,049,606                |   | 11,220,834       
|Other liabilities                                              |   | 955,307                   |   | 369,523          
|Due to affiliates                                              |   | 7,252,357                 |   | 2,515,204        
|                                                               |   |                           |   |                  
|Total liabilities                                              | $ | 1,329,382,601             | $ | 722,010,008      
|                                                               |   |                           |   |                  
|Minority interest                                              |   | 1,002,000                 |   | 2,000            
|                                                               |   |                           |   |                  
|Stockholders' Equity:                                          |   |                           |   |                  
|Preferred stock, $.01 par value, 10,000,000 shares authorized, |   |                           |   |                  
|none outstanding                                               |   | --                        |   | --               
|Common stock, $.01 par value, 280,000,000 shares authorized,   |   |                           |   |                  
|216,479,757 and 122,313,103 issued and outstanding at          |   | 2,164,797                 |   | 1,223,131        
|June 30, 2003 and December 31, 2002, respectively              |   |                           |   |                  
|Additional paid-in capital (net of costs of offering of        |   |                           |   |                  
|$211,885,317 and $125,224,459 at June 30, 2003 and             |   |                           |   |                  
|December 31, 2002 respectively, of which $194,717,701 and      |   |                           |   |                  
|$111,594,675 was paid or accrued to Affiliates, respectively)  |   | 1,942,053,822             |   | 1,091,208,613    
|Accumulated distributions in excess of net income              |   | (81,897,520)              |   | (45,848,709)     
|Accumulated other comprehensive gain (loss)                    |   | 667,522                   |   | (906,684)        
|                                                               |   |                           |   |                  
|Total stockholders' equity                                     | $ | 1,862,988,621             | $ | 1,045,676,351    
|                                                               |   |                           |   |                  
|Commitments and contingencies (Notes 6, 10 and 11)             |   |                           |   |                  
|                                                               |   |                           |   |                  
|Total liabilities and stockholders' equity                     | $ | 3,193,373,222             | $ | 1,767,688,359    
|                                                               |   | ==========                |   | ==========       
|See accompanying notes to consolidated financial statements.  



INLAND RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2003 and 2002
(unaudited)



|                                                             |   | Three months ended |   | Three months ended |   | Six months ended |   | Six months ended
|------------------------------------------------------------ | - | ------------------ | - | ------------------ | - | ---------------- | - | ----------------
|                                                             |   | June 30, 2003      |   | June 30, 2002      |   | June 30, 2003    |   | June 30, 2002   
|Income:                                                      |   |                    |   |                    |   |                  |   |                 
|Rental income, net of amortization of above                  |   |                    |   |                    |   |                  |   |                 
|and below market lease intangibles                           | $ | 57,662,924         | $ | 19,814,664         | $ | 99,702,912       | $ | 36,332,102      
|Real estate tax recovery income                              |   | 6,811,533          |   | 1,808,002          |   | 10,493,103       |   | 3,714,267       
|Common area cost recovery income                             |   | 4,767,248          |   | 2,014,507          |   | 9,008,157        |   | 3,668,856       
|Additional rental income                                     |   | 402,839            |   | 111,442            |   | 604,399          |   | 347,648         
|Interest and dividend income                                 |   | 1,485,514          |   | 595,028            |   | 3,259,331        |   | 925,860         
|Other income, net of realized loss                           |   |                    |   |                    |   |                  |   |                 
|from investment securities                                   |   | 123,555            |   | 376,751            |   | 350,511          |   | 546,186         
|                                                             |   |                    |   |                    |   |                  |   |                 
|Total income                                                 |   | 71,253,613         |   | 24,720,394         |   | 123,418,413      |   | 45,534,919      
|                                                             |   |                    |   |                    |   |                  |   |                 
|Expenses:                                                    |   |                    |   |                    |   |                  |   |                 
|Professional services to affiliates                          |   | 6,751              |   | -                  |   | 13,662           |   | -               
|Professional services to non-affiliates                      |   | 347,606            |   | 143,591            |   | 593,858          |   | 225,977         
|General and administrative expenses                          |   | 403,796            |   | 210,392            |   | 559,630          |   | 357,874         
|to affiliates                                                |   |                    |   |                    |   |                  |   |                 
|General and administrative expenses                          |   | 421,825            |   | 192,148            |   | 493,182          |   | 288,407         
|to non-affiliates                                            |   |                    |   |                    |   |                  |   |                 
|Advisor asset management fee                                 |   | 3,920,000          |   | 1,050,000          |   | 6,693,960        |   | 1,847,000       
|Property operating expenses to affiliates                    |   | 2,950,284          |   | 1,059,022          |   | 5,244,177        |   | 2,010,694       
|Property operating expenses to                               |   |                    |   |                    |   |                  |   |                 
|non-affiliates                                               |   | 6,638,849          |   | 2,294,707          |   | 12,240,555       |   | 4,097,772       
|Real estate tax                                              |   | 7,169,997          |   | 1,979,116          |   | 11,397,307       |   | 3,910,421       
|Mortgage interest to non-affiliates                          |   | 12,827,118         |   | 5,405,442          |   | 22,261,025       |   | 9,982,058       
|Depreciation                                                 |   | 16,875,040         |   | 5,873,788          |   | 28,805,512       |   | 10,613,902      
|Amortization                                                 |   | 1,887,222          |   | 446,312            |   | 2,696,009        |   | 827,247         
|Acquisition cost expenses to affiliates                      |   | 55,519             |   | -                  |   | 87,326           |   | - -             
|Acquisition cost expenses to                                 |   |                    |   |                    |   |                  |   |                 
|non-affiliates                                               |   | 485,962            |   | 137,857            |   | 625,232          |   | 164,428         
|                                                             |   |                    |   |                    |   |                  |   |                 
|Total expenses                                               |   | 53,989,969         |   | 18,792,375         |   | 91,711,435       |   | 34,325,780      
|                                                             |   |                    |   |                    |   |                  |   |                 
|Net income                                                   | $ | 17,263,644         | $ | 5,928,019          | $ | 31,706,978       | $ | 11,209,139      
|                                                             |   |                    |   |                    |   |                  |   |                 
|Other comprehensive income:                                  |   |                    |   |                    |   |                  |   |                 
|Unrealized gain (loss) on investment securities              |   | 1,344,069          |   | (912,634)          |   | 1,574,206        |   | (633,185)       
|Comprehensive income                                         | $ | 18,607,713         | $ | 5,015,385          | $ | 33,281,184       | $ | 10,575,954      
|                                                             |   | ============       |   | ============       |   | ============     |   | ==========      
|Net income per common share, basic and diluted               | $ | .09                | $ | .11                | $ | .19              | $ | .23             
|Weighted average number of common shares                     |   |                    |   |                    |   |                  |   |                 
|outstanding, basic and diluted                               |   | 190,290,064        |   | 55,907,279         |   | 164,451,522      |   | 48,581,036      
|                                                             |   |                    |   |                    |   |                  |   |                 
|See accompanying notes to consolidated financial statements.



INLAND RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Stockholders' Equity

For the Six Months Ended June 30, 2003
(unaudited)

|                                                             |             |                |                    | Accumulated      | Accumulated    |                  
|------------------------------------------------------------ | ----------- | -------------- | ------------------ | ---------------- | -------------- | -----------------
|                                                             |             |                | Additional         | Distributions    | Other          |                  
|                                                             | Number of   | Common         | Paid-in            | in excess of     | Comprehensive  |                  
|                                                             | Shares      | Stock          | Capital            | Net Income       | Loss           | Total            
|                                                             |             |                |                    |                  |                |                  
|Balance at December 31, 2002                                 | 122,313,103 | $   1,223,131  | $   1,091,208,613  | $   (45,848,709) | $   ( 906,684) | $  1,045,676,351 
|                                                             |             |                |                    |                  |                |                  
|Net income                                                   | --          | --             | --                 | 31,706,978       | --             | 31,706,978       
|Unrealized gain on investment securities                     | --          | --             | --                 | --               | 1,574,206      | 1,574,206        
|Distributions declared ($.41 per weighted average            |             |                |                    |                  |                |                  
|number of common shares outstanding)                         | --          | --             | --                 | (67,755,789)     | --             | (67,755,789)     
|Proceeds from Offering including DRP (net of                 |             |                |                    |                  |                |                  
|Offering costs $86,660,858)                                  | 94,535,093  | 945,350        | 854,364,885        | --               | --             | 855,310,235      
|Shares repurchased                                           | (368,439)   | (3,684)        | (3,519,676)        | --               | --             | (3,523,360)      
|                                                             |             |                |                    |                  |                |                  
|Balance at June 30, 2003                                     | 216,479,757 | $    2,164,797 | $    1,942,053,822 | $  (81,897,520)  | $     667,522  | $   1,862,988,621
|                                                             | ==========  | ==========     | ============       | ===========      | ===========    | ============     
|See accompanying notes to consolidated financial statements.

INLAND RETAIL REAL ESTATE TRUST, INC.







|                                                             |      | June 30,        |   | June 30,     
|------------------------------------------------------------ | ---- | --------------- | - | -------------
|                                                             | 2003 | 2002           
|Cash flows from operating activities:                        |      |                 |   |              
|Net income                                                   | $    | 31,706,978      | $ | 11,209,139   
|Adjustments to reconcile net income:                         |      |                 |   |              
|Depreciation                                                 |      | 28,805,512      |   | 10,613,902   
|Amortization                                                 |      | 2,696,009       |   | 827,247      
|(Gain) loss on sale of investment securities                 |      | 5,722           |   | (36,654)     
|Rental income under master leases                            |      | 3,142,117       |   | 503,629      
|Straight-line rental income                                  |      | (2,867,976)     |   | (957,300)    
|Amortization of above and below market lease intangibles     |      | (326,685)       |   | -            
|Income from unconsolidated joint venture                     |      | -               |   | (190,405)    
|Changes in assets and liabilities:                           |      |                 |   |              
|Accounts and rents receivable net of change in allowance of  |      |                 |   |              
|$1,137,708 and $(78,278) for 2003 and 2002, respectively     |      | (5,236,749)     |   | (2,164,665)  
|Other assets                                                 |      | (1,564,876)     |   | (819,447)    
|Accrued interest payable to non-affiliates                   |      | 789,180         |   | 177,043      
|Real estate tax payable                                      |      | 12,311,561      |   | 4,369,336    
|Accounts payable                                             |      | 730,858         |   | 314,434      
|Prepaid rental and recovery income                           |      | 1,035,691       |   | 511,239      
|Other liabilities                                            |      | 585,784         |   | 5,459,895    
|Security deposits                                            |      | 2,068,324       |   | 432,317      
|Due to affiliates                                            |      | 4,737,153       |   | 904,750      
|Net cash provided by operating activities                    | $    | 78,618,603      | $ | 31,154,460   
|                                                             |      |                 |   |              
|Cash flows from investing activities:                        |      |                 |   |              
|Restricted escrows                                           |      | (30,574,223)    |   | (6,687,962)  
|Purchase of investment securities, net of change in margin   |      |                 |   |              
|account of $(36,437) and $(42,061) for 2003 and 2002,        |      |                 |   |              
|respectively                                                 |      | (81,559)        |   | (964,614)    
|Contribution from minority interest joint venture            |      | 1,000,000       |   | -            
|Proceeds from sale of investment securities                  |      | 155,979         |   | 512,067      
|Purchase of joint venture                                    |      | -               |   | 2,876,869    
|Distributions from unconsolidated joint venture              |      | -               |   | 190,405      
|Purchase of investment properties, net                       |      | (1,185,453,710) |   | (243,769,821)
|Additions to investment properties                           |      | (2,278,852)     |   | (6,300,387)  
|Acquired value of below market leasehold interests           |      | (11,000,000)    |   | -            
|Leasing fees                                                 |      | (515,268)       |   | (97,706)     
|Funding of mortgages receivable                              |      | (35,065,631)    |   | (1,375,000)  
|                                                             |      |                 |   |              
|Net cash used in investing activities                        | $    | (1,263,813,264) | $ | (255,616,149)
|                                                             |      |                 |   |              
|See accompanying notes to consolidated financial statements.





INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)

Consolidated Statements of Cash Flows
(continued)

For the Six Months Ended June 30, 2003 and June 30, 2002
(unaudited)



|                                                             |   | June 30,        |      | June 30,     
|------------------------------------------------------------ | - | --------------- | ---- | -------------
|                                                             |   | 2003            | 2002
|Cash flows from financing activities:                        |   |                 |      |              
|Proceeds from offerings                                      | $ | 941,971,093     | $    | 289,402,643  
|Repurchase of shares                                         |   | (3,523,360)     |      | (539,950)    
|Payment of offering costs                                    |   | (87,591,537)    |      | (28,703,336) 
|Proceeds from issuance of debt                               |   | 530,184,011     |      | 213,198,631  
|Principal payments of debt-balloon                           |   | (72,437,357)    |      | (170,925,600)
|Principal payments of debt-amortization                      |   | (481,193)       |      | (136,668)    
|Proceeds from unsecured line of credit                       |   | 150,000,000     |      | -            
|Payoff of unsecured line of credit                           |   | (150,000,000)   |      | -            
|Loan fees and deposits                                       |   | (8,551,781)     |      | (2,975,429)  
|Distributions paid                                           |   | (61,459,008)    |      | (17,863,768) 
|Net cash provided by financing activities                    |   | 1,238,110,868   |      | 281,456,523  
|                                                             |   |                 |      |              
|Net increase in cash and cash equivalents                    |   | 52,916,207      |      | 56,994,834   
|                                                             |   |                 |      |              
|Cash and cash equivalents, at beginning of period            |   | 134,977,144     |      | 24,534,356   
|                                                             |   |                 |      |              
|Cash and cash equivalents, at end of period                  | $ | 187,893,351     | $    | 81,529,190   
|                                                             |   |                 |      |              
|Supplemental disclosure of cash flow information:            |   |                 |      |              
|                                                             |   |                 |      |              
|Cash paid for interest, net of $423,507 and $116,648         |   |                 |      |              
|capitalized and $121,969 and $0 of premium amortization      |   |                 |      |              
|at June 30, 2003 and 2002, respectively                      | $ | 21,471,845      | $    | 9,805,015    
|                                                             |   |                 |      |              
|Restricted cash                                              | $ | (18,828,772)    | $    | (9,418,391)  
|Restricted cash liability                                    | $ | 18,828,772      | $    | 9,418,391    
|                                                             |   |                 |      |              
|Supplemental schedule of non-cash investing and              |   |                 |      |              
|financing activities:                                        |   |                 |      |              
|Purchase of investment properties, net                       | $ | (1,360,458,610) | $    | (314,637,405)
|Assumption of mortgage debt                                  |   | 73,378,965      |      | 70,867,584   
|Conversion of mortgage receivable to investment property     |   | 99,053,960      |      |              
|Net change in development payables                           |   | 2,571,975       |      | --           
|                                                             |   |                 |      |              
|Cash used to purchase investment properties                  | $ | (1,185,453,710) | $    | (243,769,821)
|                                                             |   |                 |      |              
|Distributions payable                                        | $ | 14,578,151      | $    | 4,185,546    
|                                                             |   |                 |      |              
|See accompanying notes to consolidated financial statements.

INLAND RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  Readers of this Quarterly Report should refer to the audited financial statements of Inland Retail Real Estate Trust, Inc. (the "Company") for the fiscal year ended December 31, 2002, which are included in the Company's 2002 Annual Report, as certain footnote disclosures contained in such audited financial statements have been omitted from this Report.

(1)  Organization and Basis of Accounting



The Company is qualified and has elected to be taxed as a real estate investment trust ("REIT") under section 856 through 860 of the Internal Revenue Code of 1986.  Since the Company qualifies for taxation as a REIT, the Company generally will not be subject to Federal income tax to the extent it distributes at least 90% of its REIT taxable income to its stockholders.  If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to Federal income tax on its taxable income at regular corporate tax rates.  Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and Federal income and excise taxes on its undistributed income.







INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

The Company's election to be taxed as a REIT has important consequences for it requires the Company to satisfy certain tests regarding the nature of the revenues it can generate and the distributions that it pays to stockholders.  To ensure that the Company qualifies to be taxed as a REIT, the company determines, on a quarterly basis, that the gross income, asset and distribution tests imposed by the Internal Revenue Code are met.  On an ongoing basis, as due diligence is performed by the Company on potential real estate purchases or temporary investment of uninvested capital, the Company determines that the income from the new assets qualifies for REIT purposes.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.

In the opinion of management, the financial statements contain all the adjustments necessary, which are of a normal recurring nature, to present fairly the financial position and results of operations for the period presented herein.  Results of interim periods are not necessarily indicative of results to be expected for the year.

Certain reclassifications have been made to 2002 financial statements to conform with the 2003 presentations.









INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)



On January 1, 2003, the Company adopted Financial Accounting Standard Board's (FASB) Statement of Financial Accounting Standards No. 145 ("SFAS 145"), "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections."  The rescission of SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements," which amended SFAS No. 4, affects income statement classification of gains and losses from extinguishment of debt.  SFAS No. 4 requires that gains and losses from extinguishment of debt be classified as an extraordinary item, if material.  Under SFAS No. 145, extinguishment of debt is now considered a risk management strategy by the reporting enterprise and the FASB does not believe it should be considered extraordinary under the criteria in APB Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," unless the debt extinguishment meets the unusual in nature and infrequency of occurrence criteria in APB Opinion No. 30.  SFAS 145 is effective for fiscal years beginning after May 15, 2002. The adoption of SFAS 145 did not have a material effect on the Company's results of operations or financial condition.

On January 1, 2003, the Company adopted FASB Interpretation No. 45 ("FIN 45") "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34."  FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued.  FIN 45 also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken.  The adoption of FIN 45 did not have a material effect on the Company's results of operations or financial condition.

On January 1, 2003, the Company adopted FASB Statement of Financial Accounting Standards No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation - Transition and Disclosure," an amendment of FASB Statement No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation.  In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements.  The adoption of SFAS 148 did not have a material effect on the Company's results of operations or financial condition.











INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

The Company capitalizes costs incurred during the development period, including direct and indirect costs such as construction, insurance, architectural costs, legal fees, interest and other financing costs, and real estate taxes.  The development period is considered to end once the property is substantially complete and available for occupancy.  At such time those costs included in construction in progress are reclassified to land and building and other improvements. Development payables consist of retainage and other costs incurred and not yet paid pertaining to the development projects.  The Company maintained development payables of $5,130,809 and $2,558,834 at June 30, 2003 and December 31, 2002, respectively.

Restricted escrows primarily consist of lenders' restricted escrows and earnout escrows.  Earnout escrows are established upon the acquisition of certain investment properties for which the funds may be released to the seller when certain leasing conditions have been met.

The Company performs impairment analysis for its long-lived assets in accordance with Statement of Financial Accounting Standards No. 144 ("SFAS 144") "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"

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

Tenant improvements are amortized on a straight-line basis over the life of the related lease as a component of amortization expense.

In July 2001, the FASB issued Statement No. 141, "Business Combinations", ("SFAS 141") and Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").  SFAS 141 requires use of the purchase method of accounting for all business combinations completed after June 30, 2001.  SFAS 141 also specifies that intangible assets acquired in a purchase method business combination must meet certain criteria to be recognized and reported apart from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually.  SFAS 142 also requires the amortization of intangible assets with estimable useful lives over their respective estimated useful lives to their estimated residual values and review for impairment in accordance with SFAS 144.  On January 1, 2002, the Company adopted SFAS 141.  Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 were amortized until January 1, 2002.  The adoption of these standards resulted in the recognition of intangible assets for acquired in-place lease intangibles and acquired above market lease intangibles and liabilities for acquired below market lease intangibles relating to the Company's real estate acquisitions of approximately $27,792,859, $30,158,560 and $31,209,729, respectively, as of June 30, 2003.  For the three months ended June 30, 2003 the Company recognized upon acquisition, additional intangible assets for acquired in-place lease intangibles and above market lease intangibles and liabilities for acquired below market lease intangibles of approximately $8,866,472, $9,014,626 and $6,746,531, respectively. The portions of the purchase price allocated to acquired above market lease intangibles and acquired below market lease intangibles



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

are amortized on a straight-line basis over the life of the related lease as an adjustment to rental income.  Amortization pertaining to the above market lease intangibles was applied as a reduction to rental income of $1,031,272 for the three month period ended June 30, 2003, and $1,383,703 for the six month period ended June 30, 2003.  Amortization pertaining to the liabilities for below market lease intangibles was applied as an increase to rental income of $1,361,908 for the three month period ended June 30, 2003, and $1,710,388 for the six month period ended June 30, 2003.

The portions of the purchase price allocated to acquired value of in-place leases are amortized on a straight-line basis over the expected term of the related lease.  The Company incurred amortization expense pertaining to acquired in-place lease intangibles of $973,364 for the three month period ended June 30, 2003, and $1,322,317 for the six month period ended June 30, 2003.

Acquired value of below market



Loan fees are amortized on a straight-line basis over the life of the related loans.

Offering costs are offset against the stockholders' equity accounts and consist principally of commissions, legal, printing, selling and registration costs.

Rental income is recognized on a straight-line basis over the term of each lease.  The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease agreements is recorded as deferred rent receivable and is included as a component of accounts and rents receivable in the accompanying consolidated balance sheets.



Notes receivable which relate to real estate financing arrangements that exceed one year, bear interest at a market rate based on the borrower's credit quality and are recorded at face value.  Interest is recognized over the life of the note.  The Company requires collateral for the notes.

A note may be considered impaired pursuant to criteria established in FASB Statement of Financial Accounting Standards ("SFAS 114"), "Accounting by Creditors for Impairment of a Loan".  Pursuant to SFAS 114, a note is impaired if it is probable that the Company will not collect all principal and interest contractually due.  The impairment is measured based on the present value of expected future cash flows discounted at the note's effective interest rate.  When ultimate collectability of the principal balance of the impaired note is in doubt, all cash receipts on impaired notes are applied to reduce the principal amount of such notes until the principal has been recovered. All cash receipts recognized thereafter are recorded as interest income.  Based on the Company's judgment, no impairment was warranted for the periods ended June 30, 2003 and December 31, 2002.





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)



(2)  Basis of Presentation

The accompanying Consolidated Financial Statements include the accounts of the Company, as well as all wholly owned subsidiaries and joint venture investment, and the accounts of the operating partnership. Wholly owned subsidiaries generally consist of limited liability companies ("LLCs") for which separate financial records are maintained.

The Consolidated Financial Statements also include the accounts of an investment property for which the Company has funded a mortgage loan.  The Company is considered the owner of the property for financial reporting purposes because it effectively has the risks and rewards of ownership as a result of the limited equity provided and the minimal risk of loss to be incurred by the borrower.  This relates to the mortgage note receivable funded for the Fountains. 
On February 18, 2003 the Company entered into an agreement to fund a mortgage note receivable of $53,000,000 which is secured by the Fountains property.  Approximately $45,000,000 was funded on that date with the remainder to be funded over the following 12 month periods.  The note maintains a stated interest rate of 9.5% per annum and matures on August 31, 2004.  The note requires monthly payments of interest only and a final balloon payment at maturity.



The Company has a 98.97% ownership interest in, and is the controlling member of the LLC which owns Birkdale Village.  Crosland/Pappas Birkdale Holdings, LLC ("Crosland"), which contributed $1,000,000 for a 1.03% ownership interest, is the minority member.  Crosland's share of the investment in the property is reflected as minority interest in the accompanying Consolidated Financial Statements.



The Company has approximately a 99% controlling general partner interest of the operating partnership, and the Advisor owns the remaining, limited partner common units for which it paid $2,000.  The Advisor's limited partner common units are reflected as minority interest in the accompanying Consolidated Financial Statement.  The effects of all significant intercompany transactions have been eliminated.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities",an interpretation of ARB No. 51 which provides new accounting guidance on when to consolidate a variable interest, as defined in the interpretation.  The interpretation applies immediately to variable interests in variable interest entities created or obtained after January 31, 2003. 
The interpretation is applied to the Company no later than the end of the first annual reporting period beginning after June 15, 2003.  The interpretation requires certain disclosures in financial statements issued after January
31, 2003 if it is reasonably possible that the Company will consolidate or disclose information about variable interest entities when the interpretation becomes effective.  During the transition period, prior to the application of the interpretation for the annual statements dated December 31, 2003, the Company continues to evaluate other fundings.  Currently, the Company has accounted for
it's remaining fundings issued to a borrower as a mortgage receivable. This
receivable is secured by the underlying investment property and is guaranteed by
an affiliate of the borrower.  The Company's maximum exposure to loss as a result of the notes receivable would be the amount of the receivable balance outstanding at June 30, 2003 which amounts to approximately $34,500,000.







INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

(3)  Services Provided by Affiliates of the Advisor

As of June 30, 2003 and December 31, 2002, the Company had incurred $211,885,317 and $125,224,459, respectively, of offering costs, of which $194,717,701 and $111,594,675 were paid to affiliates of the Advisor. Pursuant to the terms of the Offerings, the Advisor has guaranteed payment of all public offering expenses (excluding sales commissions and the marketing contribution and the due diligence expense allowance) in excess of 5.5% of the gross proceeds of the Offerings ("Gross Offering Proceeds") or all organization and offering expenses (including selling commissions) which together exceed 15% of Gross Offering Proceeds.  As of June 30, 2003 and December 31, 2002, offering costs did not exceed the 5.5% and 15% limitations.

The Advisor and its affiliates are entitled to reimbursement for salaries and expenses of employees of the Advisor and its affiliates relating to the Offerings.  In addition, an affiliate of the Advisor is entitled to receive selling commissions, and the marketing contribution and due diligence expense allowance from the Company in connection with the Offerings.  Such costs are offset against the Stockholders' equity accounts. Such costs totaled $82,716,757 and $79,614,867 for the six month period ended June 30, 2003 and the year ended December 31, 2002, respectively.  As of June 30, 2003, $394,358 of selling commissions had been advanced to and were due from the affiliate of the Advisor and $198,100 were payable to the Advisor and its affiliates for salaries and expenses.  At December 31, 2002, $1,309,885 of these costs were unpaid.

