INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

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 1934For The Quarterly Period Ended March 31, 2003or
[  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Commission File Number 333-64391Inland Retail Real Estate Trust, Inc.(Exact name of registrant as specified in its charter)



|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 May 8, 2003, there were 181,371,407 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                               | 72      
|        |                                                 |         
|ITEM 4. | CONTROLS AND PROCEDURES                         | 73      
|        |                                                 |         
|        | PART II - OTHER INFORMATION                     |         
|        |                                                 |         
|ITEM 5  | CHANGES IN SECURITIES AND USE OF PROCEEDS       | 73      
|        |                                                 |         
|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K                | 78      
|        | (a) Exhibits                                    |         
|        | (b) Reports on From 8-K                         |         
|        |                                                 |         
|        | Signatures                                      |         























































2

PART I - Financial Information

Item 1. Consolidated Financial Statements

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Consolidated Balance Sheets
March 31, 2003 and December 31, 2002Assets

|                                                                                                                                                                          |   | March 31, 
2003
(unaudited) |   | December 31, 2002
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------- | - | -----------------
|Investment properties:                                                                                                                                                    |   |                             |   |                  
|Land                                                                                                                                                                      | $ | 511,027,514                 | $ | 363,767,644      
|Building and other improvements                                                                                                                                           |   | 1,463,899,220               |   | 1,124,824,956    
|Construction in progress-land                                                                                                                                             |   | 8,313,227                   |   | 8,090,004        
|Construction in progress-buildings and other improvements                                                                                                                 |   | 6,038,292                   |   | 2,998,492        
|                                                                                                                                                                          |   |                             |   |                  
|                                                                                                                                                                          |   | 1,989,278,253               |   | 1,499,681,096    
|Less accumulated depreciation                                                                                                                                             |   | (52,667,611)                |   | (40,737,139)     
|                                                                                                                                                                          |   |                             |   |                  
|Net investment properties                                                                                                                                                 |   | 1,936,610,642               |   | 1,458,943,957    
|                                                                                                                                                                          |   |                             |   |                  
|                                                                                                                                                                          |   |                             |   |                  
|Mortgages receivable                                                                                                                                                      |   | 85,018,847                  |   | 100,975,017      
|Cash and cash equivalents                                                                                                                                                 |   | 173,339,686                 |   | 134,977,144      
|Restricted escrows                                                                                                                                                        |   | 8,085,046                   |   | 6,872,411        
|Restricted cash                                                                                                                                                           |   | 19,532,050                  |   | 11,220,834       
|Investment in securities                                                                                                                                                  |   | 7,101,259                   |   | 6,987,700        
|Accounts and rents receivable, (net of allowance of $1,469,123 and   $1,024,720 as of March 31, 2003 and December 31, 2002 respectively)                                  |   | 16,041,160                  |   | 12,831,387       
|Development receivables                                                                                                                                                   |   | 4,865,698                   |   | 928,363          
|Acquired in-place lease origination intangibles (net of accumulated  amortization of  $1,555,277  and $1,206,324 as of March 31, 2003 and December 31, 2002 respectively) |   | 17,371,110                  |   | 13,344,182       
|Acquired above market lease intangibles (net of  accumulated amortization of $1,305,925 and $953,493 as of March 31, 2003 and December 31, 2002 respectively)             |   | 19,838,010                  |   | 11,371,843       
|Leasing and loan fees and loan fee deposits (net of accumulated amortization of $2,512,900  and $2,053,066 as of March 31, 2003 and December 31, 2002 respectively)       |   | 11,018,466                  |   | 6,864,374        
|Other assets                                                                                                                                                              |   | 7,168,428                   |   | 2,371,147        
|                                                                                                                                                                          |   |                             |   |                  
|Total assets                                                                                                                                                              | $ | 2,305,990,402               | $ | 1,767,688,359    
|                                                                                                                                                                          |   |                             |   |                  



See accompanying notes to consolidated financial statements.











3

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Consolidated Balance Sheets
(continued)
March 31, 2003 and December 31, 2002Liabilities and Stockholders' Equity