The Advisor and its affiliates are entitled to reimbursement for general and administrative expenses of the Advisor and its affiliates relating to the Company's administration.  Such costs are included in general and administrative expenses to affiliates, professional services to affiliates, and acquisition cost expenses to affiliates, in addition to costs that were capitalized pertaining to property acquisitions.  During the three month period ended June 30, 2003 and 2002, the Company incurred $942,969 and $98,624, respectively, of general and administrative expenses to the Advisor and its affiliates.  Additionally, during the six month period ended June 30, 2003 and 2002, the Company incurred $1,525,718 and $246,106, respectively, of these costs, of which $713,861 and $515,204 remained unpaid as of June 30, 2003 and December 31, 2002, respectively.







INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

An affiliate of the Advisor provides loan servicing to the Company for an annual fee.  Such costs are included in property operating expenses to affiliates.  The agreement allows for annual fees totaling .03% of the first $1 billion in mortgage balance outstanding and .01% of the remaining mortgage balance, payable monthly.  Such fees totaled $119,360 and $64,365 for the six month periods ended June 30, 2003 and 2002, respectively, and $66,642 and $34,191 for the three month period ended June 30, 2003 and 2002, respectively.

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

The Company used the services of an affiliate of the Advisor to facilitate the mortgage financing that the Company obtained on some of the properties purchased.  Such costs are capitalized as loan fees and amortized over the respective loan term.  As of June 30, 2003 and 2002, the Company paid loan fees totaling $847,172 and $148,123 respectively, to this affiliate.

The Company is obligated to pay an advisor asset management fee of not more than 1% of the Company's net asset value. The Company's net asset value is defined as the total book value of the assets invested in equity interests and loans receivable secured by real estate, before reserves for depreciation, reserves for bad debt or other similar non-cash reserves, reduced by any mortgages payable on the respective assets. The Company computes the net asset value by taking the average of these values at the end of each month for which the Company is calculating the fee.  The fee is payable quarterly in an amount equal to 1/4 of 1% of net asset value as of the last day of the immediately preceding quarter.  For any year in which the Company qualifies as a REIT, the Company's advisor must reimburse the Company for the following amounts if any: (1) the amounts by which the sum of the Company's total operating expenses, the sum of the advisor asset management fee plus other operating expenses paid during the previous fiscal year exceed the greater of: (i) 2% of the Company's average invested assets for that fiscal year (Average invested assets is the average of the total book value of the assets invested in equity interest and loans secured by real estate, before depreciation, reserve for bad debt or other similar non-cash reserves.  The Company will compute the average invested assets by taking the average of these values at the end of each month for which the Company is calculating the fee.), or (ii) 25% of the Company's net income, before any additions to or allowances for reserves, depreciation, amortization, bad debts or other similar non-cash reserves and before any gain from the sale of our assets, for that fiscal year; plus (2) an amount, which will not exceed the advisor asset management fee for that year, equal to any difference between the total amount of distributions to stockholders for that year and a 7% minimum annual return on the net investment of stockholders.  For the three month period ended June 30, 2003 and 2002, the Company incurred $3,920,000 and $1,050,000, respectively, of asset management fees.  Additionally, for the six month period ended June 30, 2003 and 2002, the Company incurred $6,693,960 and $1,847,000 of asset management fees, respectively.  Aggregate unpaid fees were $6,693,960 and $2,000,000 at June 30, 2003 and December 31, 2002, respectively.







INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)



The property managers, entities owned principally by individuals who are affiliates of the Advisor, are entitled to receive property management fees totaling 4.5% of gross operating income, for management and leasing services.  The Company incurred and paid property management fees of $5,124,817 and $1,946,329 for the six month ended June 30, 2003 and 2002, respectively, and $2,883,642 and $1,024,831 for the three month period ended June 30, 2003 and 2002, respectively.

In December, 2001 and January, 2002, an affiliate of the Advisor guaranteed the mortgages payable pertaining to Douglasville Pavilion, Southlake Pavilion, Fayetteville Pavilion, and Sarasota Pavilion, all of which matured in July, 2002.  The Company agreed to pay the affiliate 1/8% per annum of the guaranteed amount for providing such a guarantee.  For the six and three month periods ended June 30, 2002 $56,639 and, $28,320 of guarantee fees related to the LLCs had been incurred and paid.  All of the respective mortgages payable were paid off in June 2002.

(4)  Stock Option Plan and Soliciting Dealer Warrants

The Company adopted an Independent Director Stock Option Plan which, subject to certain conditions, provides for the grant to each Independent Director of an option to acquire 3,000 Shares following their becoming a Director and for the grant of additional options to acquire 500 Shares on the date of each annual stockholders' meeting commencing with the annual meeting in 2000 if the Independent Director is a member of the board of directors on such date.  The options for the initial 3,000 Shares are exercisable as follows: 1,000 Shares on the date of grant and 1,000 Shares on each of the first and second anniversaries of the date of grant.  The subsequent options will be exercisable on the second anniversary of the date of grant.  The initial options will be exercisable at $9.05 per Share.  The subsequent options will be exercisable at the fair market value of a Share on the last business day preceding the annual meeting of stockholders.  As of June 30, 2003 and December 31, 2002, options to acquire 15,000 and 13,500 Shares of common stock were outstanding, respectively.

In addition to sales commissions, the dealer manager of the Offering an affiliate of the Advisor, has the right to purchase one soliciting dealer warrant for $.0008 for each 25 Shares sold by such soliciting dealer during the Offering, subject to state and federal securities laws and subject to the issuance of a maximum of 2,000,000 soliciting dealer warrants to purchase an equivalent number of Shares with respect to the Initial and first Follow-On Offerings and the issuance of a maximum of 6,000,000 Soliciting Dealer Warrants to purchase an equivalent number of shares with respect to the second Follow-On Offering.  The dealer manager intends to re-allow such warrants to the soliciting dealers who sold such shares.  The holder of a soliciting dealer warrant will be entitled to purchase one Share from the Company at a price of $12 during the period commencing one year from the date of the first issuance of any of the soliciting dealer warrants and ending five years after the effective date of each offering.  As of June 30, 2003 and December 31, 2002, 8,451,364 and 4,788,966 warrants, respectively, had been issued.  At June 30, 2003, these warrants had nominal value and none had been exercised.





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)



(5)  Leases

Master Lease Agreements

In conjunction with certain acquisitions, the Company receives payments under master lease agreements pertaining to some non-revenue producing spaces at the time of purchase, for periods ranging from one to three years after the date of the purchase or until the spaces are leased.  GAAP requires that as these payments are received, they be recorded as a reduction in the purchase price of the respective property rather than as rental income. The cumulative amount of such payments was $7,135,863 and $3,993,746 as of June 30, 2003 and December 31, 2002, respectively.

Operating Leases

Minimum lease payments to be received in the future under operating leases, excluding rental income under master lease agreements and assuming no expiring leases are renewed, are as follows:



|           |   | Minimum Lease
|---------- | - | -------------
|           |   | Payments     
|2003       | $ | 213,150,832  
|2004       |   | 229,887,993  
|2005       |   | 217,501,793  
|2006       |   | 206,366,141  
|2007       |   | 188,968,490  
|Thereafter |   | 1,418,257,769
|Total      | $ | 2,474,133,018
|           |   | ===========  

The remaining lease terms range from one year to 25 years.  Pursuant to the lease agreements, tenants of the property are required to reimburse the Company for some or all of their pro rata share of the real estate taxes, operating expenses and management fees of the properties.  Such amounts are included in additional rental income.

Certain tenant leases contain provisions providing for stepped rent increases and rent abatements. GAAP requires the Company to record rental income for the period of occupancy using the effective monthly rent, which is the average monthly rent for the entire period of occupancy during the term of the lease.  As a direct result of recording the effective monthly rent, the accompanying Consolidated Financial Statements include a net increase in rental income of $2,867,976 and $957,300 for the six months ended June 30, 2003 and 2002 respectively.  The related accounts and rents receivable as of June 30, 2003, and December 31, 2002 were $6,455,615 and $3,587,639, respectively.  The Company anticipates collecting these amounts over the terms of the related leases as scheduled rent payments are made.



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

(6)  Mortgages and Notes Payable
Mortgages payable consist of the following at June 30, 2003 and December 31, 2002:
Property as collateral:



|                                 |                  |          | Balance at
|-------------------------------- | ---------------- | -------- | ----------
|                                 | Interest Rate at | Maturity | June 30,  
|Fixed Rate Mortgages payable     | 06/30/03         | Date     | 2003      
|440 Commons                      | 4.51%            | 02/2008  | 9,875,000 
|Aberdeen Square                  | 6.25%            | 01/2007  | 3,670,000 
|Abernathy Square                 | 6.29%            | 03/2009  | 13,392,000
|Anderson Central                 | 7.63%            | 09/2003  | 11,000,000
|Bass Pro Shops                   | 5.93%            | 08/2009  | 9,100,000 
|Brandon Blvd. Shoppes            | 6.24%            | 03/2009  | 5,137,000 
|Brick Center                     | 4.38%            | 06/2010  | 10,300,000
|Brooker Creek                    | 7.88%            | 12/2004  | 4,468,070 
|Casselberry Commons              | 7.64%            | 04/2006  | 8,703,000 
|Chatham Crossing                 | 4.65%            | 04/2010  | 2,190,000 
|Chesterfield Crossing            | 5.50%            | 10/2009  | 6,380,000 
|Chickasaw Trails Shopping Center | 6.26%            | 11/2006  | 4,400,000 
|Circuit City - Cary              | 4.74%            | 04/2010  | 3,280,000 
|Circuit City Plaza               | 5.50%            | 09/2009  | 6,275,000 
|Circuit City - Rome              | 5.50%            | 09/2009  | 2,470,000 
|Circuit City - Vero Beach        | 5.50%            | 09/2009  | 3,120,000 
|Clayton Corners                  | 7.25%            | 04/2012  | 9,850,000 
|Columbiana                       | 4.04%            | 05/2010  | 25,900,000
|Columbia Promenade               | 7.61%            | 02/2006  | 3,600,000 
|Commonwealth Center II           | 4.39%            | 07/2010  | 12,250,000
|Comp USA Retail Center           | 4.41%            | 04/2010  | 4,000,000 
|Concord                          | 4.44%            | 06/2010  | 2,890,000 
|Countryside                      | 6.54%            | 06/2006  | 4,300,000 
|Cox Creek Centre                 | 7.09%            | 03/2012  | 15,178,840
|Creeks at Virginia               | 6.37%            | 08/2012  | 27,754,435
|Crystal Springs                  | 6.15%            | 08/2009  | 4,070,000 
|Duvall Village                   | 7.04%            | 10/2012  | 9,404,837 
|East Hanover Sony                | 4.69%            | 07/2010  | 15,725,000
|Eckerds #6379 - Greenville       | 6.30%            | 08/2009  | 1,540,400 
|Eckerds- #1232 - Blackstock      | 6.30%            | 08/2009  | 1,541,600 
|Eckerds #0234R - Marietta        | 5.05%            | 06/2013  | 1,161,350 
|Eckerds #0444R  - S. Enota       | 5.05%            | 06/2013  | 1,128,600 
|Eckerds #0943R- Buckingham       | 5.05%            | 06/2013  | 1,338,350 
|Eckerds #0963R - Arapaho         | 5.05%            | 06/2013  | 1,316,400 
|Eckerds #0818R - 2706 Jacksboro  | 5.05%            | 06/2013  | 1,540,000 
|Eckerds #0862R - 3601 Jacksboro  | 5.05%            | 06/2013  | 1,203,350 
|Eckerds #0968 - Southwest        | 5.05%            | 06/2013  | 1,035,700 
|Eckerds #0980R - Main Street     | 5.05%            | 06/2013  | 1,096,600 
|Eckerds #2320R - Highway 124     | 5.05%            | 06/2013  | 1,271,000 
|Eckerds #2506R - Marsh           | 5.05%            | 06/2013  | 1,177,000 
|Eckerds #3072R  David Blvd.      | 5.05%            | 06/2013  | 1,521,350 
|Eckerds #3152R - Lake Worth      | 5.05%            | 06/2013  | 1,021,500 
|Eckerds #3169R - River Oaks      | 5.05%            | 06/2013  | 1,545,700 



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)



|                                     |                  |          | Balance at
|------------------------------------ | ---------------- | -------- | ----------
|                                     | Interest Rate at | Maturity | June 30,  
|Fixed Rate Mortgages payable         | 06/30/03         | Date     | 2003      
|Eckerds #3192R- W. Gentry            | 5.05%            | 06/2013  | 845,200   
|Eckerds #3338 - S. Orange            | 5.05%            | 06/2013  | 1,406,800 
|Eckerds #3350 - N. MLK               | 5.05%            | 06/2013  | 1,005,100 
|Eckerds #3363 -Sycamore              | 5.05%            | 06/2013  | 941,000   
|Eckerds #3528 - Parker               | 5.05%            | 06/2013  | 1,445,000 
|Eckerds #5018 - Millersport          | 4.97%            | 02/2010  | 1,581,660 
|Eckerds #5661 - Broadway             | 4.97%            | 02/2010  | 1,777,076 
|Eckerds #5786 - Central              | 4.97%            | 02/2010  | 905,364   
|Eckerds #5797 - Gennessee            | 4.97%            | 02/2010  | 1,636,200 
|Eckerds #6007 - Route 119            | 4.97%            | 02/2010  | 1,636,200 
|Eckerds #6036 - Route 51             | 4.97%            | 02/2010  | 1,636,200 
|Eckerds #6040 - Route 22 & Center    | 4.94%            | 02/2010  | 1,910,700 
|Eckerds #6043 - Monroeville          | 4.97%            | 02/2010  | 1,636,200 
|Eckerds #6062 - Eastway Plaza        | 4.94%            | 02/2010  | 1,418,040 
|Eckerds #6089 - Route 22 & Cove      | 4.97%            | 02/2010  | 1,374,408 
|Eckerds #6095 - Old Freeport         | 4.97%            | 02/2010  | 1,570,752 
|Eckerds #6172 - Washington           | 4.94%            | 02/2010  | 1,636,200 
|Eckerds #6193 - 26th & Parade        | 4.94%            | 02/2010  | 1,636,200 
|Eckerds #6199 - 26th & Sterrettainia | 4.94%            | 02/2010  | 1,636,200 
|Eckerds #6257 - Peach                | 5.18%            | 04/2010  | 640,000   
|Eckerds #6286 - 12th                 | 5.18%            | 04/2010  | 1,601,450 
|Eckerds #6334 - 6th                  | 4.94%            | 02/2010  | 1,636,200 
|Eckerds #6392 - Route 130            | 4.97%            | 02/2010  | 1,636,200 
|Eckerds #6695 - Route 286            | 4.97%            | 02/2010  | 1,636,200 
|Edgewater Town Center                | 4.69%            | 06/2010  | 14,000,000
|Eisenhower Crossing I                | 6.09%            | 01/2007  | 16,375,000
|Eisenhower Crossing II               | 6.12%            | 01/2007  | 7,425,000 
|Forestdale Plaza                     | 4.91%            | 02/2010  | 3,319,000 
|Forest Hills                         | 4.49%            | 03/2010  | 3,660,000 
|Gateway Mall Market Center           | 7.94%            | 08/2005  | 10,425,000
|Gateway Plaza II                     | 4.65%            | 05/2010  | 3,480,000 
|Gateway Plaza                        | 4.82%            | 03/2010  | 6,500,000 
|Golden Gate Shopping Center          | 4.74%            | 04/2010  | 6,378,550 
|Goldenrod Groves                     | 4.41%            | 04/2010  | 4,575,000 
|Hairston Crossing                    | 5.99%            | 07/2009  | 3,655,000 
|Hampton Point                        | 5.50%            | 10/2009  | 2,475,000 
|Harundale                            | 4.64%            | 04/2010  | 12,362,000
|Heritage Pavilion                    | 4.46%            | 07/2009  | 21,500,000
|Hillsboro Square                     | 5.50%            | 10/2009  | 12,100,000
|Jones Bridge Square                  | 4.38%            | 04/2010  | 4,350,000 
|Killearn                             | 8.25%            | 01/2004  | 4,041,377 
|Kmart                                | 6.80%            | 06/2006  | 4,655,000 
|Lake Olympia Square                  | 8.25%            | 04/2007  | 5,397,740 
|Lakeview Plaza                       | 8.00%            | 03/2018  | 3,613,237 
|Lake Walden Square                   | 7.63%            | 11/2007  | 9,633,322 
|Lowe's Home Improvement Center       | 6.80%            | 06/2006  | 4,845,000 



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)



|                                   |                  |          | Balance at  
|---------------------------------- | ---------------- | -------- | ------------
|                                   | Interest Rate at | Maturity | June 30,    
|Fixed Rate Mortgages payable       | 06/30/03         | Date     | 2003        
|Marketplace at Mill Creek          | 4.34%            | 05/2010  | 27,700,000  
|Market Square                      | 7.02%            | 09/2008  | 8,344,301   
|McFarland Plaza                    | 5.50%            | 09/2009  | 8,425,000   
|Melbourne Shopping Center          | 7.68%            | 03/2009  | 5,947,325   
|Merchants Square                   | 7.25%            | 11/2008  | 3,167,437   
|Monroe Shopping Center             | 4.44%            | 06/2010  | 1,915,000   
|North Aiken Bi-Lo                  | 4.64%            | 04/2010  | 2,900,000   
|Northpoint Marketplace             | 5.50%            | 09/2009  | 4,535,000   
|Oleander Shopping Center           | 7.80%            | 11/2011  | 3,000,000   
|Overlook at King of Prussia        | 4.60%            | 03/2008  | 30,000,000  
|Paraiso                            | 4.44%            | 06/2010  | 5,280,000   
|PETsMART- Chattanooga              | 7.37%            | 06/2008  | 1,303,800   
|PETsMART-Daytona Beach             | 7.37%            | 06/2008  | 1,361,200   
|PETsMART-Fredericksburg            | 7.37%            | 06/2008  | 1,435,000   
|Plant City                         | 4.70%            | 04/2010  | 5,900,000   
|Pleasant Hill Square               | 7.35%            | 06/2005  | 17,120,000  
|Presidential Commons               | 6.80%            | 12/2007  | 24,066,555  
|Presidential Commons               | 2.50%            | 11/2006  | 2,000,000   
|River Ridge                        | 4.16%            | 04/2008  | 14,500,000  
|Riverstone Plaza                   | 5.50%            | 09/2009  | 17,600,000  
|Rosedale Shopping Center           | 7.94%            | 06/2011  | 13,300,000  
|Sand Lake Corners                  | 6.80%            | 06/2008  | 11,900,000  
|Sexton Commons                     | 4.50%            | 12/2009  | 4,400,000   
|Sharon Greens                      | 6.07%            | 09/2009  | 6,500,000   
|Sheridan Square                    | 4.39%            | 06/2010  | 3,600,000   
|Shoppes at Citiside                | 4.37%            | 05/2010  | 5,600,000   
|Shoppes of Lake Mary               | 4.91%            | 01/2010  | 6,250,000   
|Shops on the Circle                | 7.92%            | 11/2010  | 12,145,904  
|Southlake Shopping Center          | 7.25%            | 11/2008  | 7,637,235   
|Stonecrest Marketplace             | 4.34%            | 05/2010  | 19,075,000  
|Sycamore Commons                   | 5.11%            | 09/2009  | 20,000,000  
|Target Super Center                | 6.02%            | 08/2009  | 4,192,000   
|Town and Country                   | 4.70%            | 05/2010  | 30,900,000  
|Town Center Commons                | 7.00%            | 04/2006  | 4,750,000   
|Valley Park                        | 4.44%            | 04/2010  | 6,770,000   
|Village Center                     | 4.44%            | 04/2010  | 13,200,000  
|Village Crossing                   | 4.73%            | 06/2010  | 44,000,000  
|Walk at Highwood I                 | 5.50%            | 09/2009  | 13,230,000  
|Wakefield Crossing                 | 4.50%            | 12/2009  | 5,920,000   
|Wards Crossing                     | 5.50%            | 09/2009  | 6,090,000   
|West Falls                         | 4.69%            | 06/2010  | 11,075,000  
|West Oaks Plaza                    | 6.80%            | 06/2006  | 4,900,000   
|Willoughby Hills                   | 6.98%            | 06/2018  | 14,480,310  
|Windsor Court                      | 4.39%            | 06/2010  | 8,015,000   
|Total Fixed Rate Mortgages Payable |                  |          | $922,102,925





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)



|                                      |                           |               | Balance at     
|------------------------------------- | ------------------------- | ------------- | ---------------
|Variable Rate Mortgages               | Interest Rate at 06/30/03 | Maturity Date | June 30,2003   
|Barrett Pavilion                      | 3.19%                     | 12/2003       | 20,000,000     
|Bartow Marketplace                    | 2.96%                     | 09/2006       | 13,475,000     
|Boynton Commons                       | 2.97%                     | 03/2008       | 15,125,000     
|Bridgewater Marketplace               | 3.03%                     | 09/2006       | 2,987,500      
|Citrus Hills                          | 2.98%                     | 02/2007       | 3,000,000      
|Conway Plaza                          | 2.97%                     | 06/2005       | 5,000,000      
|Creekwood Crossing                    | 4.00%                     | 03/2007       | 11,750,000     
|Douglasville Pavilion                 | 2.61%                     | 07/2007       | 14,925,000     
|Douglasville Pavilion                 | N/A                       | 07/2003       | -              
|Fayetteville Pavilion                 | 2.61%                     | 07/2007       | 15,940,000     
|Fayetteville Pavilion                 | N/A                       | 07/2003       | -              
|Fountains                             | 3.06%                     | 03/2004       | 13,999,900     
|Jo-Ann Fabrics                        | 2.97%                     | 08/2008       | 2,450,000      
|Just For Feet- Augusta                | 3.06%                     | 03/2007       | 1,668,000      
|Just For Feet- Covington              | 3.06%                     | 03/2007       | 1,885,000      
|Just For Feet- Daytona                | 3.07%                     | 09/2006       | 2,000,000      
|Lakewood Ranch Gateway                | 3.17%                     | 10/2009       | 4,400,000      
|Newnan Pavilion                       | 2.61%                     | 07/2007       | 18,999,243     
|Newnan Pavilion                       | N/A                       | 07/2003       | -              
|Sarasota Pavilion                     | 2.94%                     | 07/2007       | 19,000,000     
|Sarasota Pavilion                     | 2.94%                     | 07/2007       | 2,000,000      
|Sarasota Pavilion                     | N/A                       | 07/2003       | -              
|Skyview Plaza                         | 2.91%                     | 11/2006       | 10,875,000     
|Southlake Pavilion                    | 2.61%                     | 07/2007       | 31,723,316     
|Southlake Pavilion                    | N/A                       | 07/2003       | -              
|Steeplechase                          | 2.81%                     | 04/2007       | 4,651,350      
|Stonebridge                           | 3.06%                     | 07/2007       | 10,900,000     
|Turkey Creek                          | N/A                       | 07/2003       | -              
|Turkey Creek                          | 2.61%                     | 07/2007       | 12,120,000     
|Universal Plaza                       | 4.00%                     | 04/2007       | 4,970,000      
|Venture Pointe                        | 2.61%                     | 07/2007       | 14,475,000     
|Venture Pointe                        | N/A                       | 07/2003       | -              
|Westside Pavilion                     | 4.50%                     | 04/2004       | 10,000,000     
|Woodstock Square                      | 2.93%                     | 08/2008       | 14,000,000     
|Woodstock Square                      | 3.06%                     | 02/2004       | 6,700,000      
|                                      |                           |               |                
|Total Variable Rate Mortgages Payable |                           |               | 289,019,309    
|                                      |                           |               |                
|Total Mortgages Payable before        |                           |               |                
|premium assumed at acquisition        |                           |               | 1,211,122,234  
|Premium from debt assumed at          |                           |               |                
|acquisition, net of amortization      |                           |               | 4,078,337      
|                                      |                           |               |                
|Total Mortgages Payable               |                           |               | 1,215,200,571  
|                                      |                           |               | ==========     
|Notes and Margin payable              |                           |               |                
|                                      |                           |               |                
|Margin Account                        |                           |               | $     3,365,634
|                                      |                           |               | ==========     





INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)

The Company believes it can achieve the optimum balance between risk and return to its shareholders by leveraging its properties at approximately 50% of their value.  The Company also believes that it can borrow at the lowest overall cost of funds by placing individual financing on each of the properties.  Accordingly, mortgage loans have generally been placed on each property at the time that the property is purchased, or shortly thereafter, with the property securing the financing.

The majority of the Company's loans require monthly payments of interest only, although some loans require principal and interest payments as well as reserves for taxes, insurance, and certain other costs.  Interest on variable-rate loans are currently based on LIBOR plus a spread ranging from 150 to 185 basis points.  Fixed-rate loans bear interest based on corresponding treasury instruments plus a spread of 130 to 175 basis points.  Variable-rate loans may be prepaid without penalty, while fixed-rate loans may be prepaid with a penalty after specific lockout periods.

During 2002, the Company closed on or assumed debt with a principal amount of $538,604,975 and retired debt in the amount of $176,482,316.  The average cost of funds for 2002 was approximately 5.3%.  The Company also maintained two lines of credit in the aggregate amount of $64 million, of which no funds were outstanding as of December 31, 2002.

For the six months ended June 30, 2003, the Company closed on or assumed debt with a principal amount of $530,644,426, net of debt repaid.  The average costs of funds at June 30, 2003 were approximately 4.88%.  The Company also maintained three lines of credit in the aggregate amount of $264 million, of which $34 million was outstanding as of June 30, 2003.  The first line of credit for $14 million is secured by the Fountains investment property while the second line of credit must be secured by individual first mortgages and can be drawn up to a maximum of $50 million.  As of June 30, 2003, $20 million is drawn on the second line of credit and secured by Barrett Pavilion.,  In addition, a $200 million line of credit was granted for which no funds were outstanding as of June 30, 2003.  The $200 million line of credit requires the maintenance of financial covenants for which the Company was in compliance for the reporting period ending June 30, 2003, and does not require specific assets to secure the line.

Certain debt is assumed at acquisition and may require interest payments at rates above or below current market rates of interest.  At assumption, a determination is made of above or below market interest to be incurred over the life of the instrument and reported as a premium or discount on the debt.  The premium or discount is then amortized over the life of the debt instrument as a reduction or increase to the interest expense, resulting in interest expense being recognized at an effective market rate based on market conditions as of the date the debt was assumed.





INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)

Notes to Consolidated Financial Statements

June 30, 2003
(unaudited)



Although the loans placed by the Company are generally non-recourse, occasionally, when it is deemed to be advantageous, the Company may guarantee all or a portion of the debt on a full-recourse basis.  At times, the Company has borrowed funds financed as part of a cross-collateralized package, with cross-default provisions, in order to enhance the financial benefits.  In those circumstances, one or more of the properties may secure the debt of another of the Company's properties.

The following table shows the debt maturing during the next five years and the respective weighted average interest rate as of June 30, 2003 related to that debt.

|                         | 2003       | 2004       | 2005       | 2006       | 2007        | Thereafter 
|------------------------ | ---------- | ---------- | ---------- | ---------- | ----------- | -----------
|                         |            |            |            |            |             |            
|Maturing debt:           |            |            |            |            |             |            
|Fixed rate debt          | 11,665,563 | 9,974,977  | 29,127,208 | 44,035,195 | 67,055,505  | 760,244,477
|Variable rate debt       | 20,000,000 | 30,699,900 | 5,000,000  | 29,337,500 | 168,006,909 | 35,975,000 
|                         |            |            |            |            |             |            
|Average interest rate on |            |            |            |            |             |            
|maturing debt:           |            |            |            |            |             |            
|Fixed rate debt          | 7.61%      | 7.93%      | 7.55%      | 6.80%      | 6.74%       | 5.14%      
|Variable rate debt       | 3.19%      | 3.53%      | 2.97%      | 2.96%      | 2.84%       | 2.98%      

The principal balance of $289,019,309 or 24% of the Company's mortgages payable at June 30, 2003, have variable interest rates averaging 2.97%. An increase in the variable interest rate on certain mortgages payable constitutes a market risk.

The Company paid off or refinanced all of the debt that matured during 2002 and 2003.  In those case where maturing debt was repaid from new financing obtained, the replacement financing was for amounts which differ from the loans retired, either producing or requiring cash on a property by property basis.

(7) Mortgages Receivable

On April 29, 2002, the Company funded a $2,475,000 second mortgage note receivable to be used by the borrower for the redevelopment of a shopping center known as Midway Plaza.  The note maintained a stated interest rate of 10% per annum and had a maturity date of the earlier of May 31, 2003 or the date upon which the property was sold, transferred or conveyed by the borrower.  The note required monthly payments of interest only and a final balloon payment due at maturity.  Pursuant to the terms of the agreement, the monthly interest payments were to be drawn from a reserve the borrower was required to establish.  This $268,125 reserve was retained by the Company as a reduction of the principal distributed to the borrower.  The note was fully paid in May, 2003 when the Company purchased the shopping center.





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

On October 31, 2002, the Company funded a mortgage note receivable on 19 Eckerd stores located in Pennsylvania, New York, and West Virginia totaling 210,906 square feet.  The principal amount of $53,000,000 was secured by first mortgages on the properties.  The interest rate of the note was 5.6% per annum and was due to mature January 8, 2003.  On January 8, 2003, the Company exercised its option to purchase these properties and this mortgage note receivable was applied toward the purchase price of the property.

On March 27, 2003, the Company agreed to fund a first mortgage receivable for $36,000,000 for a shopping center known as Carlisle Commons in Carlisle, Pennsylvania.  The note maintains a stated interest rate of 8.446% and matures September 1, 2003.  The note requires monthly interest payments only and a final balloon payment due at maturity.  The note receivable balance at June 30, 2003 was $36,000,000.  The Company intends to exercise its rights and acquire the property per the terms of the purchase option.

(8)  Segment Reporting

The Company owns and seeks to acquire multi-tenant shopping centers in the southeastern states, primarily Florida, Georgia, North Carolina, and South Carolina.  All of the Company's shopping centers are currently located in Florida, Georgia, North Carolina, South Carolina, Virginia, Tennessee, Alabama, Louisiana, Maryland, Texas, New York, Pennsylvania, West Virginia, Connecticut, Wisconsin, Illinois, Oklahoma and New Jersey.  The Company's shopping centers are typically anchored by grocery and drugstores complemented with additional stores providing a wide range of other goods and services to shoppers.

The Company assesses and measures operating results on an individual property basis for each of its properties based on net property operations.  Since all of the Company's properties exhibit highly similar economic characteristics, cater to the day-to-day living needs of their respective surrounding communities, and offer similar degrees of risk and opportunities for growth, the properties have been aggregated and reported as one operating segment.





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

The property revenues and net property operations are summarized in the following tables for the six months ended June 30, 2003 and 2002, along with reconciliation to net income.  Property asset information is as of June 30, 2003 and June 30, 2002.



|                                                          |   | 2003          |   | 2002         
|--------------------------------------------------------- | - | ------------- | - | -------------
|                                                          |   |               |   |              
|Property and additional rental income                     | $ | 119,808,571   | $ | 44,062,873   
|Other property operating income                           |   | 319,455       |   | 524,439      
|Total property operating expenses                         |   | 28,882,039    |   | 10,018,887   
|Mortgage interest                                         |   | 22,261,025    |   | 9,982,058    
|                                                          |   |               |   |              
|Net property operations                                   |   | 68,984,962    |   | 24,586,367   
|                                                          |   |               |   |              
|Interest and dividend income                              |   | 3,259,331     |   | 925,860      
|Other income (loss)                                       |   | 36,778        |   | (14,907)     
|Gain (loss) on sale of investment securities              |   | (5,722)       |   | 36,654       
|Less non property expenses:                               |   |               |   |              
|Professional services                                     |   | 607,520       |   | 225,977      
|General and administrative and acquisition costs expensed |   | 1,765,370     |   | 810,709      
|Advisor asset management fee                              |   | 6,693,960     |   | 1,847,000    
|Depreciation and amortization                             |   | 31,501,521    |   | 11,441,149   
|Net income                                                | $ | 31,706,978    | $ | 11,209,139   
|                                                          |   | ==========    |   | ==========   
|                                                          |   |               |   |              
|Investment properties                                     | $ | 2,791,279,994 | $ | 895,090,033  
|Non-segment assets                                        |   | 402,093,228   |   | 118,166,239  
|Total Assets                                              | $ | 3,193,373,222 | $ | 1,013,256,272
|                                                          |   | ==========    |   | ==========   

(9)  Earnings per Share

Basic earnings per share ("EPS") is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted EPS is computed by reflecting the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

As of June 30, 2003 and December 31, 2002, warrants to purchase 8,451,364 and 4,788,966 shares of common stock at a price of $12.00 per share were outstanding, respectively.  These warrants were not included in the computation of diluted EPS because the exercise price of such warrants was greater than the average market price of common shares.  The weighted average numbers of common shares outstanding were 164,451,522 and 70,243,809 for the period ended June 30, 2003 and December 31, 2002, respectively.



(10) Commitments and Contingencies

On February 18, 2002, the Company entered into a development agreement with an unaffiliated third party to develop a shopping center on 27 acres of land located in Newport Richey, Florida.  The center, known as the Shoppes at Golden Acres, will be developed in two phases.  Phase I development has commenced and consists of approximately 76,370 square feet of leasable space with total acquisition cost after development expected to be $14,160,000.  Total costs incurred through June 30, 2003, including land, amounted to $10,748,000,

On April 15, 2002, the Company acquired two separate land parcels in order to construct two freestanding retail properties to be leased as Eckerd Drug Stores for approximately 24,700 gross leasable square feet.  The land parcels were acquired from an unaffiliated third party for $2,078,261.  The Company funded the purchase of the land and the development costs; however, the Company expects to place financing on the properties at a later date.  The parcels are located in Concord, North Carolina and Tega Cay, South Carolina.  Both stores were considered substantially completed and placed in service the fourth quarter of 2002 and maintain no amounts unpaid at June 30, 2003.

On July 1, 2002, the Company acquired 2.3 acres of land and simultaneously contracted for the development of a freestanding retail building to be leased as an Eckerd's Drug Store.  The parcel was acquired from an unaffiliated third party for approximately $1,165,000.  The Company funded the purchase of the land and the development costs; however, the Company expects to finance the property at a later date.  The total acquisition cost after development is expected to be approximately $3,053,000 for 13,800 gross leasable square feet.  The parcel is located in Woodruff, South Carolina.  The store was considered substantially completed and placed in service in the fourth quarter of 2002.  Total costs incurred through June 30, 2003, including land, amounted to approximately $2,821,000,





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

On August 29, 2002, the Company funded a mortgage note receivable of $44,000,000 used by the borrower for the construction of a shopping center known as Westside Pavilion Shopping Center in Huntsville, Alabama.  The note maintained a stated interest rate of 9.25% per annum, matured on April 2, 2003, and was fully repaid on April 9, 2003, at the time the property was purchased.  The note receivable balance at December 31, 2002 was $44,000,000.

Additionally, on November 19, 2002, the Company agreed to fund a second mortgage note receivable for $7,000,000 to be used by the borrower for the construction of a portion of Westside Pavilion Shopping Center.  The note maintained a stated rate of interest of 9.00% per annum, matured on April 2, 2003, and was fully repaid on April 9, 2003.  The note receivable balance at December 31, 2002 was $1,500,017.  On April 9, 2003, the Company exercised its option to purchase the property.



On April 9, 2003, the Company agreed to fund a development receivable for $7,104,381 to be used by the borrower for the construction of additional space for Westside Pavilion Shopping Center, Huntsville, AL.  The note maintains a stated interest rate of 9.00% per annum and matures on March 8, 2006.  The note requires monthly interest payments only and a final balloon payment due at maturity.  The note receivable balance at June 30, 2003 was $7,104,381.

On September 12, 2002, the Company acquired 3.1 acres of land and simultaneously contracted for the development of a freestanding retail building to be leased as an Eckerd's Drug Store.  The parcel was acquired from an unaffiliated third party for approximately $1,053,000.  The Company funded the purchase of the land and the development costs; however, the Company expects to finance the property at a later date.  The total acquisition cost after development is expected to be approximately $2,856,000 for 10,908 gross leasable square feet.  The parcel is located in Raleigh, North Carolina, and known as Eckerd-Perry Creek.  The store was considered substantially completed and placed in service in the first quarter of 2003.  Total costs incurred through June 30, 2003, including land, amounted to approximately $2,729,000, of which $327,000 remained unpaid at June 30, 2003.  This store was placed in service in March, 2003.

On October 18, 2002, the Company acquired approximately 14.2 acres of land and simultaneously contracted for the development of a new Publix store and additional shop space.  The parcel was acquired from an unaffiliated third party for approximately $800,000.  The Company funded the purchase of the land and the development costs; however, the Company expects to finance the property at a later date.  The total development cost is expected to be approximately $6,883,502 for 62,500 gross leasable square feet.  The parcel is located in Tallahassee, Florida, and known as Southwood Plantation.  Total costs incurred through June 30, 2003, including land, amounted to approximately $6,580,000, which includes $1,096,000 yet to be repaid by the anchor tenant.  $1,299,000 of the gross costs incurred remained unpaid at June 30, 2003.





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

On October 28, 2002, the Company agreed to fund a development receivable for a maximum of $1,295,000 for a tenant build-out at a shopping center known as Southlake Pavilion in Morrow, Georgia.  The note maintains a stated interest rate of 9.00% per annum and matures on December 31, 2005.  The note requires monthly interest payments only and a final balloon payment due at maturity.  The note receivable balance of $739,395 at June 30, 2003 is included in construction in progress.

On December 18, 2002, the Company agreed to fund a development receivable for a maximum of $2,100,000 for a tenant build-out relating to H.H. Gregg at Southlake Pavilion in Morrow, Georgia.  The note maintained a stated interest rate of 9.00% per annum and matured on December 31, 2005.  The note required monthly interest payments only and a final balloon payment due at maturity.  Payments to reduce the outstanding principal were allowed, and additional draws were also possible, as long as the outstanding balance did not exceed $2,100,000.  The note receivable was repaid in full on April 7, 2003.  The note receivable outstanding balance at December 31, 2002 was $193,925.

On November 12, 2002, the Company acquired 9.84 acres of land and simultaneously contracted for the development of a new Publix store and additional shopping space.  The parcel was acquired from an unaffiliated third party for approximately $2,492,776.  The Company funded the purchase of the land and the development costs; however, the Company expects to finance the property at a later date.  The total acquisition cost after development is expected to be approximately $9,038,051 for 77,900 gross leasable square feet.  The parcel is located in Tyrone, Georgia and known as Southhampton Village.  Total costs incurred through June 30, 2003, including land, amounted to approximately $5,740,000, which includes $60,000 yet to be repaid by the anchor tenant.  $1,600,000 of the gross costs incurred remained unpaid at June 30, 2003.

On December 23, 2002, the Company acquired 2.6 acres of land and simultaneously contracted for the development of a freestanding retail building to be leased as an Eckerd's Drug Store.  The parcel was acquired from an unaffiliated third party for approximately $990,000.  The Company funded the purchase of the land and the development costs; however, the Company expects to finance the property at a later date.  The total acquisition cost after development is expected to be approximately $2,813,543 for 13,813 gross leasable square feet.  The parcel is located in Gaffney, South Carolina.  The store was considered substantially completed and placed in service in the second quarter of 2003.   Total costs incurred through June 30, 2003, including land, amounted to approximately $2,664,000, of which $265,000 remained unpaid at June 30, 2003.





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

On December 12, 2002, the Company acquired 15.27 acres of land and simultaneously contracted for the development of a new Publix store and additional shopping space.  The parcel was acquired from an unaffiliated third party for approximately $3,056,400.  The Company funded the purchase of the land and the development costs; however, the Company expects to finance the property at a later date.  The total acquisition cost after development is expected to be approximately $14,790,144 for 91,165 gross leasable square feet.  The parcel is located in Lake Wales, Florida and known as Shoppes at Chalet Suzanne.  Total costs incurred through June 30, 2003, including land, amounted to approximately $5,530,000, which includes $150,000 yet to be repaid by the anchor tenant.  $972,000 of the gross cost incurred remained unpaid at June 30, 2003.

On March 27, 2003, the Company acquired 6.5 acres of land and simultaneously contracted for the development of a new Publix and additional shopping space.  The parcel was acquired from an unaffiliated third party for approximately $500,000.  The Company funded the purchase of the land and will fund the development costs; however, the Company expects to finance the property at a later date.  The total acquisition cost after development is expected to be approximately $6,818,363 for 43,200 gross leasable square feet.  The parcel is located in Watercolor, Florida and known as Watercolor Crossing.  Total costs incurred through June 30, 2003, including land, amounted to approximately $2,127,000, of which $494,000 remained unpaid at June 30, 2003.

On June 4, 2003, the Company acquired 9.1 acres of land and simultaneously contracted for the development of a shopping center to be anchored by a Bi-Lo grocery store.  The parcel was acquired from an unaffiliated third party for approximately $1,400,000. The Company funded the purchase of the land and the development costs; however, the Company expects to finance the property at a later date.  The total acquisition cost after development is expected to be $7,689,560 for 62,527 gross leasable square feet.  The parcel is located in Castonia, North Carolina and known as Redbud Commons.  Total costs incurred through June 30, 2003, including land, amounted to approximately $2,520,000, which includes $50,000 yet to be repaid by the anchor tenant.  $74,000 of the gross costs incurred remained unpaid at June 30, 2003.



The Company has committed to various construction obligations as well as lease agreements as a result of the aforementioned development agreements.

We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business.  While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material adverse effect on our results of operations or financial condition.

(11) Subsequent Events





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

The Company issued 4,004,674 Shares of Common Stock from July 1, 2003 through August 8, 2003, resulting in a total of 220,484,431 Shares of Common Stock outstanding. As a result, as of August 8, 2003, subscriptions for a total of 213,696,821 Shares were received resulting in total gross offering proceeds of $2,136,370,654 and an additional 7,647,534 Shares were issued pursuant to the DRP for $72,651,572 of additional gross proceeds.  The Company has repurchased 859,924 Shares through its Share Repurchase Program for $8,093,304.

The Company has acquired the following properties during the period July 1 to August 8, 2003.  The respective acquisitions are summarized in the table below.

|                 |                                                                |      |            | Approximate    | Gross         |                         
|---------------- | -------------------------------------------------------------- | ---- | ---------- | -------------- | ------------- | ------------------------
|Date             |                                                                |      |            | Purchase Price | Leasable      |                         
|Acquired         | Property                                                       | Type | Year Built | ($)            | Area (Sq. Ft) | Major Tenants           
|                 |                                                                |      |            |                |               |                         
|08/07/03         | Bellevue Place Shopping Center                                 | NC   | 2002/2003  | 10,882,049     | 76,778        | Bed, Bath & Beyond      
|                 | Nashville, TN                                                  |      |            |                |               | Michael's               
|                 |                                                                |      |            |                |               | PetCo                   
|                 |                                                                |      |            |                |               | Dollar Tree             
|                 |                                                                |      |            |                |               |                         
|08/05/03         | Camfield Corner                                                | NC   | 1994/2003  | 9,350,000      | 69,880        | Bi-Lo Supermarket       
|                 | Charlotte, NC                                                  |      |            |                |               | Tire Kingdom            
|                 |                                                                |      |            |                |               |                         
|07/25/03         | Cascade Market Place                                           | NC   | 1996/1998  | 16,800,000     | 100,134       | Staples                 
|                 | Sterling, VA                                                   |      |            |                |               | Sports Authority        
|                 |                                                                |      |            |                |               |                         
|07/17/03         | Fayette Pavilion                                               | NC   | 2000       | 46,192,670     | 371,042       | Kohl's                  
|                 | Fayette, GA                                                    |      |            |                |               | Belk                    
|                 |                                                                |      |            |                |               | JoAnn's                 
|                 |                                                                |      |            |                |               | Goody's                 
|                 |                                                                |      |            |                |               |                         
|07/25/03         | Northlake Commons                                              | NC   | 1987/2003  | 24,321,186     | 143,955       | Ross                    
|                 | Palm Beach, FL                                                 |      |            |                |               | Office Main Furniture   
|                 |                                                                |      |            |                |               |                         
|07/31/03         | Route 22 Retail                                                | NC   | 1997       | 18,687,358     | 110,453       | Circuit City            
|                 | Union, NJ                                                      |      |            |                |               | Baby Superstore         
|                 |                                                                |      |            |                |               | The Furniture King      
|                 |                                                                |      |            |                |               |                         
|08/08/03         | Spring Mall                                                    | NC   | 1995/2001  | 10,479,451     | 56,511        | Bassett Furniture Direct
|                 | Springfield, VA                                                |      |            |                |               | Michael's               
|                 |                                                                |      |            |                |               |                         
|07/08/03         | Turkey Creek Pavilion                                          | NC   | 2002       | 9,781,814      | 82,940        | Ross                    
|                 | Knoxville, TN                                                  |      |            |                |               |                         
|                 |                                                                |      |            |                |               |                         
|07/02/03         | Vision Works                                                   | SU   | 1989       | 1,700,000      | 6,891         | Vision Works            
|                 | Plantation, FL                                                 |      |            |                |               |                         
|                 |                                                                |      |            |                |               |                         
|Type of Property
|NC               | Neighborhood and Community Multi-Tenant Retail Shopping Center
|SU               | Single User Retail Property                                   
|D                | Development Project                                           



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

Mortgage debt and financings closed for the period July 1, 2003 to August 8, 2003, are detailed in the list below.





|Date Funded | Mortgage Payable          | Annual Interest & Rate at 6/30/03 | Maturity Date | Principal Borrowed ($)
|----------- | ------------------------- | --------------------------------- | ------------- | ----------------------
|07/25/03    | Barrett Pavilion          | 4.66                              | 8/1/10        | 44,000,000            
|07/11/03    | Birkdale Village          | 4.08                              | 8/1/10        | 48,000,000            
|07/22/03    | Birkdale Village          | 4.08                              | 8/1/10        | 7,000,000             
|07/24/03    | Camp Hill Center          | 4.20                              | 8/1/10        | 4,300,000             
|08/05/03    | Capital Crossing          | 4.30                              | 8/1/10        | 5,478,000             
|07/17/03    | Colonial Bardmoor         | 4.52                              | 8/10/10       | 9,400,000             
|07/29/03    | Flamingo Falls            | 4.35                              | 8/1/10        | 13,200,000            
|07/25/03    | Hiram Pavilion            | 4.51                              | 8/1/10        | 25,100,000            
|07/24/03    | Meadowmont Village Center | 4.20                              | 8/1/10        | 13,400,000            
|07/15/03    | Oakley Plaza              | 4.29                              | 8/11/10       | 5,175,000             
|07/22/03    | River Run                 | 4.05                              | 8/1/10        | 6,490,000             
|08/08/03    | Shoppes at New Tampa      | 4.27                              | 9/1/10        | 29,350,000            
|07/24/03    | Springfield Park          | 4.20                              | 8/1/10        | 5,600,000             
|07/25/03    | Suwannee Crossroads       | 4.60                              | 8/1/10        | 6,670,000             
|07/01/03    | Village Crossing          | 4.73                              | 6/1/10        | 44,000,000            
|08/03/03    | Westside Pavilion         | 4.91                              | 9/10/10       | 10,600,000            





INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

The Company anticipates purchasing or may have already purchased the following properties from unaffiliated third parties.  The Company intends to purchase these properties with its own funds unless noted otherwise; however, the Company expects to place financing on the properties at a later date.



|                                    |      |             | Estimated      |           |         |                        
|----------------------------------- | ---- | ----------- | -------------- | --------- | ------- | -----------------------
|                                    |      |             | Purchase Price | Gross     |         |                        
|                                    |      |             | Including      | Leasable  |         |                        
|                                    |      | Year        | Expenses       | Area      |         |                        
|Property                            | Type | Built       | ($) (1)        | (Sq. Ft.) | Comment | Major Tenants(2)       
|                                    |      |             |                |           |         |                        
|Cedar Springs Crossing              | NC   | 2001        | 10,150,000     | 86,312    |         | Bi-Lo                  
|Spartanburg, SC                     |      |             |                |           |         | Eckerds                
|                                    |      |             |                |           |         | Dollar Tree            
|                                    |      |             |                |           |         |                        
|Cortez Plaza                        | NC   | 1966/1988   | 26,800,000     | 289,100   |         | Publix                 
|Bradenton, FL                       |      |             |                |           |         | Circuit City           
|                                    |      |             |                |           |         | PETsMART               
|                                    |      |             |                |           |         | Burlington Coat Factory
|                                    |      |             |                |           |         |                        
|Fayette Pavilion l & II             | NC   | 1995        | 96,812,000     | 794,748   |         | Super Wal-Mart         
|Fayette Pavilion  III & lV          | NC   | 2003        | 33,530,000     | 248,813   |         | Publix                 
|Fayetteville, GA                    |      |             |                |           |         | Kohl's                 
|                                    |      |             |                |           |         | Cinemark               
|                                    |      |             |                |           |         | Belk                   
|                                    |      |             |                |           |         |                        
|Hartsville Crossing Shopping Center | NC   | 2001        | 7,384,000      | 71,120    |         | Cato Dollar Tree       
|Hartsville, SC                      |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Kensington Place                    | NC   | 1998        | 7,270,000      | 70,624    |         | Bi-Lo Grocery          
|Murfreesboro, TN                    |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Largo Towne Center                  | NC   | 1991        | 30,500,000     | 274,396   | (3)     | Shoppers Food Warehouse
|Largo, MD                           |      |             |                |           |         | Marshall's             
|                                    |      |             |                |           |         | Regency Furniture      
|                                    |      |             |                |           |         |                        
|Legacy Place                        | D    | To be built | 73,480,000     | 308,500   |         | Linens N Things        
|Palm Beach Gardens, FL              |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Lexington Place                     | NC   | To be built | 8,397,000      | 83,167    |         | TJ Maxx                
|Lexington, SC                       |      |             |                |           |         | Ross                   
|                                    |      |             |                |           |         |                        
|Naugatuck Valley Shopping Center    | NC   | 2001/2003   | 53,326,000     | 380,332   |         | Wal-Mart ground lease  
|Waterbury, CT                       |      |             |                |           |         | Stop & Shop            
|                                    |      |             |                |           |         | Linens 'N Thins        
|                                    |      |             |                |           |         | Bob's Stores           
|                                    |      |             |                |           |         |                        



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)



|                               |      |             | Estimated      |           |         |                  
|------------------------------ | ---- | ----------- | -------------- | --------- | ------- | -----------------
|                               |      |             | Purchase Price | Gross     |         |                  
|                               |      |             | Including      | Leasable  |         |                  
|                               |      | Year        | Expenses       | Area      |         |                  
|Property                       | Type | Built       | ($) (1)        | (Sq. Ft.) | Comment | Major Tenants (2)
|Pointe at Tampa Palms          | NC   | 2003        | 5,250,000      | 20,258    |         | Spa Avalon       
|Tampa, FL                      |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Stockbridge  Commons           | NC   | To be built | 11,925,000     | 79,100    |         | Lowe's Food      
|Tega Cay, SC                   |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Shoppes at Oliver's Crossing   | NC   | 2003        | 10,375,000     | 76,512    |         | Lowe's Foods     
|Winston Salem, NC              |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Shoppes at Wendover Village    | D    | To be built | 29,500,000     | 165,932   |         | Ross             
|Greensboro, NC                 |      |             |                |           |         | Homegoods        
|                               |      |             |                |           |         | A.C. Moore       
|                               |      |             |                |           |         |                  
|The Summit                     | NC   | 2001        | 85,000,000     | 341,343   |         | Barnes & Noble   
|Louisville, KY                 |      |             |                |           |         | Old Navy         
|                               |      |             |                |           |         | Bed Bath & Beyond
|                               |      |             |                |           |         |                  
|Walgreen's                     | SU   | 2000        | 4,358,000      | 14,998    |         | Walgreen's       
|Port Huron, MI                 |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Walk at Highwood Preserve II   | NC   | To be built | 6,577,000      | 28,427    |         | Boston Market    
|Tampa, FL                      |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Paradise Portfolio             |      |             |                |           |         |                  
|Paradise Place                 | NC   | To be built | 10,873,000     | 74,620    |         | Publix           
|West Palm Beach, FL            |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Paradise Shoppes of  Ellenwood | NC   | To be built | 10,354,000     | 67,721    |         | Publix           
|Ellenwood, GA                  |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Paradise Promenade             | NC   | To be built | 12,530,000     | 70,291    |         | Publix           
|Davie, FL                      |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Shoppes of Lithia              | NC   | To be built | 14,173,000     | 79,161    |         | Publix           
|Brandon, FL                    |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Plaza Del Paraiso              |      |             |                |           |         |                  
|Miami, FL                      | NC   | To be built | 14,050,000     | 82,291    |         | Publix           
|                               |      |             |                |           |         |                  



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)



|                                   |      |             | Estimated      |           |         |                        
|---------------------------------- | ---- | ----------- | -------------- | --------- | ------- | -----------------------
|                                   |      |             | Purchase Price | Gross     |         |                        
|                                   |      |             | Including      | Leasable  |         |                        
|                                   |      | Year        | Expenses       | Area      |         |                        
|Property                           | Type | Built       | ($) (1)        | (Sq. Ft.) | Comment | Major Tenants (2)      
|Milt Turner Portfolio              |      |             |                |           |         |                        
|Oak Summit                         | NC   | 2003        | 24,468,000     | 180,774   |         | Staples                
|Winston-Salem, NC                  |      |             |                |           |         | Goody's                
|                                   |      |             |                |           |         |                        
|Squire Wood Village                | NC   | 2003        | 4,166,000      | 46,150    |         | Food City              
|Dandridge, TN                      |      |             |                |           |         |                        
|                                   |      |             |                |           |         |                        
|The Crossings                      | NC   | 1999        | 6,879,000      | 62,278    |         | Goody's                
|Crossville, TN                     |      |             |                |           |         |                        
|                                   |      |             |                |           |         |                        
|Wytheville Commons                 | NC   | 2003        | 20,019,000     | 150,267   |         | Goody's                
|Phase I & II                       |      | To be built |                |           |         | Dollar Tree            
|Wytheville, VA                     |      |             |                |           |         | Old Navy               
|                                   |      |             |                |           |         |                        
|Colonial Portfolio                 |      |             |                |           |         |                        
|Hilliard Rome Road                 | NC   | 2001        | 17,100,000     | 110,871   |         | Giant Eagle Grocery    
|Hilliard, OH                       |      |             |                |           |         |                        
|                                   |      |             |                |           |         |                        
|Loisdale Center                    | NC   | 1999        | 29,000,000     | 120,742   |         | Bed Bath & Beyond      
|Springfield, VA                    |      |             |                |           |         | Circuit City           
|                                   |      |             |                |           |         | Barnes & Noble         
|                                   |      |             |                |           |         | Designer Shoe Warehouse
|                                   |      |             |                |           |         |                        
|Waterfront Market                  | NC   | 2001/2003   | 123,500,000    | 755,313   |         | Lowes Cinemas          
|Pittsburgh, PA                     |      |             |                |           |         | (Ground Lease)         
|                                   |      |             |                |           |         |                        
|Principal Net Lease Portfolio      |      |             |                |           |         |                        
|Kroger, Cincinnati, OH             | SU   | 1995/1998   | 7,653,000      | 56,634    |         | Kroger                 
|Kroger, Westchester, OH            |      |             | 4,802,000      | 56,083    |         | Kroger                 
|Kroger, Richardson, TX             |      |             | 6,065,000      | 59,213    |         | Kroger                 
|Kroger, Grand Prairie, TX          |      |             | 5,963,000      | 64,522    |         | Kroger                 
|Circuit City, Highlands Ranch, CO  |      |             | 6,101,000      | 43,480    |         | Circuit City           
|Circuit City, Olympia, WA          |      |             | 6,105,000      | 35,776    |         | Circuit City           
|Circuit City, Culver City, CA      |      |             | 9,353,000      | 32,873    |         | Circuit City           
|Wal-Mart, Greenville, SC           |      |             | 17,501,000     | 200,084   |         | Wal-Mart               
|Wal-Mart Alliance, OH              |      |             | 16,373,000     | 200,084   |         | Wal-Mart               
|Wal-Mart Winston-Salem, NC         |      |             | 19,306,000     | 204,931   |         | Wal-Mart               
|Sam's Club, Worcester, MA          |      |             | 15,356,000     | 107,929   |         | Sam's Club             
|Lowe's Home Impr. Cullman, AL      |      |             | 9,241,000      | 101,287   |         | Lowe's Home Improvement
|Lowe's Home Impr. Steubenville, OH |      |             | 11,794,000     | 130,497   |         | Lowe's Home Improvement
|Lowe's Home Impr. Baytown, TX      |      |             | 11,837,000     | 125,357   |         | Lowe's Home Improvement
|Lowe's Home Impr. Katy, TX         |      |             | 12,422,000     | 131,644   |         | Lowe's Home Improvement



INLAND RETAIL REAL ESTATE TRUST, INC.

(a Maryland corporation)

Notes to Consolidated Financial Statements



June 30, 2003

(unaudited)

The Company's acquisition costs may increase by additional costs, which have not yet been finally determined. The Company expects any additional costs to be insignificant.

1. Major tenants include tenants leasing more than 10% of the gross leasable area of the individual property.
2. Property was acquired between the period of 08/09/03 and 08/14/03.

Type of Property

NC   Neighborhood and Community Multi-Tenant Retail Shopping Center

SU   Single User Property

D    Development Project





INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                                     |             | Initial Costs |              | Gross amount at which carried at end of period |            |             
|---------------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | ---------- | ------------
|                                                     |             |               |              |                                                |            |             
|(12) Investment Properties                           |             |               | Buildings    | Adjustments                                    |            | Buildings   
|                                                     |             |               | And          | To                                             |            | And         
|Multi-tenant Retail                                  | Encumbrance | Land          | Improvements | Basis  (A)                                     | Land       | Improvements
|440 Commons
  Jersey City, NJ                        | 9,875,000   | 5,809,968     | 12,235,860   | (170,173)                                      | 5,809,968  | 12,065,687  
|Aberdeen Square
  Boynton Beach, FL                  | 3,670,000   | 1,948,473     | 4,768,166    | (118,966)                                      | 1,948,473  | 4,649,200   
|Abernathy Square
  Atlanta, GA                       | 13,392,000  | 8,054,652     | 16,076,111   | (246,389)                                      | 8,054,652  | 15,829,722  
|Acworth Avenue Retail 
Shopping Center
  Acworth, GA | -           | 959,257       | 1,875,198    | (21,421)                                       | 959,257    | 1,853,777   
|Anderson Central
  Anderson, SC                      | 11,000,000  | 2,219,839     | 13,642,727   | (411,842)                                      | 2,219,839  | 13,230,885  
|Barrett Pavilion
  Kennesaw, GA                      | 20,000,000  | 20,032,828    | 60,149,900   | 45,474                                         | 20,032,828 | 60,195,374  
|Bartow Marketplace
  Cartersville, GA                | 13,475,000  | 6,098,178     | 18,308,271   | 78,339                                         | 6,098,178  | 18,386,610  
|Bi-Lo - Asheville
  Asheville, NC                    | -           | 1,358,196     | 6,368,469    | (225,378)                                      | 1,358,196  | 6,143,091   
|Bi-Lo - Shelmore
  Mt. Pleasant, SC                  | -           | 2,280,531     | 9,555,354    | (96,552)                                       | 2,280,531  | 9,458,802   
|Bi-Lo - Southern Pines
  Southern Pines, NC          | -           | 1,652,015     | 6,474,861    | (66,775)                                       | 1,652,015  | 6,408,086   
|Birkdale Village
  Charlotte, NC                     | -           | 7,354,553     | 89,055,809   | (3,215,800)                                    | 7,354,553  | 85,840,009  
|Boynton Commons
  Boynton Beach, FL                  | 15,125,000  | 8,698,355     | 21,803,370   | (21,131)                                       | 8,698,355  | 21,782,239  
|Brandon Blvd. Shoppes
  Valrico, FL                  | 5,137,000   | 1,894,787     | 7,587,323    | (87,717)                                       | 1,894,787  | 7,499,606   
|Brick Center Plaza 
  Brick, NJ                      | 10,300,000  | 3,187,625     | 16,263,625   | 63,014                                         | 3,187,625  | 16,326,639  
|Bridgewater Marketplace
  Orlando, FL                | 2,987,500   | 783,493       | 5,221,618    | (62,782)                                       | 783,493    | 5,158,836   
|Camp Hill Center
  Harrisburg, PA                    | -           | 1,126,880     | 6,659,326    | (45,129)                                       | 1,126,880  | 6,614,197   
|Capital Crossing
  Raleigh, NC                       | -           | 2,394,055     | 7,590,288    | (326,181)                                      | 2,394,055  | 7,264,107   





INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                                |             | Initial Costs |              | Gross amount at which carried at end of period |           |             
|----------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | --------- | ------------
|                                                |             |               |              |                                                |           |             
|                                                |             |               | Buildings    | Adjustments                                    |           | Buildings   
|                                                |             |               | And          | To                                             |           | And         
|Multi-tenant Retail                             | Encumbrance | Land          | Improvements | Basis (A)                                      | Land      | Improvements
|Casselberry Commons
  Casselberry, FL           | 8,703,000   | 6,702,658     | 11,191,912   | 323,016                                        | 6,702,658 | 11,514,928  
|Chatham Crossing
  Siler City, NC               | 2,190,000   | 971,620       | 2,992,100    | (86,962)                                       | 971,620   | 2,905,138   
|Chesterfield Crossings
  Richmond, VA,          | 6,380,000   | 2,791,620     | 8,190,130    | 569,726                                        | 2,791,620 | 8,759,856   
|Chickasaw Trails 
Shopping Center
  Orlando, FL | 4,400,000   | 1,723,260     | 6,907,737    | (108,194)                                      | 1,723,260 | 6,799,543   
|Circuit City Plaza
  Orlando, FL                | 6,275,000   | 3,756,672     | 7,761,404    | (111,424)                                      | 3,756,672 | 7,649,980   
|Citrus Hills
  Citrus Hills, FL                 | 3,000,000   | 841,567       | 5,185,586    | 116,657                                        | 841,567   | 5,302,243   
|City Crossing
  Warner Robins, GA               | -           | 1,893,133     | 12,750,925   | (252,041)                                      | 1,893,133 | 12,498,884  
|Clayton Corners
  Clayton, NC                   | 9,850,000   | 1,615,060     | 13,379,346   | (513,832)                                      | 1,615,060 | 12,865,514  
|Colonial Bardmoore Center
  Largo, FL           | -           | 8,745,733     | 8,405,232    | (516,193)                                      | 8,745,733 | 7,889,039   
|Columbia Promenade
  Kissimmee, FL              | 3,600,000   | 1,483,737     | 5,956,206    | (6,206)                                        | 1,483,737 | 5,950,000   
|Columbiana Station
  Columbia, SC               | 25,900,000  | 7,486,111     | 39,128,619   | (824,794)                                      | 7,486,111 | 38,303,825  
|Commonwealth Center II
  Midlothian, VA         | 12,250,000  | 4,509,455     | 17,768,396   | 494,670                                        | 4,509,455 | 18,263,066  
|CompUSA Retail Center
  Newport News, VA        | 4,000,000   | 2,261,885     | 5,062,238    | (67,105)                                       | 2,261,885 | 4,995,133   
|Concord Crossing
  Concord, NC                  | 2,890,000   | 816,686       | 4,513,910    | 232,817                                        | 816,686   | 4,746,727   
|Conway Plaza
  Orlando, FL                      | 5,000,000   | 2,215,324     | 6,332,434    | 328,743                                        | 2,215,324 | 6,661,177   
|CostCo Plaza
  White Marsh, MD                  | -           | 6,472,771     | 10,383,803   | (394,602)                                      | 6,472,772 | 9,989,200   





INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                           |             | Initial Costs |              | Gross amount at which carried at end of period |            |             
|------------------------------------------ | ----------- | ------------- | ------------ | ---------------------------------------------- | ---------- | ------------
|                                           |             |               |              |                                                |            |             
|                                           |             |               | Buildings    | Adjustments                                    |            | Buildings   
|                                           |             |               | And          | To                                             |            | And         
|Multi-tenant Retail                        | Encumbrance | Land          | Improvements | Basis (A)                                      | Land       | Improvements
|Countryside
  Naples, FL                   | 4,300,000   | 1,117,428     | 7,478,173    | 9,571                                          | 1,117,428  | 7,487,744   
|Cox Creek Centre
  Florence, AL            | 15,178,840  | 4,256,549     | 14,974,285   | (290,544)                                      | 4,256,549  | 14,683,741  
|Creeks at Virginia Center
  Glen Allen, VA | 27,754,435  | 8,125,000     | 31,332,730   | 918,639                                        | 8,125,000  | 32,251,369  
|Creekwood Crossing
  Bradenton, FL         | 11,750,000  | 6,376,185     | 17,239,607   | (213,958)                                      | 6,376,185  | 17,025,649  
|Crystal Springs 
  Crystal River, FL       | 4,070,000   | 1,064,112     | 6,413,838    | (132,598)                                      | 1,064,112  | 6,281,240   
|Denbigh Village Center
  Newport News, VA  | -           | 6,371,122     | 14,483,694   | 226,441                                        | 6,371,122  | 14,710,135  
|Douglasville Pavilion
  Douglasville, GA   | 14,925,000  | 6,540,781     | 20,836,192   | (537,482)                                      | 6,540,781  | 20,298,710  
|Downtown Short Pump
  Richmond, VA         | -           | 8,045,152     | 25,470,041   | 3,049,959                                      | 8,045,152  | 28,520,000  
|Duvall Village
  Bowie, MD                 | 9,404,837   | 4,000,000     | 9,045,904    | (581,725)                                      | 4,000,000  | 8,464,179   
|East Hanover Plaza
  East Hanover, NJ      | 9,280,000   | 2,769,561     | 14,542,979   | (157,903)                                      | 2,769,561  | 14,385,076  
|Edgewater Town Center
  Edgewater, NJ      | 14,000,000  | 7,288,957     | 19,741,150   | (1,227,967)                                    | 7,288,957  | 18,513,183  
|Eisenhower Crossing I & II
  Macon, GA     | 23,800,000  | 7,487,472     | 35,804,354   | (653,796)                                      | 7,487,472  | 35,150,558  
|Fayetteville Pavilion
  Fayetteville, NC   | 15,940,000  | 7,114,584     | 19,783,655   | 471,612                                        | 7,446,420  | 19,923,431  
|Flamingo Falls
  Pembroke Pines, FL        | -           | 5,935,273     | 18,010,465   | (255,711)                                      | 5,935,273  | 17,754,754  
|Forest Hills Centre
  Wilson, NC           | 3,660,000   | 1,582,094     | 5,093,270    | (61,927)                                       | 868,647    | 5,744,790   
|Forestdale Plaza
  Jamestown, NC           | 3,319,000   | 1,262,754     | 5,407,118    | (115,134)                                      | 1,262,754  | 5,291,984   
|Fountains
  Plantation, FL                 | 13,999,900  | 15,920,000    | 28,492,462   | (613,211)                                      | 15,920,000 | 27,879,251  



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                             |             | Initial Costs |              | Gross amount at which carried at end of period |            |             
|-------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | ---------- | ------------
|                                             |             |               |              |                                                |            |             
|                                             |             |               | Buildings    | Adjustments                                    |            | Buildings   
|                                             |             |               | And          | To                                             |            | And         
|Multi-tenant Retail                          | Encumbrance | Land          | Improvements | Basis (A)                                      | Land       | Improvements
|Gateway Mall
  St. Petersburg, FL            | 10,425,000  | 6,351,847     | 14,576,808   | 114,644                                        | 6,351,847  | 14,691,452  
|Gateway Plaza II
  Conway, SC                | 3,480,000   | 912,466       | 5,382,247    | (109,412)                                      | 912,466    | 5,272,835   
|Gateway Plaza 
  Jacksonville, NC            | 6,500,000   | 2,906,103     | 8,959,217    | 1,141,393                                      | 2,906,103  | 10,100,610  
|Glenmark Shopping Center
  Morgantown, WV    | -           | 4,128,488     | 8,853,200    | (257,510)                                      | 4,128,488  | 8,595,690   
|Golden Gate Shopping Center
  Greensboro, NC | 6,378,550   | 3,644,643     | 6,899,915    | 842,513                                        | 3,644,643  | 7,742,428   
|Goldenrod Groves
  Winter Park, FL           | 4,575,000   | 3,048,044     | 6,128,605    | 680,720                                        | 3,048,044  | 6,809,325   
|Goody's Shopping Center
  Augusta, GA        | -           | 441,167       | 1,610,064    | (25,380)                                       | 441,167    | 1,584,684   
|Hairston Crossing
  Decatur, GA              | 3,655,000   | 1,066,527     | 5,563,132    | (27,873)                                       | 1,066,527  | 5,535,259   
|Hampton Point
  Taylors, SC                  | 2,475,000   | 1,072,903     | 3,453,395    | (13,252)                                       | 1,072,903  | 3,440,143   
|Harundale Plaza
  Glen Burnie, MD            | 12,362,000  | 9,869,539     | 14,882,463   | (755,213)                                      | 9,869,539  | 14,127,250  
|Heritage Pavilion 
  Smyrna, GA              | 21,500,000  | 11,492,051    | 28,521,372   | (247,355)                                      | 11,492,051 | 28,274,017  
|Hillsboro Square
  Deerfield Beach, FL       | 12,100,000  | 6,157,134     | 12,828,066   | 2,167,061                                      | 5,780,000  | 15,372,261  
|Hiram Pavilion 
  Hiram, GA                  | -           | 9,258,950     | 27,528,110   | (1,038,141)                                    | 9,258,950  | 26,489,969  
|Jones Bridge Square
  Norcross, GA           | 4,350,000   | 1,791,065     | 5,734,426    | 327,688                                        | 1,885,398  | 5,967,781   
|Killearn Shopping Center 
  Tallahassee, FL  | 4,041,377   | 2,733,696     | 8,211,799    | (106,475)                                      | 2,733,696  | 8,105,324   
|Lake Olympia Square
  Ocoee, FL              | 5,397,740   | 2,567,471     | 7,306,483    | (20,238)                                       | 2,562,471  | 7,291,245   
|Lake Walden Square
  Plant City, FL          | 9,633,322   | 3,006,662     | 11,549,586   | 238,143                                        | 3,006,662  | 11,787,729  
|Lakeview Plaza
  Kissimmee, FL               | 3,613,237   | 842,077       | 5,345,819    | (95,471)                                       | 842,077    | 5,250,348   



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                                  |             | Initial Costs |              | Gross amount at which carried at end of period |            |             
|------------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | ---------- | ------------
|                                                  |             |               |              |                                                |            |             
|                                                  |             |               | Buildings    | Adjustments                                    |            | Buildings   
|                                                  |             |               | And          | To                                             |            | And         
|Multi-tenant Retail                               | Encumbrance | Land          | Improvements | Basis (A)                                      | Land       | Improvements
|Lakewood Ranch Gateway
  Bradenton, FL            | 4,400,000   | 3,426,105     | 6,067,556    | (232,171)                                      | 3,426,105  | 5,835,385   
|Logger Head Junction
  Holmes Beach, FL           | -           | 344,321       | 320,738      | (14,646)                                       | 344,321    | 306,092     
|Market Square
  Douglasville, GA                  | 8,344,301   | 2,309,461     | 10,595,333   | 1,372,963                                      | 2,400,000  | 11,877,757  
|Marketplace at Mill Creek
  Buford, GA            | 27,700,000  | 14,457,044    | 35,660,892   | (653,455)                                      | 14,457,044 | 35,007,437  
|McFarland Plaza
  Tuscaloosa, AL                  | 8,425,000   | 2,325,039     | 12,933,566   | (315,355)                                      | 2,325,039  | 12,618,211  
|Meadowmont Village CenterChapel Hill, NC          | -           | 2,948,143     | 23,860,318   | (1,182,303)                                    | 2,948,143  | 22,678,015  
|Melbourne Shopping Center
  Melbourne, FL         | 5,947,325   | 2,382,330     | 7,459,634    | 687,905                                        | 2,382,330  | 8,147,539   
|Merchants Square
  Zephyrhills, FL                | 3,167,437   | 992,225       | 4,749,818    | 40,123                                         | 992,225    | 4,789,941   
|Midway Plaza 
  Tamarac, FL                       | -           | 9,126,646     | 17,731,321   | (813,692)                                      | 9,126,646  | 16,917,629  
|Newnan Pavilion
  Newnan, GA                      | 18,999,243  | 8,560,550     | 24,553,440   | 760,199                                        | 8,987,539  | 24,886,650  
|North Aiken Bi-Lo Center
  Aiken, SC              | 2,900,000   | 660,000       | 5,156,040    | (95,807)                                       | 660,000    | 5,060,233   
|North Hill Commons 
  Anderson, SC                | -           | 736,586       | 3,804,359    | (30,291)                                       | 736,586    | 3,774,068   
|Northpoint Marketplace
  Boiling Springs, SC      | 4,535,000   | 809,351       | 7,459,725    | (365,643)                                      | 809,351    | 7,094,082   
|Oakley Plaza
  Ashville, NC                       | -           | 2,013,562     | 7,455,436    | (833,511)                                      | 2,013,562  | 6,621,925   
|Oleander Shopping Center
  Wilmington, NC         | 3,000,000   | 794,912       | 4,425,726    | (121,314)                                      | 794,912    | 4,304,412   
|Overlook at
King of Prussia
  King of Prussia, PA | 30,000,000  | 32,402,117    | 24,643,324   | (3,753,683)                                    | 32,402,117 | 20,889,641  
|Paraiso Plaza
  Hialeah, FL                       | 5,280,000   | 2,789,414     | 6,692,059    | 29,511                                         | 2,789,414  | 6,721,570   



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                            |             | Initial Costs |              | Gross amount at which carried at end of period |            |             
|------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | ---------- | ------------
|                                            |             |               |              |                                                |            |             
|                                            |             |               | Buildings    | Adjustments                                    |            | Buildings   
|                                            |             |               | And          | To                                             |            | And         
|Multi-tenant Retail                         | Encumbrance | Land          | Improvements | Basis (A)                                      | Land       | Improvements
|Plant City Crossing
  Plant City, FL        | 5,900,000   | 2,660,804     | 8,218,061    | (341,417)                                      | 2,660,804  | 7,876,644   
|Pleasant Hill Square
  Duluth, GA           | 17,120,000  | 4,805,830     | 29,526,305   | (234,177)                                      | 4,805,830  | 29,292,128  
|Presidential Commons
  Snellville, GA       | 26,066,555  | 9,001,185     | 36,030,481   | (711,723)                                      | 9,001,185  | 35,318,758  
|Publix at Brooker Creek
  Palm Harbor, FL   | 4,468,070   | 2,931,581     | 5,787,185    | 10,917                                         | 2,950,000  | 5,779,683   
|River Ridge
  Birmingham, AL                | 14,500,000  | 6,487,314     | 20,004,535   | (434,572)                                      | 6,487,314  | 19,569,963  
|River Run 
  Miramar, FL                    | -           | 2,791,260     | 8,847,053    | (69,318)                                       | 2,791,260  | 8,777,735   
|Riverstone Plaza
  Canton, GA               | 17,600,000  | 5,672,769     | 26,270,288   | (673,097)                                      | 5,672,769  | 25,597,191  
|Rosedale Shopping Center
  Huntersville, NC | 13,300,000  | 2,913,676     | 16,630,071   | (87,528)                                       | 2,913,676  | 16,542,543  
|Sand Lake Corners
  Orlando, FL             | 11,900,000  | 6,091,246     | 16,164,600   | (105,878)                                      | 6,091,246  | 16,058,722  
|Sandy Plains Village 
  Roswell, GA         | -           | 4,615,446     | 13,440,022   | 595,192                                        | 4,615,446  | 14,035,214  
|Sarasota Pavilion
  Sarasota, FL            | 21,000,000  | 17,273,845    | 24,826,101   | (277,297)                                      | 17,273,845 | 24,548,804  
|Sexton Commons
  Fuquay Varina, NC          | 4,400,000   | 799,852       | 7,223,004    | (167,428)                                      | 799,852    | 7,055,576   
|Sharon Greens
  Cumming, GA                 | 6,500,000   | 3,593,247     | 9,468,907    | 197,525                                        | 4,225,167  | 9,034,512   
|Sheridan Square
  Dania, FL                 | 3,600,000   | 2,425,266     | 5,160,970    | 7,377                                          | 2,425,266  | 5,168,347   
|Shoppes at Citiside
  Charlotte, NC         | 5,600,000   | 2,009,614     | 7,696,077    | 289,154                                        | 2,009,614  | 7,985,231   
|Shoppes at Lake Dow
  McDonough, GA         | -           | 1,304,456     | 9,709,675    | (84,617)                                       | 1,304,456  | 9,625,058   
|Shoppes at Lake Mary
  Lake Mary, FL        | 6,250,000   | 3,618,581     | 7,521,439    | (41,093)                                       | 3,618,581  | 7,480,346   
|Shoppes at New Tampa
  Wesley Chapel, FL    | -           | 6,007,635     | 13,187,920   | 461,081                                        | 6,007,635  | 13,649,001  



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                                  |             | Initial Costs |              | Gross amount at which carried at end of period |           |             
|------------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | --------- | ------------
|                                                  |             |               |              |                                                |           |             
|                                                  |             |               | Buildings    | Adjustments                                    |           | Buildings   
|                                                  |             |               | And          | To                                             |           | And         
|Multi-tenant Retail                               | Encumbrance | Land          | Improvements | Basis (A)                                      | Land      | Improvements
|Shoppes at Paradise Pointe 
  Ft Walton Beach, FL | -           | 2,147,867     | 9,443,556    | (152,900)                                      | 2,147,867 | 9,290,656   
|Shoppes of Golden Acres
  Newport Richey, FL      | -           | 3,900,000     | 6,930,734    | (24,214)                                       | 3,900,000 | 6,906,520   
|Shoppes on the Circle
  Dothan, AL                | 12,145,904  | 1,544,088     | 13,468,413   | 9,597                                          | 1,544,088 | 13,478,010  
|Skyview Plaza
  Orlando, FL                       | 10,875,000  | 7,460,820     | 13,871,448   | 764,527                                        | 7,460,820 | 14,635,975  
|Sony Theatre Complex 
  East Hanover, NJ          | 6,445,000   | 4,503,167     | 7,564,572    | (122,765)                                      | 4,503,167 | 7,441,807   
|Southlake Pavilion
  Morrow, GA                   | 31,723,316  | 7,830,718     | 48,545,944   | 6,192,049                                      | 8,872,212 | 53,696,499  
|Southlake Shopping Center
  Cornelius, NC         | 7,637,235   | 3,633,377     | 9,999,573    | (114,152)                                      | 3,633,377 | 9,885,421   
|Springfield Park
  Lawrenceville, GA              | -           | 1,980,202     | 8,943,936    | 876,733                                        | 1,980,202 | 9,820,669   
|Steeplechase Plaza
  Ocala, FL                    | 4,651,350   | 1,554,810     | 7,092,510    | 361,749                                        | 1,618,271 | 7,390,798   
|Stonebridge Square
  Roswell, GA                  | 10,900,000  | 4,582,728     | 14,946,585   | 576,644                                        | 4,976,080 | 15,129,877  
|Stonecrest Marketplace
  Lithonia, GA             | 19,075,000  | 7,463,134     | 27,278,964   | 2,234,396                                      | 7,463,134 | 29,513,360  
|Suwannee Crossroads
  Suwannee, GA                | -           | 2,481,318     | 9,586,230    | (13,316)                                       | 2,481,318 | 9,572,914   
|Sycamore Commons
  Matthews, NC                   | 20,000,000  | 7,995,359     | 30,188,891   | (349,108)                                      | 7,995,359 | 29,839,783  
|Target Super Center
  Columbia, SC                | 4,192,000   | 1,994,642     | 5,677,919    | (93,513)                                       | 1,994,642 | 5,584,406   
|Tequesta Shoppes 
  Tequesta, FL                  | -           | 2,898,918     | 8,539,792    | 271,831                                        | 2,898,918 | 8,811,623   
|Town & Country
  Knoxville, TN                    | 30,900,000  | -             | 39,266,338   | 90,408                                         | -         | 39,356,746  
|Town Center Commons
  Kennesaw, GA                | 4,750,000   | 3,293,792     | 6,350,835    | (31,262)                                       | 3,293,792 | 6,319,573   





INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                           |             | Initial Costs |              | Gross amount at which carried at end of period |            |             
|------------------------------------------ | ----------- | ------------- | ------------ | ---------------------------------------------- | ---------- | ------------
|                                           |             |               |              |                                                |            |             
|                                           |             |               | Buildings    | Adjustments                                    |            | Buildings   
|                                           |             |               | And          | To                                             |            | And         
|Multi-tenant Retail                        | Encumbrance | Land          | Improvements | Basis (A)                                      | Land       | Improvements
|Turkey Creek Phase I
  Knoxville, TN       | 12,120,000  | 3,973,419     | 17,788,597   | 146,029                                        | 4,054,200  | 17,853,845  
|Universal Plaza
  Lauderhill, FL           | 4,970,000   | 3,571,566     | 6,300,870    | (620,803)                                      | 3,571,566  | 5,680,067   
|Valley Park Commons
  Hagerstown, MD       | 6,770,000   | 1,822,018     | 9,495,115    | (90,777)                                       | 1,822,018  | 9,404,338   
|Venture Pointe
  Duluth, GA                | 14,475,000  | 10,878,572    | 15,654,530   | 185,203                                        | 10,878,571 | 15,839,734  
|Village Center
  Racine, WI                | 13,200,000  | 5,511,994     | 18,474,755   | (920,665)                                      | 5,511,994  | 17,554,090  
|Village Crossing 
  Skokie, IL             | 44,000,000  | 24,379,852    | 45,063,466   | 607,629                                        | 24,379,852 | 45,671,095  
|Village Square at Golf
  Boynton Beach, FL | -           | 4,536,806     | 14,000,584   | (244,194)                                      | 4,536,806  | 13,756,390  
|Wakefield Crossing
  Raleigh, NC           | 5,920,000   | 2,151,750     | 8,642,715    | (213,520)                                      | 2,151,750  | 8,429,195   
|Walk at Highwoods I
  Tampa, FL            | 13,230,000  | 7,423,113     | 16,575,476   | (545,063)                                      | 7,423,113  | 16,030,413  
|Ward's Crossing
  Lynchburg, VA            | 6,090,000   | 2,661,733     | 8,438,070    | (210,042)                                      | 2,661,733  | 8,228,028   
|West Falls Plaza 
  West Paterson, NJ      | 11,075,000  | 4,108,712     | 16,871,205   | (101,872)                                      | 4,108,712  | 16,769,333  
|West Oaks Plaza
  Ocoee, FL                | 4,900,000   | 4,514,559     | 6,706,310    | 26,852                                         | 4,514,559  | 6,733,162   
|Westside Pavilion 
  Huntsville, AL        | 10,000,000  | 11,568,840    | 34,446,710   | (2,076,134)                                    | 11,568,840 | 32,370,576  
|Willoughby Hills
  Willoughby Hills, OH    | 14,480,310  | 9,485,217     | 28,219,486   | (568,390)                                      | 9,485,217  | 27,651,096  
|Windsor Court 
  Windsor Court, CT         | 8,015,000   | 4,315,529     | 10,323,403   | (77,947)                                       | 4,315,529  | 10,245,456  
|Woodstock Square
  Atlanta, GA             | 20,700,000  | 5,516,733     | 22,079,359   | (63,928)                                       | 5,516,733  | 22,015,431  



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                                  |             | Initial Costs |              | Gross amount at which carried at end of period |           |             
|------------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | --------- | ------------
|                                                  |             |               |              |                                                |           |             
|                                                  |             |               | Buildings    | Adjustments                                    |           | Buildings   
|                                                  |             |               | And          | To                                             |           | And         
|Single-User Retail                                | Encumbrance | Land          | Improvements | Basis (A)                                      | Land      | Improvements
|BJ's Wholesale Club
  Charlotte, NC               | -           | 3,177,864     | 9,847,625    | (140,992)                                      | 3,177,864 | 9,706,633   
|Bass Pro Outdoor World
  Dania Beach, FL          | 9,100,000   | 6,938,145     | 11,281,774   | (187,260)                                      | 6,938,145 | 11,094,514  
|Bi-Lo - Sylvania
  Sylvania, GA                   | -           | 221,759       | 4,185,399    | (54,000)                                       | 221,759   | 4,131,399   
|Circuit City-Cary
  Cary, NC                      | 3,280,000   | 1,876,188     | 3,773,564    | (32,941)                                       | 1,876,188 | 3,740,623   
|Circuit City-Rome
  Rome, GA                      | 2,470,000   | 662,211       | 3,813,902    | (39,890)                                       | 662,211   | 3,774,012   
|Circuit City-Vero Beach
  Vero Beach, FL          | 3,120,000   | 1,985,167     | 3,663,277    | (37,084)                                       | 1,985,167 | 3,626,193   
|Eckerd Drug Store - 0234R
  Marietta, GA          | 1,161,350   | 1,294,035     | 749,829      | (13,781)                                       | 1,294,035 | 736,048     
|Eckerd Drug Store - 0444R
  Gainesville, GA       | 1,128,600   | 892,167       | 1,093,698    | (13,772)                                       | 892,167   | 1,079,926   
|Eckerd Drug Store - 0818R 
  Ft. Worth, TX        | 1,540,000   | 729,658       | 1,961,303    | (15,271)                                       | 729,658   | 1,946,032   
|Eckerd Drug Store - 0862R 
  Wichita Falls, TX    | 1,203,350   | 206,285       | 1,880,673    | (15,345)                                       | 206,285   | 1,865,328   
|Eckerd Drug Store - 0943R 
  Richardson, TX       | 1,338,350   | 815,280       | 1,538,616    | (14,520)                                       | 815,280   | 1,524,096   
|Eckerd Drug Store - 0963R
  Richardson, TX        | 1,316,400   | 801,828       | 1,510,787    | (14,520)                                       | 801,828   | 1,496,267   
|Eckerd Drug Store - 0968R 
  Wichita Falls, TX    | 1,035,700   | 172,896       | 1,663,673    | (15,048)                                       | 172,896   | 1,648,625   
|Eckerd Drug Store - 0980R 
  The Colony, TX       | 1,096,600   | 706,814       | 1,210,124    | (14,751)                                       | 706,814   | 1,195,373   
|Eckerd Drug Store - 2320R
  Snellville, GA        | 1,271,000   | 1,088,565     | 1,141,317    | (14,302)                                       | 1,088,565 | 1,127,015   
|Eckerd Drug Store - 2506R
  Carrolton, TX         | 1,177,000   | 856,764       | 1,216,273    | (14,751)                                       | 856,764   | 1,201,522   
|Eckerd Drug Store - 3072R
  N. Richland Hills, TX | 1,521,350   | 979,331       | 1,683,545    | (15,544)                                       | 979,331   | 1,668,001   



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                              |             | Initial Costs |              | Gross amount at which carried at end of period |           |             
|--------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | --------- | ------------
|                                              |             |               |              |                                                |           |             
|                                              |             |               | Buildings    | Adjustments                                    |           | Buildings   
|                                              |             |               | And          | To                                             |           | And         
|Single-User Retail                            | Encumbrance | Land          | Improvements | Basis (A)                                      | Land      | Improvements
|Eckerd Drug Store - 3152R
  Lake Worth, TX    | 1,021,500   | 504,862       | 1,300,072    | (15,345)                                       | 504,862   | 1,284,727   
|Eckerd Drug Store - 3169R
  River Oaks, TX    | 1,545,700   | 771,277       | 1,933,445    | (14,999)                                       | 771,277   | 1,918,446   
|Eckerd Drug Store - 3192R
  Tyler, TX         | 845,200     | 240,041       | 1,254,843    | (15,741)                                       | 240,041   | 1,239,102   
|Eckerd Drug Store - #3338
  Kissimmee, FL     | 1,406,800   | 822,077       | 1,657,329    | (14,850)                                       | 822,077   | 1,642,479   
|Eckerd Drug Store - #3350
  Oklahoma City, OK | 1,005,100   | 312,932       | 1,462,960    | (15,741)                                       | 312,932   | 1,447,219   
|Eckerd Drug Store - #3363
  Ft. Worth, TX     | 941,000     | 637,241       | 1,023,651    | (14,850)                                       | 637,241   | 1,008,801   
|Eckerd Drug Store - #3449
  Lawrenceville, GA | -           | 1,175,982     | 885,258      | (14,590)                                       | 1,175,982 | 870,668     
|Eckerd Drug Store - #3528
  Plano, TX         | 1,445,000   | 1,154,754     | 1,380,437    | (15,363)                                       | 1,154,754 | 1,365,074   
|Eckerd Drug Store - #5018
  Getzville, NY     | 1,581,660   | 856,127       | 1,948,873    | (19,362)                                       | 856,127   | 1,929,511   
|Eckerd Drug Store - #5661
  Buffalo, NY       | 1,777,076   | 959,933       | 2,184,622    | (22,623)                                       | 959,933   | 2,161,999   
|Eckerd Drug Store - #5786
  Dunkirk, NY       | 905,364     | -             | 1,720,216    | (19,372)                                       | -         | 1,700,844   
|Eckerd Drug Store - #5797
  Cheektowaga, NY   | 1,636,200   | 1,146,993     | 2,609,448    | (19,616)                                       | 1,146,993 | 2,589,832   
|Eckerd Drug Store - #6007
  Connellsville, PA | 1,636,200   | 1,069,666     | 2,433,833    | (18,271)                                       | 1,069,666 | 2,415,562   
|Eckerd Drug Store - #6036
  Pittsburgh, PA    | 1,636,200   | 1,172,637     | 2,667,687    | (17,817)                                       | 1,172,637 | 2,649,870   
|Eckerd Drug Store - #6040
  Monroeville, PA   | 1,910,700   | 1,658,487     | 3,771,081    | (21,018)                                       | 1,658,487 | 3,750,063   
|Eckerd Drug Store - #6043
  Monroeville, PA   | 1,636,200   | 1,011,958     | 2,302,775    | (18,362)                                       | 1,011,958 | 2,284,413   
|Eckerd Drug Store - #6062
  Erie, PA          | 1,418,040   | 771,094       | 1,755,759    | (18,453)                                       | 771,094   | 1,737,306   
|                                              |             |               |              |                                                |           |             



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                            |             | Initial Costs |              | Gross amount at which carried at end of period |           |             
|------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | --------- | ------------
|                                            |             |               |              |                                                |           |             
|                                            |             |               | Buildings    | Adjustments                                    |           | Buildings   
|                                            |             |               | And          | To                                             |           | And         
|Single-User Retail                          | Encumbrance | Land          | Improvements | Basis (A)                                      | Land      | Improvements
|Eckerd Drug Store - #6089
  Weirton, WV     | 1,374,408   | 754,218       | 1,717,431    | (19,089)                                       | 754,218   | 1,698,342   
|Eckerd Drug Store - #6095
  Cheswick, PA    | 1,570,752   | 851,841       | 1,939,140    | (19,452)                                       | 851,841   | 1,919,688   
|Eckerd Drug Store - #6172
  Newcastle,PA    | 1,636,200   | 878,146       | 1,998,880    | (18,453)                                       | 878,146   | 1,980,427   
|Eckerd Drug Store - #6193
  Erie, PA        | 1,636,200   | 891,033       | 2,028,147    | (17,817)                                       | 891,033   | 2,010,330   
|Eckerd Drug Store - #6199
  Erie, PA        | 1,636,200   | 1,138,640     | 2,590,478    | (18,362)                                       | 1,138,640 | 2,572,116   
|Eckerd Drug Store - #6257
  Erie, PA        | 640,000     | -             | 1,443,819    | (18,271)                                       | -         | 1,425,548   
|Eckerd Drug Store - #6286
  Erie, PA        | 1,601,450   | 1,280,323     | 2,912,248    | (19,453)                                       | 1,280,323 | 2,892,795   
|Eckerd Drug Store - #6334
  Erie, PA        | 1,636,200   | 914,751       | 2,082,011    | (17,833)                                       | 914,751   | 2,064,178   
|Eckerd Drug Store - #6392
  Irwin, PA       | 1,636,200   | 900,264       | 2,049,110    | (19,543)                                       | 900,264   | 2,029,567   
|Eckerd Drug Store - #6695
  Pittsburgh, PA  | 1,636,200   | 1,120,237     | 2,548,682    | (18,634)                                       | 1,120,237 | 2,530,048   
|Eckerd Drug Store - #1232
  Spartanburg, SC | -           | 850,144       | 1,872,737    | (21,725)                                       | 850,144   | 1,851,012   
|Eckerd Drug Store - #3912
  Concord, NC     | -           | 725,000       | 1,313,566    | 135,658                                        | 725,000   | 1,449,224   
|Eckerd Drug Store
  Gaffney, SC             | -           | 1,038,631     | 1,335,395    | 290,223                                        | 990,000   | 1,674,249   
|Eckerd Drug Store -  #6379
  Greenville, SC | 1,540,400   | 1,470,306     | 1,357,205    | (37,269)                                       | 1,470,306 | 1,319,936   
|Eckerd Drug Store - #3924
  Raleigh, NC     | -           | 1,010,000     | 1,784,871    | (65,509)                                       | 1,010,000 | 1,719,362   
|                                            |             |               |              |                                                |           |             





INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                                     |             | Initial Costs |              | Gross amount at which carried at end of period |           |             
|---------------------------------------------------- | ----------- | ------------- | ------------ | ---------------------------------------------- | --------- | ------------
|                                                     |             |               |              |                                                |           |             
|                                                     |             |               | Buildings    | Adjustments                                    |           | Buildings   
|                                                     |             |               | And          | To                                             |           | And         
|Single-User Retail                                   | Encumbrance | Land          | Improvements | Basis (A)                                      | Land      | Improvements
|Eckerd Drug Store - #8036
  Piedmont, SC             | -           | 602,021       | 1,365,882    | (14,053)                                       | 602,021   | 1,351,829   
|Eckerd Drug Store - #1095
  Spartanburg, SC          | 1,541,600   | 757,850       | 2,049,000    | (11,061)                                       | 757,850   | 2,037,939   
|Eckerd Drug Store - #3937
  Tega Cay, SC             | -           | 1,156,000     | 1,388,212    | 516,992                                        | 1,156,000 | 1,905,204   
|Eckerd Drug Store - #8049
  Woodruff, SC             | -           | 950,000       | 1,525,208    | 346,109                                        | 950,000   | 1,871,317   
|Jo-Ann Fabrics
  Alpharetta, GA                      | 2,450,000   | 2,217,303     | 2,693,824    | -                                              | 2,217,303 | 2,693,824   
|Just for Feet - Augusta
  Augusta, GA                | 1,668,000   | 697,307       | 2,357,037    | (26,283)                                       | 697,307   | 2,330,754   
|Just For Feet - Covington
  Covington, LA            | 1,885,000   | 1,218,745     | 2,228,638    | (31,180)                                       | 1,218,745 | 2,197,458   
|Just for Feet - Daytona
  Daytona Beach, FL          | 2,000,000   | 1,651,300     | 2,249,996    | (24,737)                                       | 1,651,300 | 2,225,259   
|K-Mart
  Macon, GA                                   | 4,655,000   | 1,172,127     | 7,858,709    | -                                              | 1,172,127 | 7,858,709   
|Lowe's Home 
Improvement Center
  Warner Robbins, GA | 4,845,000   | 2,430,841     | 7,000,513    | -                                              | 2,430,841 | 7,000,513   
|Monroe Shopping Center
  Monroe, NC                  | 1,915,000   | 714,882       | 2,833,326    | (25,992)                                       | 714,882   | 2,807,334   
|PETsMART - Chattanooga
  Chattanooga, TN             | 1,303,800   | 775,738       | 2,327,215    | -                                              | 775,738   | 2,327,215   
|PETsMART - Daytona Beach
  Daytona Beach, FL         | 1,361,200   | 809,449       | 2,428,348    | -                                              | 809,449   | 2,428,348   
|PETsMART - Fredricksburg
  Fredricksburg, VA         | 1,435,000   | 852,498       | 2,557,493    | -                                              | 852,498   | 2,557,493   
|                                                     |             |               |              |                                                |           |             





INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                           |                | Initial Costs |                | Gross amount at which carried at end of period |              |               
|------------------------------------------ | -------------- | ------------- | -------------- | ---------------------------------------------- | ------------ | --------------
|                                           |                |               |                |                                                |              |               
|                                           |                |               | Buildings      | Adjustments                                    |              | Buildings     
|                                           |                |               | And            | To                                             |              | And           
|Single-User Retail                         | Encumbrance    | Land          | Improvements   | Basis(A)                                       | Land         | Improvements  
|Rainbow Foods - Garland
  Garland, TX      | -              | 1,248,572     | 3,849,672      | (93,762)                                       | 1,248,578    | 3,755,904     
|Rainbow Foods - Rowlett
  Rowlett, TX      | -              | 1,128,295     | 3,475,459      | (89,104)                                       | 1,128,295    | 3,386,355     
|                                           |                |               |                |                                                |              |               
|Development Projects                       |                |               |                |                                                |              |               
|Redbud Commons
  Gastonia, NC              | -              | 1,400,000     | 1,118,724      | -                                              | 1,400,000    | 1,118,724     
|Shoppes at Chalet Suzanne
  Lake Wales, FL | -              | 3,101,849     | 2,431,918      | -                                              | 3,101,849    | 2,431,918     
|Southlake Pavilion
  Morrow, GA            | -              | -             | 718,825        | -                                              | -            | 718,825       
|Southampton Village
  Tyrone, GA           | -              | 2,183,059     | 3,561,096      | -                                              | 2,183,059    | 3,561,096     
|Southwood Plantation
  Tallahassee, FL     | -              | 847,540       | 5,734,295      | -                                              | 847,540      | 5,734,295     
|The Fountains
  Plantation, FL             | -              | -             | 336,062        | -                                              | -            | 336,062       
|Watercolor Crossing
  Tallahassee, FL      | -              | 510,228       | 1,616,919      | -                                              | 510,228      | 1,616,919     
|Westside Pavilion 
  Huntsville, AL        | -              | -             | 7,032,139      | -                                              | -            | 7,032,139     
|                                           |                |               |                |                                                |              |               
|                                           | $1,211,122,234 | $718,375,756  | $2,147,309,646 | $ (4,862,757)                                  | $720,404,674 | $2,140,417,971
|                                           | ==========     | =========     | ==========     | =========                                      | =========    | ==========    

|(A) | Adjustments to basis include additions to investment properties net of payments received under master lease agreements.  As part of several purchases, the Company will receive rent in accordance with master lease agreements pertaining to non-revenue producing spaces for periods ranging form one to two years or until the spaces are leased.  GAAP requires that these payments are received, they be recorded as a reduction in the purchase price of the properties rather than as rental income.  The adjustment to basis also includes tangible costs associated with the acquisition of investment properties.  Intangible costs reflected as an adjustment to reduce the initial investment costs consists of acquired in-place lease intangibles and acquired above market lease intangibles.  Adjustments for acquired below market lease intangibles are reflected as an adjustment to increase the initial cost.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis compares the six month period ended June 30, 2003 to the six month period ended June 30, 2002.  You should read the following discussion and analysis along with our consolidated financial statements and the related notes included in this report and in our consolidated financial statements and the related notes.  Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this annual report on Form 10-K constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995.  (See "Cautionary Note Regarding Forward-Looking Statements")

T

Overview

We were formed on September 3, 1998, to acquire and manage a diversified portfolio of real estate, primarily multi-tenant shopping centers.  We have been operating and intend to continue operating as a real estate investment trust or REIT, for Federal and state income tax purposes.  We, through entities owned or controlled directly or indirectly by us, have initially focused on acquiring properties in the southeastern states, primarily Florida, Georgia, North Carolina and South Carolina.  We have acquired and plan to continue to acquire properties in the mid-Atlantic and Northeastern states.  We may also, through entities owned or controlled directly or indirectly by us, acquire single-user retail properties in locations throughout the United States, some of which may be sale and leaseback transactions, net leased to creditworthy tenants.  Inland Retail Real Estate Advisory Services, Inc., our Advisor, has been retained to manage, for a fee, our day-to-day affairs, subject to the supervision of our Board of Directors.

Many of our properties are located in the southeastern states.  During the first half of 2003, as throughout the nation, the southeastern market experienced the economic slowdown.  The local southeastern economies have been further impacted by the continued slowdown in airline travel and tourism.  We believe that the effects of a continuing economic downturn should be mitigated by the fact that the tenants at our properties, to a large extent, consist of: (1) retailers who serve primary non-discretionary shopping needs, such as grocers and pharmacies; (2) discount chains that can compete well during an economic downturn; and (3) national tenants with strong credit ratings that can withstand a downturn.  The length and severity of any economic downturn cannot be predicted.  Our operations could be negatively impacted to the extent that an economic downturn is prolonged or becomes more severe.  The Kmart bankruptcy may negatively impact three of the four Kmart leased properties.  In April 2003, Kmart vacated the space at three of these properties and affirmed the lease at the fourth property.  We are currently discussing terms with potential replacement tenants at the three vacated locations.  No assurance can be given that we will enter into leases with these potential tenants or that the rental rate will equal or exceed the rates







Kmart paid.  Further, we will probably have to spend additional sums of money to modify the space for any new tenants.  However, we believe that Kmart's bankruptcy will not have a material adverse effect on us..  As of August 8, 2003, the Kmart stores represent approximately .8% of the gross leasable area of the properties.  We believe that the diversification of creditworthy tenants provides additional mitigation of risks.  As of August 8, 2003, the largest tenant in the portfolio, Publix, comprises approximately 6.5% of the properties GLA and approximately 4.8% of the properties rental income.

As of June 30, 2003, our operating partnership owned a portfolio of 201 properties, has agreements with unaffiliated third parties to develop five land parcels and made one loan totaling $34,500,000 to an unaffiliated third party secured by a mortgage on the property reported as a mortgage receivable.  Substantially, all of the properties in the portfolio are shopping centers located in Florida, Georgia, North Carolina, South Carolina, Virginia, Tennessee, Alabama, Louisiana, Maryland, Texas, New York, Pennsylvania, West Virginia, Connecticut, Wisconsin, Illinois, Oklahoma, Ohio and New Jersey, containing an aggregate of approximately 23,500,000 square feet of GLA.  As of June 30, 2003, approximately 93% of GLA in the properties was leased.

Critical Accounting Policies

General.

The following disclosure pertains to critical accounting policies we believe are most "critical" to the portrayal of our financial condition and results of operations which require our most difficult, subjective or complex judgments.  These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain.  Critical accounting policies discussed in this section are not to be confused with accounting principles and methods disclosed in accordance with accounting principles generally accepted in the United States or GAAP.  GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates.  This discussion addresses our judgment pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions.

Valuation and Allocation of Investment Property.In order to ascertain the value of an investment property, we take into consideration many factors which require difficult, subjective, or complex judgments to be made.  These judgments require us to make assumptions when valuing each investment property.  Such assumptions include projecting vacancy rates, rental rates, property operating expenses, capital expenditures, and debt financing rates, among other assumptions.  The capitalization rate is also a significant driving factor in determining the property valuation which requires judgment of factors such as market knowledge, historical experience, length of leases, tenant financial strength, economy, demographics, environment, property location, visibility, age, physical condition and investor return requirements, among others.  Furthermore, at the acquisition date, we require that every property acquired is supported by an independent appraisal.  All of the aforementioned factors are taken as a whole in determining the valuation.  The valuation is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole.  Should the actual results differ from our judgment, the valuation could be negatively effected.





We allocate the purchase price of the each acquired investment property between land, building and improvements, other intangibles (including acquired above market leases, acquired below market leases, and acquired value of in-place lease intangibles), and any assumed financing that is determined to be above or below market terms.  In addition, we allocate a portion of the purchase price to the value of customer relationships and as of June 30, 2003, no cost has been allocated to such relationships.  The allocation of the purchase price is an area that requires judgment and significant estimates.  We use the information contained in the independent appraisal obtained at acquisition as the primary basis for the allocation to land and building and improvements.  We determine whether any financing assumed is above or below market based upon comparison to financing terms for similar investment properties currently available in the marketplace.  We also allocate a portion of the purchase price to the estimated acquired in-place lease intangibles.  The aggregate value of in-place lease intangibles is measured based on the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant.  We use independent appraisals or management's estimates to determine the respective property values.  Factors considered by management in our analysis include an estimate of carrying costs during the expected lease-up periods under current market conditions and costs to execute leases.  In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses as well as estimates of lost rentals at market rates during the expected lease-up periods of up to 24 months.  Management also estimates costs to execute leases including leasing commissions, legal and other related expenses.  We also compare each acquired lease intangible at the acquisition date to those generally prevalent in the market and we consider various factors including geographical location, size of the leased premise, location of leased space within the investment property, tenant profile, and the credit risk of the tenant in determining whether the acquired lease is above or below market.  After an acquired lease is determined to be above or below market lease intangibles, we allocate a portion of the purchase price to acquired above or below market lease intangibles based upon the present value of the difference between the contractual lease rate and the estimated market rate.  The determination of the discount rate used in the present value calculation is based upon the "risk free rate."   This discount rate is a significant factor in determining the market valuation which requires our judgment of subjective factors such as market knowledge, economic conditions, demographics, location, visibility, age and physical condition of the property.

When we identify certain factors that may cause a negative valuation, we conduct an impairment analysis in accordance with Statement of Financial Accounting Standards No. 144 or FAS 144 to ensure that the property's carrying value does not exceed its fair value.  If this were to occur, we are required to record an impairment loss.

The valuation and allocation of purchase price, and possible subsequent impairment of investment properties, is a significant estimate that can and does change based on our continuous process of analyzing each property and reviewing assumptions about uncertain inherent factors, as well as the economic condition of the property at a particular point in time.

Cost Capitalization, Depreciation and Amortization Policies. Our policy is to review expenses paid and capitalize any items exceeding $5,000 which were deemed to be an upgrade or a tenant improvement.  These costs are capitalized and are included in the investment property's classification as an asset to buildings and improvements.  In addition, we capitalize costs incurred during the development period, including direct costs and indirect costs such as construction, insurance, architectural costs, legal fees, interest and other financing costs, and real estate taxes.  We cease capitalization of indirect costs once we consider the property to be substantially complete and available for occupancy.It is our judgment that when the anchor tenant receives its certificate of occupancy or when over 60% of the tenants receive their certificates of occupancy, the development is deemed to be substantially complete.





Buildings and improvements are depreciated on a straight-line basis based upon estimated useful lives of 30 years for buildings and improvements and 15 years for site improvements.  Acquired in-place lease intangibles are amortized over the expected term of the related lease as a component of amortization expense.  Leasing costs and tenant improvements are amortized on a straight-line basis over the life of the related lease as a component of amortization expense.

A portion of the purchase price allocated to acquired above market lease intangibles and acquired below market lease intangibles are amortized on a straight-line basis over the life of the related lease as an adjustment to rental income.  Amortization pertaining to the above market lease intangibles of $1,383,703 was applied as a reduction to rental income for the six month period ending June 30, 2003.  Amortization pertaining to the below market lease intangibles of $1,710,388 was applied as an increase to rental income for the six month period ending June 30, 2003.  The portion of the purchase price allocated to acquired in-place lease intangibles are amortized on a straight-line basis over the life of the related lease.  We incurred amortization expense pertaining to acquired in-place lease intangibles of $1,322,317 for the six month period ending June 30, 2003.

Acquired value of below market l



Revenue recognition.We recognize rental income on a straight-line basis over the term of each lease. The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease agreements is recorded as deferred rent receivable and is included as a component of accounts and rents receivable in the accompanying consolidated balance sheets.  We anticipate collecting these amounts over the terms of the leases as scheduled rent payments are made.

Reimbursements from tenants for recoverable real estate tax and operating expenses are accrued as revenue in the period the applicable expenditures are incurred.  We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period. Should the actual results differ from our judgment, the estimated reimbursement could be negatively effected and would be adjusted appropriately.

In conjunction with certain acquisitions, we receive payments under master lease agreements pertaining to non-revenue producing spaces either at the time of or subsequent to the purchase.  GAAP requires that as these payments are received, they be recorded as a reduction in the purchase price rather than as rental income.  These master leases were established at the time of purchase in order to mitigate the potential negative effects of rent and occupancy assumptions used in the valuation of the investment property.  Master lease payments are received through a draw of funds escrowed at the time of purchase and are for a period from one to three years.  There is no assurance that upon the expiration of the master lease agreements, the valuation factors, assumed by us,  pertaining to rent and occupancy will be met.  Should the actual results differ from our judgment, the property valuation could be negatively or positively effected.

Valuation of accounts and rents receivable.  We take into consideration certain factors that require judgments to be made as to the collectability of receivables.  Collectability factors taken into consideration are the amount outstanding, payment history, and financial strength of each tenant, which taken as a whole determines the valuation.  There is no assurance that assumptions made by us will be met.  Should the actual collection results differ from our judgment, the property valuation could be negatively or positively effected.







Notes Receivable.  We have entered into various notes receivable with unaffiliated third parties.  The notes receivable are generally secured by a first mortgage on the underlying real estate, and in come cases by personal guarantees of the borrower.  The underlying real estate may be in the process of being developed and leased or may be fully operational.  Additionally, we typically enter into options to acquire the underlying real estate subject to certain conditions including lease-up parameters and other due diligence.  The classification of such instruments as notes receivable versus investment in real estate is an area that is subjective in nature.  We individually evaluate each note receivable to ascertain whether the facts and circumstances that supported our initial classification have changed.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51," which provides new accounting guidance on when to consolidate a variable interest, as defined in the interpretation.  The interpretation applies immediately to variable interests in variable interest entities created or obtained after January 31, 2003.  The interpretation requires certain disclosures in the financial statements, issued after January
31, 2003, if it is reasonably possible that we will consolidate or disclose information about variable interest entities when the interpretation becomes effective.

We have accounted for fundings to a borrower as a mortgage receivable.  Because of the amounts funded in relation to the equity investment of the borrower in the underlying property, it is reasonably possible that we will be required to consolidate or disclose additional information with regard to the underlying investment property's financial position when the statement becomes effective.  Our maximum exposure to loss as a result of our
mortgage receivable would be the amount of the receivable balance outstanding at June 30, 2003 which amounts to approximately $34,500,000.



Liquidity and Capital Resources

General.

Our principal demands for funds have been for property acquisitions, either directly or through investment interests, for the payment of operating expenses and dividends, and for the payment of interest on outstanding indebtedness and other investments. Generally, cash needs for items other than property acquisitions have been met from operations, and property acquisitions have been funded by public offerings of our shares of common stock.  However, there may be a delay between the sale of the shares and our purchase of properties, which may result in a delay in the benefits to investors of returns generated from property operations.  Our Advisor evaluates potential additional property acquisitions and Inland Real Estate Acquisitions, Inc., one of the affiliates of our sponsor, engages in negotiations with sellers on our behalf.





Investors should be aware, that after a purchase contract is executed which contains specific terms, the property will not be purchased until due diligence, which includes review of the title insurance commitment, an appraisal and an environmental analysis, is successfully completed. In some instances, the proposed acquisition still requires the negotiation of final binding agreements, which may include financing documents.  During this period, we may decide to temporarily invest any unused proceeds from the offering in certain investments that could yield lower returns than other investments, such as the properties. These lower returns may affect our ability to make distributions.

Potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of properties, as well as undistributed funds from operations.  We anticipate that during the current year we will (i) acquire additional existing shopping centers, (ii) develop additional shopping center sites and (iii) continue to pay distributions to stockholders, and each is expected to be funded cash flows from operating activities, financings and other external capital resources available to us.

Our leases typically provide that the tenant bears responsibility for substantially all property costs and expenses associated with ongoing maintenance and operation, including utilities, property taxes and insurance. In addition, in some instances our leases provide that the tenant is responsible for roof and structural repairs.  Certain of our properties are subject to leases under which we retain responsibility for certain costs and expenses associated with the property.  We anticipate that capital demands to meet obligations related to capital improvements with respect to properties will be minimal for the foreseeable futureand can be met with funds from operations and working capital.

If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.



We believe that our current capital resources (including cash on hand) and anticipated financings are sufficient to meet our liquidity needs for the foreseeable future.

Liquidity

Offerings.On February 11, 1999, we commenced an Initial Public Offering on a best efforts basis of up to (i) 50,000,000 shares of common stock to the public at a price of $10.00 per share, (ii) 4,000,000 shares to participants in our distribution reinvestment program or  DRP at a price of $9.50 per share, (iii) 2,000,000 soliciting dealer warrants  issuable to Inland Securities Corporation, the managing dealer, at the rate of one soliciting dealer  warrant (for a price of $.0008 per warrant) for each 25 shares sold during the Initial Offering, and (iv) 2,000,000 shares issuable upon the exercise of the soliciting dealer warrants issued during the Initial Offering at a price of $12.00 per share.  The Initial Offering terminated on January 31, 2001 and a total of 13,687,349 shares were sold to the public resulting in gross proceeds of $136,454,948.  As of January 31, 2001, we had repurchased 60,475 shares for $547,301 pursuant to the Share Repurchase Program or SRP. In addition, the Advisor purchased 20,000 shares for $200,000 preceding the commencement of the Initial Offering.

On February 1, 2001, we commenced a Follow-On Public Offering, our  First Follow-On Offering, on a best efforts basis of up to (i) 50,000,000 additional shares at a price of $10.00 per share, (ii) 4,000,000 additional shares pursuant to the DRP at a price of $9.50 per share, (iii) 2,000,000 soliciting dealer warrants, and (iv) 2,000,000 shares issuable upon exercise of the soliciting dealer warrants, all on substantially the same terms as in the Initial Offering.  The First Follow-On Offering expired on February 1, 2002, but was extended by us to a date no later than February 1, 2003.  As of August 29, 2002, we had sold 50,000,000 shares from our First Follow-On Offering resulting in gross proceeds of $497,842,917, and had repurchased 182,318 shares for $1,719,927 pursuant to the Share Repurchase Program, thereby completing the First Follow-On Offering.





On June 7, 2002, concurrent with the First Follow-On Offering, we commenced a Second Follow-On Public Offering on a best efforts basis of up to (i) 150,000,000 additional shares at a price of $10.00 per share, (ii) 12,000,000 additional shares pursuant to the DRP at a price of $9.50 per share, (iii) 6,000,000 soliciting dealer warrants, and (iv) 6,000,000 shares issuable upon exercise of the soliciting dealer warrants, all on substantially the same terms in the Initial Offering. As of August 13, 2003, we have received subscriptions for a total of 150,000,000 shares sold from the Second Follow-On Offering resulting in gross proceeds of $1,497,324,695 and repurchased 617,131 shares for $5,826,076 pursuant to the Share Repurchase Program, thereby completing the Second Follow-On Offering.  Collectively the Initial Offering, First Follow-On Offering and Second Follow-On Offering are referred to as the Offerings.

As of June 30, 2003 and December 31, 2002, subscriptions for a total of 211,223,819 and 119,713,115 shares, respectively, had been received from the public, which include the 20,000 shares issued to the Advisor.  In addition, we distributed 6,049,526 and 3,025,137 shares pursuant to our DRP as of June 30, 2003 and 2002, respectively.  As of June 30, 2003 we have repurchased 793,588 shares and have issued soliciting dealer warrants to acquire 8,451,364 shares.  As a result of such sales and repurchases, we have received a net total of $2,156,103,936 of gross offering proceeds as of June 30, 2003.  Our Advisor has guaranteed payment of all public offering expenses (excluding selling commissions, the marketing contribution and the due diligence expense allowance) in excess of 5.5% of the gross offering proceeds from the offerings or all organization and offering expenses (including selling commissions) which together exceeds 15% of the gross offering proceeds.  As of June 30, 2003 and December 31, 2002, organizational and offering costs totaling $211,885,317 and $125,224,459, respectively, did not exceed these limitations.  These costs did not exceed such limitations upon completion of the Initial Offering, First Follow-On Offering or the Second Follow-On Offering.

As of June 30, 2003, 8,451,364 soliciting dealer warrants were sold to the managing dealer and none of the soliciting dealer warrants have been exercised for shares.

Lines of Credit. We also maintained three lines of credit in the aggregate amount of $264 million, of which $34 million was outstanding as of June 30, 2003.  The first line of credit for $14 million is secured by the Fountains investment property while the second line of credit must be secured by individual first mortgages and can be drawn up to a maximum of $50 million.  As of June 30, 2003, $20 million is drawn on the second line of credit and secured by Barrett Pavilion.  In addition, a $200 million line of credit was granted for which no funds were outstanding as of June 30, 2003.  The $200 million line of credit requires the maintenance of financial covenants for which we were in compliance for the reporting period ending June 30, 2003, and does not require specific assets to secure the line.



Stockholder Liquidity.We provide the following programs to facilitate investment in the shares and to provide limited liquidity for stockholders until such time as a market for the shares develops.





The DRP allows stockholders who purchase shares pursuant to the offerings to automatically reinvest distributions by purchasing additional shares from us.  Such purchases will not be subject to selling commissions or the marketing contribution and due diligence expense allowance and will be sold at a price of $9.50 per share.  As of June 30, 2003, we distributed 6,049,526 shares pursuant to the DRP for an aggregate of $57,470,495.

Subject to certain restrictions, the Share Repurchase Program provides existing stockholders with limited, interim liquidity by enabling them to sell shares back to us at the following prices:

One year from the purchase date, at $9.25 per share;

Two years from the purchase date, at $9.50 per share;

Three years from the purchase date, at $9.75 per share; and

Four years from the purchase date, at $10.00 per share, or a price equal to 10 times our "funds available for distribution" per weighted average shares outstanding for the prior calendar year.

Shares purchased by us will not be available for resale.  As of June 30, 2003, 793,588 shares have been repurchased for an aggregate cost of $7,471,853.

Capital Resources

We expect to meet our short-term operating liquidity requirements generally through our net cash provided by property operations.  We also expect that our properties will generate sufficient cash flow to cover our operating expenses plus pay a monthly distribution on weighted average shares.  Operating cash flows are expected to increase as additional properties are added to our portfolio.

We believe we can achieve the optimum balance between risk and return to our share holders by leveraging our properties at approximately 50% of their value.  We also believe that we can borrow at the lowest overall cost of funds by placing individual financing on each of our properties.  Accordingly, mortgage loans have generally been placed on each property at the time that the property is purchased, or shortly thereafter, with the property securing the financing.

The majority of our loans require monthly payments of interest only, although some loans require principal and interest payments as well as reserves for taxes, insurance, and certain other costs.  Interest on variable-rate loans are currently based on LIBOR plus a spread ranging from 150 to 185 basis points.  Fixed-rate loans bear interest based on corresponding treasury instruments plus a spread of 130 to 175 basis points.  Variable-rate loans may be prepaid without penalty, while fixed-rate loans may be prepaid with a penalty after specific lockout periods.

For the six months ended June 30, 2003, we closed on or assumed debt with a principal amount of $530,644,000, net of debt repaid.  The average costs of funds at June 30, 2003 were approximately 4.88%.  We also maintained three lines of credit in the aggregate amount of $264 million, of which $34 million was outstanding as of June 30, 2003.  The first line of credit for $14 million is secured by the Fountains investment property while the second line of credit must be secured by individual first mortgages and can be drawn up to a maximum of $50 million.  As of June 30, 2003, $20 million is drawn on the second line of credit and secured by Barrett Pavilion.  In addition, a $200 million line of credit was granted for which no funds were outstanding as of June 30, 2003.  The $200 million line of credit requires the maintenance of financial covenants for which we were in compliance for the reporting period ending June 30, 2003, and does not require specific assets to secure the line.



Certain debt is assumed at acquisition and may require interest payments at rates above or below current market rates of interest.  At assumption, a determination is made of above or below market interest to be incurred over the life of the instrument and reported as a premium or discount on the debt.  The premium or discount is then amortized on a straight-line basis over the life of the debt instrument as a reduction or increase to the interest expense, resulting in interest expense being recognized at a rate based on market conditions.





Although the loans placed are generally non-recourse, occasionally, when it is deemed to be advantageous, we may guarantee all or a portion of the debt on a full-recourse basis.  At times we have borrowed funds financed as part of a cross-collateralized package, with cross-default provisions, in order to enhance the financial benefits.  In those circumstances, one or more of the properties may secure the debt of another of our properties.

Individual decisions regarding interest rates, loan-to-value, fixed versus variable-rate financing, maturity dates and related matters are based on the condition of the financial markets at the time the debt is placed.

Distributions are determined by our Board of Directors and are dependent on a number of factors, including the amount of funds available for distribution, our financial condition, any decision by our Board of Directors to reinvest funds rather than to distribute the funds, our capital expenditures, the annual distribution required to maintain REIT status under the Internal Revenue Code and other factors the Board of Directors may deem relevant.

Cash Flows From Operating Activities

Net cash generated from operating activities was approximately $78,618,600 and $31,514,500 for the six month period ended June 30, 2003 and 2002, respectively.  The increase in net cash provided by operating activities for the six month period ended June 30, 2003 compared to prior periods is due primarily to the additional rental revenues and income generated from the operations of 149 properties owned at the beginning of the quarter plus 52 properties purchased during thequarter ended June 30, 2003, compared to the rental revenues and income generated from the operations of 48 properties owned for the period ended June 30, 2002 plus 14 properties purchased during the same period.





Cash Flows From Investing Activities

Cash flows used in investing activities was approximately $1,263,813,000 and $255,616,100 for the six month period ended June 30, 2003 and 2002, respectively.  The cash flows used in investing activities were primarily due to the acquisition of 52 and 14 properties for approximately $1,185,454,000 and $243,770,000 during the six month period ended June 30, 2003 and 2002, respectively.

Our investment in securities at June 30, 2003 and 2002 consists principally of equity investments in various real estate investment trusts and is classified as available-for-sale securities, recorded at fair value.  We purchased investment securities in the six month period ended June 30, 2003 in the amount of approximately $45,000 and decreased our margin account by approximately $36,000.  We purchased investment securities of approximately $923,000 and decreased our margin account by approximately $42,000 for the six months ended in June 30, 2002.

In 2003, we anticipate incurring construction costs related to several development projects which were in progress as of June 30, 2003 as well as others which will commence in 2003. The expected aggregate costs to be paid related to the projects in process at June 30, 2003 are approximately $62,619,000 of which approximately $31,113,000 had been incurred as of June 30, 2003.





Cash Flows From Financing Activities

Cash provided by financing activities was approximately $1,238,111,000 and $281,456,500 for the six month period ended June 30, 2003 and 2002, respectively.  We generated proceeds from the sale of shares, net of offering costs and the repurchase of shares, of approximately $850,856,000 and $260,159,000 for the six month period ended June 30, 2003 and 2002, respectively.  We also generated approximately $530,184,000 and $213,199,000 from the issuance of new mortgages secured by seventy-six and 6 of our properties for the six month period ended June 30, 2003 and 2002, respectively.  We paid approximately $61,459,000 and $17,864,000 in dividends to our stockholders for the six month period ended June 30, 2003 and 2002, respectively.  The increased shares outstanding resulted in the increases in dividends declared for the six month period ended June 30, 2003.  We also used approximately $72,437,000 and $170,926,000 for the paydown of seven and one mortgages secured by our properties for the six month period ended June 30, 2003 and 2002, respectively.

We are exposed to interest rate changes primarily as a result of our long-term debt used to maintain liquidity and fund capital expenditures and expansion of our real estate investment portfolio and operations.  Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.  To achieve our objectives we borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to current market fixed rates at the time of conversion.

Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts and weighted average interest rates by year and expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.

|                               | 2003       | 2004       | 2005       | 2006       | 2007        | Thereafter 
|------------------------------ | ---------- | ---------- | ---------- | ---------- | ----------- | -----------
|                               |            |            |            |            |             |            
|Maturing debt:                 |            |            |            |            |             |            
|Fixed rate debt                | 11,665,563 | 9,974,977  | 29,127,208 | 44,035,195 | 67,055,505  | 760,244,477
|Variable rate debt             | 20,000,000 | 30,699,900 | 5,000,000  | 29,337,500 | 168,006,909 | 35,975,000 
|                               |            |            |            |            |             |            
|Average interest rate on debt: |            |            |            |            |             |            
|maturing debt:                 |            |            |            |            |             |            
|Fixed rate debt                | 7.61%      | 7.93%      | 7.55%      | 6.80%      | 6.74%       | 5.14%      
|Variable rate debt             | 3.19%      | 3.53%      | 2.97%      | 2.96%      | 2.84%       | 2.98%      



Approximately $289,019,000, or 24%, of our mortgages payable at June 30, 2003 have variable interest rates averaging 2.97%.  An increase in the variable interest rate on certain mortgages payable constitutes a market risk. If interest rates increase by 1%, based on debt outstanding as of June 30, 2003, interest expense increases by approximately $2,900,000



As we continue to acquire properties, matching our capital sources and uses is an important aspect of our business.  As of August 8, 2003



Effects of Transactions with Related and Certain Other Parties



Our Advisor and its affiliates are entitled to reimbursement for salaries and expenses of employees of our Advisor and its affiliates relating to the offerings.  In addition, an affiliate of our Advisor is entitled to receive selling commissions, and the marketing contribution and due diligence expense allowance from us in connection with the offerings.  Such costs are offset against the stockholders' equity accounts. Such costs totaled $82,716,757 and $79,614,867 for the period ended June 30, 2003 and December 31, 2002, respectively, of which $197,605 and $1,309,885 were unpaid at June 30, 2003, and December 31, 2002.  Additionally, at June 30, 2003, $394,358 of selling commissions had been advanced to and were due from the affiliate of our Advisor and $198,100 was payable to our Advisor and its affiliates for salaries and expenses.

Our Advisor and its affiliates are entitled to reimbursement for general and administrative expenses of our Advisor and its affiliates relating to our administration.  Such costs are included in general and administrative expenses to affiliates, professional services to affiliates, and acquisition cost expenses to affiliates, in addition to costs that were capitalized pertaining to property acquisitions.  During the three month period ended June 30, 2003 and June 30, 2002, we incurred $942,969 and $98,624 of these costs, respectively.  During the six month period ended June 30, 2003 and June 30, 2002 we incurred $1,525,718 and $246,106 of these costs, respectively, of which $713,861 and $515,204 remained unpaid as of June 30, 2003 and December 31, 2002, respectively.

An affiliate of our Advisor provides loan servicing to us for an annual fee.  Such costs are included in property operating expenses to affiliates.  The agreement allows for annual fees totaling .03% of the first $1 billion in mortgage balance outstanding and .01% of the remaining mortgage balance, payable monthly.  Such fees totaled $119,360 and $64,365 for the six month period ended June 30, 2003 and December 31, 2002, respectively and $66,642 and $34,191 for the three month period ended June 30, 2003 and June 30, 2002, respectively.

Our Advisor has contributed $200,000 to our capital for which it received 20,000 shares.

We used the services of an affiliate of our Advisor to facilitate the mortgage financing that we obtained on some of the properties purchased.  Such costs are capitalized as loan fees and amortized over the respective loan term.  As of June 30, 2003 and 2002 we paid loan fees totaling $847,172 and $148,123, respectively, to this affiliate.





We pay an advisor asset management fee of not more than 1% of our net asset value. Our net asset value is defined as the total book value of our assets invested in equity interests and loans receivable secured by real estate, before reserves for depreciation, reserves for bad debt or other similar non-cash reserves, reduced by any mortgages payable on the respective assets. We compute our net asset value by taking the average of these values at the end of each month for which we are calculating the fee.  The fee is payable quarterly in an amount equal to 1/4 of 1% of net asset value as of the last day of the immediately preceding quarter.  For any year in which we qualify as a REIT, our advisor must reimburse us for the following amounts if any: (1) the amount by which the sum of our total operating expenses, the sum of the advisor asset management fee plus other operating expenses paid during the previous fiscal year exceed the greater of: (i) 2% of our average invested assets for that fiscal year.  (Average invested assets is the average of the total book value of our assets invested in equity interest and loans secured by real estate, before depreciation, reserve for bad debt or other similar non-cash reserves.  We will compute the average invested assets by taking the average of these values at the end of each month for which we are calculating the fee), or (ii) 25% of our net income, before any additions to or allowances for reserves, depreciation, amortization, bad debts or other similar non-cash reserves and before any gain from the sale of our assets, for that fiscal year; plus (2) an amount, which will not exceed the advisor asset management fee for that year, equal to any difference between the total amount of distributions to stockholders for that year and a 7% minimum annual return on the net investment of stockholders.  For the three month period ended June 30, 2003 and 2002, we incurred $3,920,000 and $1,050,000, respectively of asset management fees.  Additionally, for the six month period ended June 30, 2003 and 2002 we incurred $6,693,960 and $1,847,000 of asset management fees, respectively, of which $6,693,960 and $2,000,000 was unpaid at June 30, 2003 and December 31, 2002, respectively.

The property managers, entities owned principally by individuals who are affiliates of our Advisor, are entitled to receive property management fees totaling 4.5% of gross operating income, for management and leasing services.  We incurred and paid property management fees of $5,124,817 and $1,946,329 for the six month period ended June 30, 2003 and 2002, respectively, and $2,883,642 and $1,024,831 for the three month period ended June 30, 2003 and 2002, respectively.  None remained unpaid at June 30, 2003 and December 31, 2002.

Other Related Party Transactions.In December 2001 and January 2002, an affiliate of our Advisor guaranteed the mortgages payable pertaining to Douglasville Pavilion, Southlake Pavilion, Fayetteville Pavilion, and Sarasota Pavilion, all of which matured in July 2002.  We agreed to pay the affiliate 1/8% per annum of the guaranteed amount for providing such a guarantee.  For the six and three month periods ended June 30, 2002, $56,639 and $28,320 of guarantee fees related to the LLCs had been incurred and paid.  All of the respective mortgages payable were paid off in June 2002.





Results of Operations

General

Selected Financial Data

The following discussion is based primarily on our consolidated financial statements as of June 30, 2003 and December 31, 2002, and for the six month period ended June 30, 2003 and 2002.  The schedule excludes the following development projects: Redbud Commons, Shoppes at Chalet Suzanne, Southampton Village, Southwood Plantation, and Watercolor Crossing.



|Quarter Ended      | Properties Purchasedper Quarter | Square FeetAcquired | Purchase Price  
|------------------ | ------------------------------- | ------------------- | ----------------
|March 31, 1999     | None                            | N/A                 | N/A             
|June 30, 1999      | 2                               | 336,746             | $     20,298,291
|September 30, 1999 | 5                               | 803,169             | 80,426,866      
|December 31, 1999  | 2                               | 302,602             | 26,490,171      
|March 31, 2000     | 1                               | 117,723             | 8,547,758       
|June 30, 2000      | 1                               | 282,137             | 34,332,135      
|September 30, 2000 | 1                               | 231,326             | 20,928,655      
|December 31, 2000  | 0                               | N/A                 | N/A             
|March 31, 2001     | 4                               | 366,095             | 37,123,001      
|June 30, 2001      | 6                               | 525,279             | 64,513,807      
|September 30, 2001 | 3                               | 379,569             | 33,864,561      
|December 31, 2001  | 14                              | 2,496,876           | 267,613,756     
|March 31, 2002     | 9                               | 1,239,771           | 136,394,927     
|June 30, 2002      | 15                              | 1,783,398           | 177,023,351     
|September 30, 2002 | 12                              | 1,231,910           | 159,865,564     
|December 31, 2002  | 31                              | 3,454,085           | 424,672,664     
|March 31, 2003     | 43                              | 3,308,027           | 483,288,138     
|June 30, 2003      | 52                              | 6,641,837           | 859,709,103     
|Total              | 201                             | 23,500,550          | 2,835,092,748   
|                   | ====                            | ========            | ===========     



Rental Income.







Interest and Dividend Income.  Interest and dividend income consists of interest earned from short term investments, investments in securities and mortgage receivables that are held by us.  Interest and dividend income increased to $3,259,331 for the six month period ended June 30, 2003 from $925,860 for the six month period ended June 30, 2002.  This results primarily from increases in income and dividends from investment in securities, as well as interest earned on mortgage notes receivable.

Other Income.  Other income decreased to $350,511 for the six month period ended June 30, 2003 from $546,186 for the six month period ended June 30, 2002.  This decrease is primarily due to income received in 2002 pertaining to our investment in the joint venture of Stonebridge Square.  In June 2002, the Company acquired the venture partner's interest in Stonebridge and accordingly has consolidated the property operations.

Professional Services.  Professional services consist of fees to accountants and lawyers. Professional services expense increased to $607,520 for the six month period ended June 30, 2003 from $225,977 for the six month period ended June 30, 2002.  This increase results from additional professional services required as we raise capital, acquire properties and grow our portfolio of investment properties.  Accounting fees comprise the majority of the increase in professional services expense.

General and Administrative Expenses to Affiliates. General and administrative expenses consist of salaries and computerized information services costs reimbursed to affiliates for maintaining our accounting and investor records.  These expenses increased to $559,630 for the six month period ended June 30, 2003 from $357,874 for the six month period ended June 30, 2002. This increase results from the additional services required as we grow our portfolio of investment properties.  Salaries reimbursed to affiliates for maintaining our accounting and investor records account for the majority of the increase.

General and Administrative Expenses to Non-Affiliates. General and administrative expenses to non-affiliates consist of insurance, postage, and printing costs.  These expenses incurred amounted to $493,182 for the six month period ended June 30, 2003 from $288,407 for the six month period ended June 30, 2002.  The expense results from services required as we grow our portfolio of investment properties.









Mortgage Interest to Non-Affiliates.  Mortgage interest to non-affiliates increased to $22,261,025 for the six month period ended June 30, 2003 from $9,982,058 for the six month period ended June 30, 2002.  This increase is due to the financing of additional properties owned and operated during the six month period ended June 30, 2003 as compared to the six month period ended June 30, 2002.  The increase in interest expense was partially offset by lower interest rates on the new fixed rate mortgage loans and the floating rate mortgage loans.





Additional Information





As of August 8, 2003, three tenants individually occupying in excess of 10,000 square feet at seven properties are currently in bankruptcy proceedings and are currently undergoing financial restructuring.  None of these tenants individually or in aggregate represents greater than 5% of our space or revenue.  We have four separate properties that have leases with Kmart, who has filed for Chapter 11 bankruptcy protection.  In April 2003, Kmart vacated the space at three of these properties and affirmed the lease at the fourth property.  We are currently discussing terms with potential replacement tenants at the three vacated locations.  No assurance can be given that we will enter into leases with these potential tenants or that the rental rate will equal or exceed the rates Kmart paid.  Further, we will probably have to spend additional sums of money to modify the space for any new tenants.  However, we believe that Kmart's bankruptcy will not have a material adverse effect on us.







The table below includes individual tenants that occupy in excess of 10,000 square feet and are currently in bankruptcy proceedings or are currently undergoing financial restructuring, and whose space has not been re-leased.



|Property Name           | Tenant Name   | Bankruptcy/
Restructuring | Square Foot | AnnualRent | Gross 
Receivable at 6/30/03 | ReserveBalance* | Occupancy Status
|----------------------- | ------------- | ------------------------- | ----------- | ---------- | ---------------------------- | --------------- | ----------------
|Columbiana Station      | Zany Brainy   | Bankruptcy                | 10,600      | 151,050    | 72,021                       | 72,021          | Vacant          
|Creekwood Crossing      | Kmart         | Bankruptcy                | 103,015     | 875,628    | 117,732                      | 117,732         | Vacant          
|Kmart / Macon           | Kmart         | Bankruptcy                | 102,098     | 907,349    | 151,225                      | 151,225         | Vacant          
|Lake Walden Square      | Kmart         | Bankruptcy                | 91,266      | 383,317    | --                           | --              | Vacant          
|Skyview Plaza           | Kmart         | Bankruptcy                | 95,810      | 271,979    | 30,445                       | 30,445          | Occupied (1)    
|Rainbow Foods - Garland | Rainbow Foods | Bankruptcy                | 63,117      | 426,040    | --                           | --              | Occupied (2)    
|Rainbow Foods - Rowlett | Rainbow Foods | Bankruptcy                | 70,576      | 476,388    | --                           | --              | Occupied (2)    

*   The amount shown represents the amount reserves recorded by us against tenant receivables at June 30, 2003.

1. The tenant has affirmed the lease.
2. The tenant has neither affirmed nor rejected the lease	.

We have purchased certain properties that have been identified to have an environmental concern.  Substances found on these properties are considered contaminants under Federal environmental law.  We evaluate the risks on an individual property basis, investigate and sometimes purchase separate environmental insurance, pursue indemnification agreements and/or claims against others, and pursue potentially available state funds for clean up purposes.  As a result, we believe we are adequately protected against losses related to these environmental concerns.

Funds from Operations

Cash generated from operations is not equivalent to our net operating income as determined under Generally Accepted Accounting Principles in the United States of America ("GAAP"). Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts or NAREIT, an industry trade group, has promulgated a standard known as "Funds from Operations" or "FFO" for short, which it believes more accurately reflects the operating performance of a REIT such as us. As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation on real property and amortization, and after adjustments for unconsolidated partnerships and joint ventures in which the REIT holds an interest.  We have adopted the NAREIT definition for computing FFO because management believes that, subject to the following limitations, FFO provides a basis for comparing our performance and operations to those of other REITs.  The calculation of FFO may vary from entity to entity since capitalization and expense policies tend to vary from entity to entity.  Items that are capitalized do not impact FFO, whereas items that are expensed reduce FFO.  Consequently, our presentation of FFO may not be comparable to other similarly-titled measures presented by other REITs.  FFO is not intended to be an alternative to  "Net Income" as an indicator of our performance nor to  "Cash Flows from Operating Activities" as determined by GAAP as a measure of our capacity to pay distributions.  We use FFO to compare our performance to that of other REITs in our peer group.  Additionally, we use FFO in conjunction with our acquisition policy to determine investment capitalization strategy.  FFO is calculated as follows:



|                                              |   | Six months ended
June 30, |   | Six months ended
June 30,
|--------------------------------------------- | - | ------------------------- | - | -------------------------
|                                              |   | 2003                      |   | 2002                     
|Net income                                    | $ | 31,706,978                | $ | 11,209,139               
|Depreciation                                  |   | 28,805,512                |   | 10,613,902               
|Amortization related to investment properties |   | 1,379,902                 |   | 30,405                   
|Funds from operations (1)                     | $ | 61,892,392                | $ | 21,853,446               
|                                              |   | ========                  |   | ========                 

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



The following table lists the approximate physical occupancy levels for the Company's investment properties as of June 30, 2003, December 31, 2002, 2001, and 2000.  N/A indicates the property was not owned by the Company at the end of the period.

|                                          |                    | June 30, | December 31,
|----------------------------------------- | ------------------ | -------- | ------------
|                                          |                    | 2003     | 2002        
|Property                                  | Location           | (%)      | (%)         
|440 Commons                               | Jersey City, NJ    | 100      | N/A         
|Aberdeen Square                           | Boynton Beach, FL  | 98       | 100*        
|Abernathy Square                          | Atlanta, GA        | 96       | 91          
|Acworth Avenue 
   Retail Shopping Center | Acworth, GA        | 73       | 73          
|Anderson Central                          | Anderson, SC       | 99       | 99          
|Barrett Pavilion                          | Kennesaw, GA       | 97       | N/A         
|Bartow Marketplace                        | Cartersville, GA   | 100      | 100         
|Bass Pro Outdoor                          | Dania Beach, FL    | 100      | 100         
|Bi-Lo Asheville                           | Chandler, NC       | 97       | N/A         
|Bi-Lo at Shelmore                         | Mt. Pleasant, SC   | 100      | N/A         
|Bi-Lo Southern Pines                      | Southern Pines, NC | 84*      | N/A         
|Bi-Lo Sylvania                            | Sylvania, GA       | 100      | N/A         
|Birkdale Village                          | Huntersville, NC   | 62*      | N/A         
|BJ's Wholesale Club                       | Charlotte, NC      | 100      | N/A         
|Boynton Commons                           | Boynton Beach, FL  | 100      | 100         
|Brandon Blvd Shoppes                      | Valrico, FL        | 100      | 89*         
|Brick Center Plaza                        | Brick, NJ          | 100      | N/A         
|Bridgewater Marketplace                   | Orlando, FL        | 100      | 96          
|Camp Hill Center                          | Camp Hill, PA      | 100      | N/A         
|Capital Crossing                          | Raleigh, NC        | 100      | N/A         
|Casselberry Commons                       | Casselberry, FL    | 99       | 94          
|Chatham Crossing                          | Siler City, FL     | 100      | 100         
|Chesterfield Crossing                     | Richmond, VA       | 100      | 100         
|Chickasaw Trails 
   Shopping Center      | Orlando, FL        | 100      | 100         
|Circuit City - Cary                       | Cary, NC           | 100      | 100         
|Circuit City - Rome                       | Rome, GA           | 100      | 100         
|Circuit City - Vero Beach                 | Vero Beach, FL     | 100      | 100         
|Circuit City Plaza                        | Orlando, FL        | 94       | 100*        
|Citrus Hills                              | Citrus Hills, FL   | 97       | 91*         
|City Crossing                             | Warner Robins, GA  | 96       | 100*        
|Clayton Corners                           | Clayton, NC        | 92*      | 97*         
|Colonial Bardmoor Center                  | Largo, FL          | 88       | N/A         
|Columbia Promenade                        | Kissimmee, FL      | 99       | 93*         
|Columbiana Station                        | Columbia, SC       | 98       | 98          
|Comp USA Retail Center                    | Newport News, VA   | 100      | 100         
|Commonwealth Center II                    | Midlothian, VA     | 94*      | N/A         
|Concord Crossing                          | Concord, NC        | 100      | N/A         
|Conway Plaza                              | Orlando, FL        | 100      | 99          
|CostCo Plaza                              | White Marsh, VA    | 100      | N/A         
|Countryside                               | Naples, FL         | 85       | 85          
|Cox Creek Centre                          | Florence, AL       | 100      | 100*        
|Creeks at Virginia Center                 | Glen Allen, VA     | 99       | N/A         
|Creekwood Crossing                        | Bradenton, FL      | 55       | 100         





|                                    |                       | June 30, | December 31,
|----------------------------------- | --------------------- | -------- | ------------
|                                    |                       | 2003     | 2002        
|Property                            | Location              | (%)      | (%)         
|Crystal Springs                     | Crystal River, FL     | 100      | 100*        
|Denbigh Village Center              | Newport News, VA      | 60       | N/A         
|Douglas Pavilion                    | Douglasville, GA      | 100      | 100         
|Downtown Short Pump                 | Richmond, VA          | 96*      | N/A         
|Duvall Village                      | Bowie, MD             | 96*      | 100*        
|East Hanover Plaza                  | East Hanover, NJ      | 100      | N/A         
|Eckerd's #3912 Concord              | Concord, NC           | 100      | 100         
|Eckerd's #3937 Tega Cay             | Tega Cay, FL          | 100      | 100         
|Eckerd's #8049 Woodruff             | Woodruff, SC          | 100      | 100         
|Eckerd's #0234R Marietta            | Marietta, GA          | 100      | N/A         
|Eckerd's #0963R Arapaho             | Richardson, TX        | 100      | N/A         
|Eckerd's #2320R Highway 124         | Snellville, GA        | 100      | N/A         
|Eckerd's #2506R Marsh               | Carrolton, TX         | 100      | N/A         
|Eckerd's #3072R David Blvd.         | N. Richland Hills, TX | 100      | N/A         
|Eckerd's #3152R Lake Worth          | Lake Worth, TX        | 100      | N/A         
|Eckerd's #3169R River Oaks          | River Oaks, TX        | 100      | N/A         
|Eckerd's #3192R W. Gentry           | Tyler, TX             | 100      | N/A         
|Eckerd's #3338 S. Orange            | Kissimmee, FL         | 100      | N/A         
|Eckerd's #3350 N.MLK                | Oklahoma City, OK     | 100      | N/A         
|Eckerd's #3363 Sycamore             | Ft. Worth, TX         | 100      | N/A         
|Eckerd's #3449 Lawrenceville        | Lawerenceville, GA    | 100      | N/A         
|Eckerd's #3528 Parker               | Plano, TX             | 100      | N/A         
|Eckerd's #3924 Perry Creek          | Raleigh, NC           | 100      | N/A         
|Eckerd's #0444R S. Enota            | Gainesville, GA       | 100      | N/A         
|Eckerd's #5018 Millersport          | Getzville, NY         | 100      | N/A         
|Eckerd's #5661 Broadway.            | Buffalo, NY           | 100      | N/A         
|Eckerd's #5786 Central              | Dunkirk, NY           | 100      | N/A         
|Eckerd's #5797 Gennessee.           | Cheektowaga, NY       | 100      | N/A         
|Eckerd's #6007 Route 119            | Connellsville, PA     | 100      | N/A         
|Eckerd's #6036 Route 51             | Pittsburgh, PA        | 100      | N/A         
|Eckerd's #6040 Route 22 & Center    | Monroeville, PA       | 100      | N/A         
|Eckerd's #6043 Monroeville.         | Monroeville, PA       | 100      | N/A         
|Eckerd's #6062 Eastway Plaza        | Erie, PA              | 100      | N/A         
|Eckerd's #6089 Route 22 & Cove      | Weirton, WV           | 100      | N/A         
|Eckerd's #6095 Old Freeport         | Cheswick, PA          | 100      | N/A         
|Eckerd's #6172 Washington.          | Newcastle, PA         | 100      | N/A         
|Eckerd's #6193 26th & Parade        | Erie, PA              | 100      | N/A         
|Eckerd's #6199 26th & Sterrettania. | Erie, PA              | 100      | N/A         
|Eckerd's #6257 Peach                | Erie, PA              | 100      | N/A         
|Eckerd's #6286 12th                 | Erie, PA              | 100      | N/A         
|Eckerd's #6334 6th                  | Erie, PA              | 100      | N/A         
|Eckerd's #6392 Route. 130           | Irwin, PA             | 100      | N/A         
|Eckerd's #6695 Route 286            | Pittsburgh, PA        | 100      | N/A         
|Eckerd's #0818R 2706 Jacksboro      | Ft. Worth, TX         | 100      | N/A         
|Eckerd's #0862R 3601 Jacksboro      | Wichita Falls, TX     | 100      | N/A         
|Eckerd's #0943R Buckingham          | Richardson, TX        | 100      | N/A         
|Eckerd's #0968R Southwest           | Wichita Falls, TX     | 100      | N/A         
|Eckerd's #0980R Main Street         | The Colony, TX        | 100      | N/A         



|                               |                     | June 30, | December 31,
|------------------------------ | ------------------- | -------- | ------------
|                               |                     | 2003     | 2002        
|Property                       | Location            | (%)      | (%)         
|Eckerd's #1232 Blackstock      | Spartanburg, SC     | 100      | 100         
|Eckerd's #6379 Greenville      | Greenville, SC      | 100      | 100         
|Eckerd's #8036 Piedmont        | Piedmont, NC        | 100      | N/A         
|Eckerd's #1095 Pine Street     | Spartanburg, SC     | 100      | 100         
|Eckerd's Gaffney               | Gaffney. SC         | 100      | N/A         
|Edgewater Town Center          | Edgewater, NJ       | 96       | N/A         
|Eisenhower Crossing I & II     | Macon, GA           | 98*      | 97*         
|Fayetteville Pavilion          | Fayetteville, NC    | 100      | 100*        
|Flamingo Falls                 | Pembroke Pines, FL  | 97       | N/A         
|Forest Hills Centre            | Wilson, NC          | 100*     | 97*         
|Forestdale Plaza               | Jamestown, NC       | 88*      | 85*         
|Fountains                      | Plantation, FL      | 72       | N/A         
|Gateway Mall                   | St. Petersburg, FL  | 95       | 90          
|Gateway Plaza, Jacksonville    | Jacksonville, NC    | 96*      | 96*         
|Gateway Plaza II, Conway       | Conway, SC          | 96*      | 96*         
|Glenmark Shopping Center       | Morgantown, WV      | 90*      | N/A         
|Golden Gate Shopping Center    | Greensboro, NC      | 95       | 90          
|Goldenrod Groves               | Winter Park, FL     | 91       | 90          
|Goody's Shopping Center        | Augusta, GA         | 100      | N/A         
|Hairston Crossing              | Decatur, GA         | 98       | 100*        
|Hampton Point                  | Taylors, SC         | 100      | 100         
|Harundale Plaza                | Glen Burnie, MD     | 100*     | 97*         
|Heritage Pavilion              | Smyrna, GA          | 100      | N/A         
|Hillsboro Square               | Deerfield Beach, FL | 100      | 100*        
|Hiram Pavilion                 | Hiram, GA           | 95       | N/A         
|Jo-Ann Fabrics                 | Alpharetta, GA      | 100      | 100         
|Jones Bridge Square            | Norcross, GA        | 100      | 96*         
|Just for Feet - Augusta        | Augusta, GA         | 100      | 100         
|Just for Feet - Covington      | Covington, LA       | 100      | 100         
|Just for Feet - Daytona        | Daytona Beach, FL   | 100      | 100         
|Killearn Shopping Center       | Tallahassee, FL     | 95       | N/A         
|K-Mart                         | Macon, GA           | 100      | 100         
|Lake Olympia Square            | Ocoee, FL           | 100      | 97          
|Lake Walden Square             | Plant City, FL      | 58       | 94          
|Lakeview Plaza                 | Kissimmee, FL       | 100      | 98          
|Lakewood Ranch Gateway         | Bradenton, FL       | 100*     | 98*         
|Loggerhead Junction (1)        | Holmes Beach, FL    | 68       | 81          
|Lowe's Home Improvement Center | Warner Robins, GA   | 100      | 100         
|Market Square                  | Douglasville, GA    | 96*      | N/A         
|Marketplace at Mill Creek      | Buford, GA          | 84*      | N/A         
|McFarland Plaza                | Tuscaloosa, AL      | 97       | 97          
|Meadowmont Village Center      | Chapel Hill, NC     | 66*      | 76*         
|Melbourne Shopping Center      | Melbourne, FL       | 97       | 97          
|Merchants Square               | Zephyrhills, FL     | 100      | 100         
|Midway Plaza                   | Tamarac, FL         | 69*      | N/A         
|Monroe Shopping Center         | Monroe, NC          | 100      | N/A         
|Newnan Pavilion                | Newnan, GA          | 98       | 98          
|North Aiken Bi-Lo Center       | Aiken, SC           | 100      | 100         



|                            |                      | June 30, | December 31,
|--------------------------- | -------------------- | -------- | ------------
|                            |                      | 2003     | 2002        
|Property                    | Location             | (%)      | (%)         
|North Hill Commons          | Anderson, SC         | 100      | N/A         
|Northpoint Marketplace      | Boiling Springs, SC  | 90       | 90*         
|Oakley Plaza                | Asheville, NC        | 98       | N/A         
|Oleander Shopping Center    | Wilmington, NC       | 100      | 100         
|Overlook at King of Prussia | King of Prussia, PA  | 100      | N/A         
|Paraiso Plaza               | Hialeah, FL          | 96       | N/A         
|PETsMART                    | Fredericksburg, VA   | 100      | 100         
|PETsMART #639 Chattanooga   | Chattanooga, TN      | 100      | 100         
|PETsMART #311               | Daytona, FL          | 100      | 100         
|Plant City Crossing         | Plant City, FL       | 98*      | 93*         
|Pleasant Hill Square        | Duluth, GA           | 98       | 96*         
|Presidential Commons        | Snellville, GA       | 100      | 100         
|Publix at Brooker Creek     | Palm Harbor, FL      | 100      | N/A         
|Rainbow Foods - Garland     | Garland, TX          | 100      | 100         
|Rainbow Foods - Rowlett     | Rowlett, TX          | 100      | 100         
|River Ridge                 | Birmingham, AL       | 100      | 100         
|River Run                   | Miramar, FL          | 99*      | N/A         
|Riverstone Plaza            | Canton, GA           | 99       | 99*         
|Rosedale Shopping Center    | Huntersville, NC     | 94*      | 96*         
|Sand Lake Corners           | Orlando, FL          | 96       | 99*         
|Sandy Plains Village        | Roswell, GA          | 88       | N/A         
|Sarasota Pavilion           | Sarasota, FL         | 100      | 100*        
|Sexton Commons              | Fuquay Varina, NC    | 91*      | 91*         
|Sharon Green                | Cumming, GA          | 82*      | 82*         
|Sheridan Square             | Dania, FL            | 95       | N/A         
|Shoppes at Citiside         | Charlotte, NC        | 92*      | 90*         
|Shoppes at Golden Acres     | New Port Richey, FL  | 84       | 74          
|Shoppes at Lake Dow         | McDonough, GA        | 87       | N/A         
|Shoppes at Lake Mary        | Lake Mary, FL        | 98       | 100*        
|Shoppes at New Tampa        | Wesley Chapel, FL    | 70*      | 94*         
|Shoppes at Paradise Pointe  | Ft. Wilton Beach, FL | 81*      | N/A         
|Shops on the Circle         | Dothan, AL           | 96*      | 96*         
|Skyview Plaza               | Orlando, FL          | 100      | 100         
|Sony Theatre Complex        | East Hanover, NJ     | 100      | N/A         
|Southlake Pavilion          | Morrow, GA           | 98       | 99*         
|Southlake Shopping Center   | Cornelius, NC        | 98*      | 97*         
|Springfield Park            | Lawerenceville, GA   | 100      | N/A         
|Steeplechase Plaza          | Ocala, FL            | 98       | 100         
|Stonebridge Square          | Roswell, GA          | 100      | 99          
|Stonecrest Marketplace      | Litnonia, GA         | 98*      | N/A         
|Suwannee Crossroads         | Suwannee, GA         | 87*      | N/A         
|Sycamore Commons            | Matthews, NC         | 93*      | 93*         
|Target Super Center         | Columbia, SC         | 100      | 100         
|Tequesta Shoppes            | Tequesta, FL         | 83*      | N/A         
|Town & Country              | Knoxville, TN        | 95       | N/A         
|Town Center Commons         | Kennesaw, GA         | 93       | 93          
|Turkey Creek                | Knoxville, TN        | 100      | 100*        
|Universal Plaza             | Lauderhill, FL       | 96       | 99*         





|                       |                    | June 30, | December 31,
|---------------------- | ------------------ | -------- | ------------
|                       |                    | 2003     | 2002        
|Property               | Location           | (%)      | (%)         
|Valley Park Commons    | Hagerston, MD      | 89       | N/A         
|Venture Pointe         | Duluth, GA         | 99       | 100*        
|Village Center         | Racine, WI         | 92*      | N/A         
|Village Crossing       | Skokie, IL         | 81*      | N/A         
|Village Square at Golf | Boynton Beach, FL  | 91*      | 92          
|Wakefield Crossing     | Raleigh, NC        | 88*      | 98*         
|Walks at Highwood I    | Tampa, FL          | 100*     | 96*         
|Wards Crossing         | Lynchburg, VA      | 98*      | 98*         
|West Falls Plaza       | West Patterson, NJ | 100      | N/A         
|West Oaks Plaza        | Ocoee, FL          | 100      | 95          
|Westside Pavilion      | Huntsville, AL     | 83*      | N/A         
|Windsor Court          | Windsor, CT        | 100      | N/A         
|Woodstock Square       | Woodstock, GA      | 100      | 100*        
|Willoughby Hills       | Wickliffe, OH      | 100      | N/A         

*As part of the purchase of these Properties, we are entitled to receive payments in accordance with the master lease agreements for space, which was not producing revenue either at the time of or subsequent to the purchase.  The master lease agreements cover rental payments due for a period from one to three years from the purchase date.  The percentages in the table above do not include non-revenue producing space covered by the master lease agreements.  The master lease agreements combined with the physical occupancy, results in an economic occupancy range from
62% to 100% at June 30, 2003.





Subsequent Events



We issued 4,004,674 Shares of Common Stock from July 1, 2003 through August 8, 2003, resulting in a total of 220,484,431 Shares of Common Stock outstanding. As a result, as of August 8, 2003, subscriptions for a total of 213,696,821 Shares were received resulting in total gross offering proceeds of $2,136,370,654 and an additional 7,647,534 Shares were issued pursuant to the DRP for $72,651,572 of additional gross proceeds.  We have repurchased 859,924 Shares through our Share Repurchase Program for $8,093,304.  As of August 13, 2003, the Company had received subscriptions for a total of 150,000,000 shares sold from the Second Follow-On Offering, thereby completing that offering.

We acquired the following properties during the period July 1 to August 8, 2003.  The respective acquisitions are summarized in the table below.



|         |                                |      |            | Approximate    | Gross         |                         
|-------- | ------------------------------ | ---- | ---------- | -------------- | ------------- | ------------------------
|Date     |                                |      |            | Purchase Price | Leasable      |                         
|Acquired | Property                       | Type | Year Built | ($)            | Area (Sq. Ft) | Major Tenants           
|         |                                |      |            |                |               |                         
|08/07/03 | Bellevue Place Shopping Center | NC   | 2002/2003  | 10,882,049     | 76,778        | Bed, Bath & Beyond      
|         | Nashville, TN                  |      |            |                |               | Michael's               
|         |                                |      |            |                |               | PetCo                   
|         |                                |      |            |                |               | Dollar Tree             
|         |                                |      |            |                |               |                         
|08/05/03 | Camfield Corner                | NC   | 1994/2003  | 9,350,000      | 69,880        | Bi-Lo Supermarket       
|         | Charlotte, NC                  |      |            |                |               | Tire Kingdom            
|         |                                |      |            |                |               |                         
|07/25/03 | Cascade Market Place           | NC   | 1996/1998  | 16,800,000     | 100,134       | Staples                 
|         | Sterling, VA                   |      |            |                |               | Sports Authority        
|         |                                |      |            |                |               |                         
|07/17/03 | Fayette Pavilion               | NC   | 2000       | 46,192,670     | 371,042       | Kohl's                  
|         | Fayette, GA                    |      |            |                |               | Belk                    
|         |                                |      |            |                |               | JoAnn's                 
|         |                                |      |            |                |               | Goody's                 
|         |                                |      |            |                |               |                         
|07/25/03 | Northlake Commons              | NC   | 1987/2003  | 24,321,186     | 143,955       | Ross                    
|         | Palm Beach, FL                 |      |            |                |               | Office Main Furniture   
|         |                                |      |            |                |               |                         
|07/31/03 | Route 22 Retail                | NC   | 1997       | 18,687,358     | 110,453       | Baby Superstore         
|         | Union, NJ                      |      |            |                |               | Circuit City            
|         |                                |      |            |                |               | The Furniture King      
|         |                                |      |            |                |               |                         
|08/08/03 | Spring Mall                    | NC   | 1995/2001  | 10,479,451     | 56,511        | Bassett Furniture Direct
|         | Springfield, VA                |      |            |                |               | Michael's               
|         |                                |      |            |                |               |                         
|07/08/03 | Turkey Creek Pavilion          | NC   | 2002       | 9,781,814      | 82,940        | Ross                    
|         | Knoxville, TN                  |      |            |                |               |                         
|         |                                |      |            |                |               |                         
|07/02/03 | Vision Works                   | SU   | 1989       | 1,700,000      | 6,891         | Vision Works            
|         | Plantation, FL                 |      |            |                |               |                         



|TYPE OF PROPERTY
|----------------
|NC              
|SU              
|D               



Mortgage debt financings closed for the period July 1, 2003 to August 8, 2003, are detailed in the list below.





|Date Funded | Mortgage Payable          | Annual Interest & Rate at 6/30/03 | Maturity Date | Principal Borrowed ($)
|----------- | ------------------------- | --------------------------------- | ------------- | ----------------------
|07/25/03    | Barrett Pavilion          | 4.66                              | 8/1/10        | 44,000,000            
|07/11/03    | Birkdale Village          | 4.08                              | 8/1/10        | 48,000,000            
|07/22/03    | Birkdale Village          | 4.08                              | 8/1/10        | 7,000,000             
|07/24/03    | Camp Hill Center          | 4.20                              | 8/1/10        | 4,300,000             
|08/05/03    | Capital Crossing          | 4.30                              | 8/1/10        | 5,478,000             
|07/17/03    | Colonial Bardmoor Center  | 4.52                              | 8/10/10       | 9,400,000             
|07/29/03    | Flamingo Falls            | 4.35                              | 8/1/10        | 13,200,000            
|07/25/03    | Hiram Pavilion            | 4.51                              | 8/1/10        | 25,100,000            
|07/24/03    | Meadowmont Village Center | 4.20                              | 8/1/10        | 13,400,000            
|07/15/03    | Oakley Plaza              | 4.29                              | 8/11/10       | 5,175,000             
|07/22/03    | River Run                 | 4.05                              | 8/1/10        | 6,490,000             
|08/08/03    | Shoppes at New Tampa      | 4.27                              | 9/1/10        | 29,350,000            
|07/24/03    | Springfield Park          | 4.20                              | 8/1/10        | 5,600,000             
|07/25/03    | Suwannee Crossroads       | 4.60                              | 8/1/10        | 6,670,000             
|07/01/03    | Village Crossing          | 4.73                              | 6/1/10        | 44,000,000            
|08/03/03    | Westside Pavilion         | 4.91                              | 9/10/10       | 10,600,000            





We anticipate purchasing or may already have purchased the following properties from unaffiliated third parties.  We intend to purchase these properties with our own funds unless noted otherwise; however, we expect to place financing on the properties at a later date.



|                                    |      |             | Estimated      |           |         |                        
|----------------------------------- | ---- | ----------- | -------------- | --------- | ------- | -----------------------
|                                    |      |             | Purchase Price | Gross     |         |                        
|                                    |      |             | Including      | Leasable  |         |                        
|                                    |      | Year        | Expenses       | Area      |         |                        
|Property                            | Type | Built       | ($) (1)        | (Sq. Ft.) | Comment | Major Tenants (2)      
|                                    |      |             |                |           |         |                        
|Cedar Springs Crossing              | NC   | 2001        | 10,150,000     | 86,312    |         | Bi-Lo                  
|Spartanburg, SC                     |      |             |                |           |         | Eckerd's               
|                                    |      |             |                |           |         | Dollar Tree            
|                                    |      |             |                |           |         |                        
|Cortez Plaza                        | NC   | 1966/1988   | 26,800,000     | 289,100   |         | Publix                 
|Bradenton, FL                       |      |             |                |           |         | Circuit City           
|                                    |      |             |                |           |         | PETsMART               
|                                    |      |             |                |           |         | Burlington Coat Factory
|                                    |      |             |                |           |         |                        
|Fayette Pavilion l & II             | NC   | 1995        | 96,812,000     | 794,748   |         | Super Wal-Mart         
|Fayette Pavilion III & lV           | NC   | 2003        | 33,530,000     | 248,813   |         | Publix                 
|Fayetteville, GA                    |      |             |                |           |         | Kohl's                 
|                                    |      |             |                |           |         | Cinemark               
|                                    |      |             |                |           |         | Belk                   
|                                    |      |             |                |           |         |                        
|Hartsville Crossing Shopping Center | NC   | 2001        | 7,384,000      | 71,120    |         | Cato Dollar Tree       
|Hartsville, SC                      |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Kensington Place                    | NC   | 1998        | 7,270,000      | 70,624    |         | Bi-Lo Grocery          
|Murfreesboro, TN                    |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Largo Towne Center                  | NC   | 1991        | 30,500,000     | 274,396   | (3)     | Shoppers Food Warehouse
|Largo, MD                           |      |             |                |           |         | Marshall's             
|                                    |      |             |                |           |         | Regency Furniture      
|                                    |      |             |                |           |         |                        
|Legacy Place                        | D    | To be built | 73,480,000     | 308,500   |         | Linens N Things        
|Palm Beach Gardens, FL              |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Lexington Place                     | NC   | To be built | 8,397,000      | 83,167    |         | TJ Maxx                
|Lexington, SC                       |      |             |                |           |         | Ross                   
|                                    |      |             |                |           |         |                        
|Naugatuck Valley Shopping Center    | NC   | 2001/2003   | 53,326,000     | 380,332   |         | Wal-Mart ground lease  
|Waterbury, CT                       |      |             |                |           |         | Stop & Shop            
|                                    |      |             |                |           |         | Linens 'N Thins        
|                                    |      |             |                |           |         | Bob's Stores           
|                                    |      |             |                |           |         |                        
|Pointe at Tampa Palms               | NC   | 2003        | 5,250,000      | 20,258    |         | Spa Avalon             
|Tampa, FL                           |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Stockbridge  Commons                | NC   | To be built | 11,925,000     | 79,100    |         | Lowe's Food            
|Tega Cay, SC                        |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Shoppes at Oliver's Crossing        | NC   | 2003        | 10,375,000     | 76,512    |         | Lowe's Foods           
|Winston Salem, NC                   |      |             |                |           |         |                        
|                                    |      |             |                |           |         |                        
|Shoppes at Wendover Village         | D    | To be built | 29,500,000     | 165,932   |         | Ross                   
|Greensboro, NC                      |      |             |                |           |         | Homegoods              
|                                    |      |             |                |           |         | A.C. Moore             
|                                    |      |             |                |           |         |                        







|                               |      |             | Estimated      |           |         |                  
|------------------------------ | ---- | ----------- | -------------- | --------- | ------- | -----------------
|                               |      |             | Purchase Price | Gross     |         |                  
|                               |      |             | Including      | Leasable  |         |                  
|                               |      | Year        | Expenses       | Area      |         |                  
|Property                       | Type | Built       | ($) (1)        | (Sq. Ft.) | Comment | Major Tenants (2)
|The Summit                     | NC   | 2001        | 85,000,000     | 341,343   |         | Barnes & Noble   
|Louisville, KY                 |      |             |                |           |         | Old Navy         
|                               |      |             |                |           |         | Bed Bath & Beyond
|                               |      |             |                |           |         |                  
|Walgreen's                     | SU   | 2000        | 4,358,000      | 14,998    |         | Walgreen's       
|Port Huron, MI                 |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Walk at Highwood Preserve II   | NC   | To be built | 6,577,000      | 28,427    |         | Boston Market    
|Tampa, FL                      |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Paradise Portfolio             |      |             |                |           |         |                  
|Paradise Place                 | NC   | To be built | 10,873,000     | 74,620    |         | Publix           
|West Palm Beach, FL            |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Paradise Shoppes of  Ellenwood | NC   | To be built | 10,354,000     | 67,721    |         | Publix           
|Ellenwood, GA                  |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Paradise Promenade             | NC   | To be built | 12,530,000     | 70,291    |         | Publix           
|Davie, FL                      |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Shoppes of Lithia              | NC   | To be built | 14,173,000     | 79,161    |         | Publix           
|Brandon, FL                    |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Milt Turner Portfolio          |      |             |                |           |         |                  
|Oak Summit                     | NC   | 2003        | 24,468,000     | 180,774   |         | Staples          
|Winston-Salem, NC              |      |             |                |           |         | Goody's          
|                               |      |             |                |           |         |                  
|Squire Wood Village            | NC   | 2003        | 4,166,000      | 46,150    |         | Food City        
|Dandridge, TN                  |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|The Crossings                  | NC   | 1999        | 6,879,000      | 62,278    |         | Goody's          
|Crossville, TN                 |      |             |                |           |         |                  
|                               |      |             |                |           |         |                  
|Wytheville Commons             | NC   | 2003        | 20,019,000     | 150,267   |         | Goody's          
|Phase I & II                   |      | To be built |                |           |         | Dollar Tree      
|Wytheville, VA                 |      |             |                |           |         | Old Navy         
|                               |      |             |                |           |         |                  







|                                   |      |           | Estimated      |           |         |                        
|---------------------------------- | ---- | --------- | -------------- | --------- | ------- | -----------------------
|                                   |      |           | Purchase Price | Gross     |         |                        
|                                   |      |           | Including      | Leasable  |         |                        
|                                   |      | Year      | Expenses       | Area      |         |                        
|Property                           | Type | Built     | ($) (1)        | (Sq. Ft.) | Comment | Major Tenants (2)      
|Colonial Portfolio                 |      |           |                |           |         |                        
|Hilliard Rome Road                 | NC   | 2001      | 17,100,000     | 110,871   |         | Giant Eagle Grocery    
|Hilliard, OH                       |      |           |                |           |         |                        
|                                   |      |           |                |           |         |                        
|Loisdale Center                    | NC   | 1999      | 29,000,000     | 120,742   |         | Bed Bath & Beyond      
|Springfield, VA                    |      |           |                |           |         | Circuit City           
|                                   |      |           |                |           |         | Barnes & Noble         
|                                   |      |           |                |           |         | Designer Shoe Warehouse
|                                   |      |           |                |           |         |                        
|Waterfront Market                  | NC   | 2001/2003 | 123,500,000    | 755,313   |         | Lowes Cinemas          
|Pittsburgh, PA                     |      |           |                |           |         | (Ground Lease)         
|                                   |      |           |                |           |         |                        
|Principal Net Lease Portfolio      |      |           |                |           |         |                        
|Kroger, Cincinnati, OH             | SU   | 1995/1998 | 7,653,000      | 56,634    |         | Kroger                 
|Kroger, Westchester, OH            |      |           | 4,802,000      | 56,083    |         | Kroger                 
|Kroger, Richardson, TX             |      |           | 6,065,000      | 59,213    |         | Kroger                 
|Kroger, Grand Prairie, TX          |      |           | 5,963,000      | 64,522    |         | Kroger                 
|Circuit City, Highlands Ranch, CO  |      |           | 6,101,000      | 43,480    |         | Circuit City           
|Circuit City, Olympia, WA          |      |           | 6,105,000      | 35,776    |         | Circuit City           
|Circuit City, Culver City, CA      |      |           | 9,353,000      | 32,873    |         | Circuit City           
|Wal-Mart, Greenville, SC           |      |           | 17,501,000     | 200,084   |         | Wal-Mart               
|Wal-Mart Alliance, OH              |      |           | 16,373,000     | 200,084   |         | Wal-Mart               
|Wal-Mart Winston-Salem, NC         |      |           | 19,306,000     | 204,931   |         | Wal-Mart               
|Sam's Club, Worcester, MA          |      |           | 15,356,000     | 107,929   |         | Sam's Club             
|Lowe's Home Impr. Cullman, AL      |      |           | 9,241,000      | 101,287   |         | Lowe's Home Improvement
|Lowe's Home Impr. Steubenville, OH |      |           | 11,794,000     | 130,497   |         | Lowe's Home Improvement
|Lowe's Home Impr. Baytown, TX      |      |           | 11,837,000     | 125,357   |         | Lowe's Home Improvement
|Lowe's Home Impr. Katy, TX         |      |           | 12,422,000     | 131,644   |         | Lowe's Home Improvement
|                                   |      |           |                |           |         |                        

1. Our acquisition costs may increase by additional costs, which have not yet been finally determined. We expect any additional costs to be insignificant.
2. Major tenants include tenants leasing more than 10% of the gross leasable area of the individual property.
3. Property was acquired between the period of August 9 and August 14, 2003.

Type of Property

NC  Neighborhood and Community Multi-Tenant Retail Shopping Center

SU	Single User Property

D	Development Project



As of August 8, 2003, we have leases with or intend to acquire properties with an aggregate of 7 tenants that are affiliates of Ahold NV, for which rental income represents 1.9% of the portfolio.  Ahold has recently disclosed potentially fraudulent or improper accounting treatment in its food services unit.  Ahold also announced $880 million in financial charges that it will be reporting.  We continue to monitor the situation although we do not know what impact, if any, these issues at Ahold will have on us.

Impact of Accounting Principles



Inflation

For our multi-tenant shopping centers, inflation is likely to increase rental income from leases to new tenants and lease renewals, subject to market conditions.  Our rental income and operating expenses for those properties owned, or to be owned and operated under triple-net leases are not likely to be directly affected by future inflation, since rents are or will be fixed under the leases and property expenses are the responsibility of the tenants.  The capital appreciation of triple-net leased properties is likely to be influenced by interest rate fluctuations.  To the extent that inflation determines interest rates, future inflation may have an effect on the capital appreciation of triple-net leased properties.  As of June 30, 2003, we owned 65 single-user triple-net leased properties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate changes primarily as a result of long-term debt used to maintain liquidity and fund capital expenditures and expansion of our real estate investment portfolio and operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs.  To achieve these objectives we borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates.  We may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate interest rate risk on a related financial instrument.  We do not enter into derivative or interest rate transactions for speculative purposes.

Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.

|                          | 2003       | 2004       | 2005       | 2006       | 2007        | Thereafter 
|------------------------- | ---------- | ---------- | ---------- | ---------- | ----------- | -----------
|                          |            |            |            |            |             |            
|Maturing debt:            |            |            |            |            |             |            
|Fixed rate debt           | 11,665,563 | 9,974,977  | 29,127,208 | 44,035,195 | 67,055,505  | 760,244,477
|Variable rate debt        | 20,000,000 | 30,699,900 | 5,000,000  | 29,337,500 | 168,006,909 | 35,975,000 
|                          |            |            |            |            |             |            
|Average interest rate on: |            |            |            |            |             |            
|maturing debt:            |            |            |            |            |             |            
|Fixed rate debt           | 7.61%      | 7.93%      | 7.55%      | 6.80%      | 6.74%       | 5.14%      
|Variable rate debt        | 3.19%      | 3.53%      | 2.97%      | 2.96%      | 2.84%       | 2.98%      





The fair value of our debt approximates its carrying amount.

The principal balance of $289,019,309 or 24% of the Company's mortgages payable at June 30, 2003, have variable interest rates averaging 2.97%. An increase in the variable interest rate on certain mortgages payable constitutes a market risk.

Individual decisions regarding interest rates, loan-to-value, fixed versus variable-rate financing, maturity dates and related matters are based on the condition of the financial markets at the time the debt is placed.

We paid off or refinanced all of the debt that matured during 2002 and 2003.  In the cases where maturing debt was repaid from new financing obtained, the replacement financing was for amounts which differ from the loans retired, either producing or requiring cash on a property by property basis.  As part of our financing strategy, we prepare packages that are forwarded to prospective lenders.  Each package contains specific details regarding each property and is designed to familiarize prospective lenders with the properties sufficient to allow them to provide interest rate quotes to us.  We believe that this method of receiving competitive bids from lenders is the most effective means of obtaining favorable financing.  Packages covering the majority of properties we have purchased or intend to purchase have been prepared and are currently being disseminated to lenders.  We are confident we will obtain new long-term financing to achieve our strategy objective.





Item 4. Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of a date within 90 days prior to the date of the filing of this Report, that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company's management, including the Chairman and Chief Executive Officer and the Chief Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation.



Item 2

We registered, pursuant to a registration statement under the Securities Act of 1933 (SEC File Number 333-64391), the initial offering on a best efforts basis of 50,000,000 shares at $10.00 per share, subject to discounts in certain cases; up to 4,000,000 shares at $9.50 per share pursuant to our DRP 2,000,000 soliciting dealer warrants at $.0008 per soliciting dealer warrants and 2,000,000 shares issuable upon exercise of the soliciting dealer warrants at an exercise price of $12.00 per share. The initial offering commenced on February 11, 1999 and terminated on January 31, 2001. On February 1, 2001 we began the first follow-on offering (SEC File Number 333-50822) with substantially similar conditions as the initial offering.  As of August 29, 2002, we sold 50,000,000 shares from the first follow-on offering, thereby completing the second offering.  On June 7, 2002, concurrent with the first follow-on offering, we began the second follow-on offering (SEC File Number 333-85666) on a best effort basis of 150,000,000 shares of common stock at $10.00 per share, and up to 12,000,000 shares at $9.50 per share, pursuant to the Company's DRP 6,000,000 soliciting dealer warrants at $.0008 per soliciting dealer warrants and 6,000,000 shares issuable upon exercise of the soliciting dealer warrants at an exercise price of $12.00 per share.  As of August 13, 2003, we sold 150,000,000 shares from the Second Follow-On Offering, thereby completing the Second Follow-On Offering.



As of January 31, 2001, we have sold the following securities in the initial offering for the following aggregate offering prices:



|*                                                                  | 13,687,349 | shares on a best efforts basis for $136,454,948;                                                                                                                                                            
|------------------------------------------------------------------ | ---------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*                                                                  | 281,825    | shares pursuant to the DRP for $2,677,338;                                                                                                                                                                  
|*                                                                  | 546,972    | soliciting dealer warrants for $438; and                                                                                                                                                                    
|*                                                                  | 0          | shares pursuant to the exercise of soliciting dealer warrants,                                                                                                                                              
|and repurchased the following securities for the following amount:
|*                                                                  | (60,475)   | shares repurchased pursuant to the share repurchase program for $547,301, for a net total of 13,908,699 shares for $138,584,985 of gross offering proceeds from the initial offering as of January 31, 2001.

As of August 29, 2002, we have sold the following securities in the first follow-on offering for the following aggregate offering prices:



|*                                                                  | 50,000,000 | shares on a best efforts basis for $497,842,917;                                                                                                                                                                     
|------------------------------------------------------------------ | ---------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*                                                                  | 1,208,580  | shares pursuant to the DRP for $11,481,514;                                                                                                                                                                          
|*                                                                  | 1,999,786  | soliciting dealer warrants for $1,600; and                                                                                                                                                                           
|*                                                                  | 0          | shares pursuant to the exercise of soliciting dealer warrants,                                                                                                                                                       
|                                                                  
|and repurchased the following securities for the following amount:
|                                                                   | (182,318)  | shares repurchased pursuant to the share repurchase program for $1,719,927, for a net total of 51,026,262 shares for $507,604,504 of gross offering proceeds from the first follow-on offering as of August 29, 2002.





As of June 30, 2003, we have sold the following securities in the second follow-on offering for the following aggregate offering prices:



|*                                                                  | 147,516,470 | shares on a best efforts basis for $1,471,607,429                                                                                                                                                                    
|------------------------------------------------------------------ | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*                                                                  | 4,559,121   | shares pursuant to the DRP for $43,311,643                                                                                                                                                                           
|*                                                                  | 5,904,606   | soliciting dealer warrants for $4,723 and                                                                                                                                                                            
|*                                                                  | 0           | shares pursuant to the exercise of soliciting dealer warrants,                                                                                                                                                       
|and repurchased the following securities for the following amount:
|*                                                                  | (550,795)   | shares purchased pursuant to the share repurchase program for $5,204,625; for a net total of 151,524,796 shares for $1,509,714,447 of gross offering proceeds from the second follow-on offering as of June 30, 2003.

The net total of shares and gross offering proceeds from all offerings as of June 30, 2003 is 216,459,757 shares for $2,155,903,936. The above-stated number of shares sold and the gross offering proceeds received from such sales do not include the 20,000 shares purchased by the Advisor for $200,000 preceding the commencement of the initial offering. As of June 30, 2003, 8,451,364 soliciting dealer warrants have been issued; and the $6,761 of gross proceeds received for their issuance is not included in the above $2,155,903,936 of gross offering proceeds.



Options to purchase an aggregate of 15,000 shares at an exercise price of $9.05 per share have been granted to the independent directors pursuant to the Independent Director Stock Option Plan.  Each director was initially granted options to purchase 3,000 Shares, and subsequently received 500 additional options at each of the four annual meetings. Such options were granted, without registration under the Securities Act of 1933, in reliance upon the exemption from registration in section 4(2) of the Securities Act, as transactions not involving any public offering. None of such options have been exercised. Therefore, no shares have been issued in connection with such options.





From February 11, 1999, which was the effective date of the initial offering through January 31, 2001 or the initial offering cumulative period, we have incurred the following expenses in connection with the issuance and distribution of the registered securities:

|Type of Expense                        | Amount      | E=Estimated
A=Actual
|-------------------------------------- | ----------- | --------------------
|Underwriting discounts and commissions | $11,588,024 | A                   
|Finders' fees                          | --          | A                   
|Expenses paid to or for underwriters   | --          | A                   
|Other expenses to affiliates           | 920,319     | A                   
|Other expenses paid to non-affiliates  | 5,038,426   | A                   
|Total expenses                         | $17,546,769 |                     







From February 1, 2001, which was the effective date of the first follow-on offering through August 29, 2002 or first follow-on offering cumulative period, we have incurred the following expenses in connection with the issuance and distribution of the registered securities:

|Type of Expense                        | Amount      | E=Estimated
A=Actual
|-------------------------------------- | ----------- | --------------------
|Underwriting discounts and commissions | $43,745,069 | A                   
|Finders' fees                          | --          | A                   
|Expenses paid to or for underwriters   | --          | A                   
|Other expenses to affiliates           | 804,490     | A                   
|Other expenses paid to non-affiliates  | 5,312,519   | A                   
|Total expenses                         | $49,862,078 |                     





|Type of Expense                        | Amount       | E=Estimated
A=Actual
|-------------------------------------- | ------------ | --------------------
|Underwriting discounts and commissions | $136,774,348 | A                   
|Finders' fees                          | --           | A                   
|Expenses paid to or for underwriters   | --           | A                   
|Other expenses to affiliates           | 885,451      | A                   
|Other expenses paid to non-affiliates  | 6,816,671    | A                   
|Total expenses                         | $144,476,470 |                     



The underwriting discounts and commissions, and the expenses paid to or for underwriters, were paid to Inland Securities Corporation.  Inland Securities Corporation reallowed all or a portion of the commissions and expenses to soliciting dealers.

Cumulatively, we have used the net offering proceeds as follows:

|Use of Proceeds                                | Amount        | E=Estimated
A=Actual
|---------------------------------------------- | ------------- | --------------------
|Construction of plant, building and facilities | $54,173,816   | A                   
|Purchase of real estate                        | 1,292,892,117 | A                   
|Acquisition of other businesses                | --            | A                   
|Repayment of indebtedness                      | 278,893,262   | A                   
|Working capital (currently)                    | 141,582,875   | E                   
|Temporary investments (currently)              | 230,850,366   | A                   
|Other uses                                     | --            | A                   









|Item 6. | Exhibits and Reports on Form 8-K
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|        | (a)                             
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|        |                                 
|        |                                 
|        | (b)                             
|        |                                 
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|        |                                 









Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INLAND RETAIL REAL ESTATE TRUST, INC.

/S/ ROBERT D. PARKS

By: Robert D. Parks
Chairman and Chief Executive Officer
Date: August 8, 2003
/S/ BARRY L. LAZARUS

By: Barry L. Lazarus
President and Chief Operating Officer  
Treasurer and Chief Financial Officer
Date: August 8, 2003