|                                                                                                                                                                             |   | March 31, 
2003
(unaudited) |   | December 31, 2002
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------- | - | -----------------
|Liabilities:                                                                                                                                                                 |   |                             |   |                  
|Accounts payable                                                                                                                                                             | $ | 1,923,282                   | $ | 483,944          
|Development payables                                                                                                                                                         |   | 4,448,524                   |   | 2,558,834        
|Accrued offering costs due to affiliates                                                                                                                                     |   | 599,527                     |   | 1,309,885        
|Accrued offering costs due to non-affiliates                                                                                                                                 |   | 169,537                     |   | 117,540          
|Accrued interest payable to non-affiliates                                                                                                                                   |   | 2,092,417                   |   | 1,844,071        
|Real estate taxes payable                                                                                                                                                    |   | 5,191,689                   |   | 237,366          
|Distributions payable                                                                                                                                                        |   | 10,632,281                  |   | 8,281,370        
|Security deposits                                                                                                                                                            |   | 2,980,881                   |   | 2,339,265        
|Mortgages payable                                                                                                                                                            |   | 862,844,761                 |   | 675,621,971      
|Prepaid rental and recovery income                                                                                                                                           |   | 2,319,169                   |   | 1,762,106        
|Note and margin payable                                                                                                                                                      |   | 13,331,064                  |   | 3,402,071        
|Acquired below market lease intangibles (net of accumulated amortization of $1,095,767 and $748,287 as of March 31, 2003 and December 31, 2002, respectively)                |   | 23,367,432                  |   | 9,946,024        
|Restricted cash liability                                                                                                                                                    |   | 19,532,050                  |   | 11,220,834       
|Other liabilities                                                                                                                                                            |   | 772,698                     |   | 369,523          
|Due to affiliates                                                                                                                                                            |   | 5,614,960                   |   | 2,515,204        
|                                                                                                                                                                             |   |                             |   |                  
|Total liabilities                                                                                                                                                            |   | 955,820,272                 |   | 722,010,008      
|                                                                                                                                                                             |   |                             |   |                  
|Minority interest in partnership                                                                                                                                             |   | 2,000                       |   | 2,000            
|                                                                                                                                                                             |   |                             |   |                  
|Stockholders' Equity:                                                                                                                                                        |   |                             |   |                  
|Preferred stock, $.01 par value, 10,000,000 shares authorized,  none outstanding                                                                                             |   | --                          |   | --               
|Common stock, $.01 par value, 213,687,349 shares authorized, 157,380,342 and 122,313,103 issued and outstanding at March 31, 2003 and December 31, 2002, respectively        |   | 1,573,802                   |   | 1,223,131        
|Additional paid-in capital (net of costs of Offering of                                                                                                                      |   |                             |   |                  
|$157,044,648 and $125,224,459 at March 31, 2003  and December 31, 2002 respectively, of which $141,545,334 and $111,594,675 was paid or accrued to Affiliates, respectively) |   | 1,409,060,146               |   | 1,091,208,613    
|Accumulated distributions in excess of net income                                                                                                                            |   | (59,789,271)                |   | (45,848,709)     
|Accumulated other comprehensive loss                                                                                                                                         |   | (676,547)                   |   | (906,684)        
|                                                                                                                                                                             |   |                             |   |                  
|Total stockholders' equity                                                                                                                                                   |   | 1,350,168,130               |   | 1,045,676,351    
|                                                                                                                                                                             |   |                             |   |                  
|Commitments and contingencies (Notes 6, 10 and 11)                                                                                                                           |   |                             |   |                  
|                                                                                                                                                                             |   |                             |   |                  
|Total liabilities and stockholders' equity                                                                                                                                   | $ | 2,305,990,402               | $ | 1,767,688,359    
|                                                                                                                                                                             |   | =========                   |   | =========        

See accompanying notes to consolidated financial statements.





4

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Consolidated Statements of Operations
For the Three Months Ended March 31, 2003 and 2002

(unaudited)

|                                                                               |  |  |   | Three months ended |   | Three months ended
|------------------------------------------------------------------------------ |  |  | - | ------------------ | - | ------------------
|                                                                               |  |  |   | March 31, 2003     |   | March 31, 2002    
|Income:                                                                        |  |  |   |                    |   |                   
|Rental income, net of amortization of above and below market lease intangibles |  |  | $ | 42,039,988         | $ | 16,517,438        
|Real estate tax recovery income                                                |  |  |   | 3,681,570          |   | 1,906,265         
|Common area cost recovery income                                               |  |  |   | 4,240,909          |   | 1,654,349         
|Additional rental income                                                       |  |  |   | 201,560            |   | 236,206           
|Interest and dividend income                                                   |  |  |   | 1,773,817          |   | 330,832           
|Other income, net of realized gain/loss from investment securities             |  |  |   | 226,956            |   | 169,435           
|                                                                               |  |  |   |                    |   |                   
|Total income                                                                   |  |  |   | 52,164,800         |   | 20,814,525        
|                                                                               |  |  |   |                    |   |                   
|Expenses:                                                                      |  |  |   |                    |   |                   
|Professional services to affiliates                                            |  |  |   | 6,911              |   | --                
|Professional services to non-affiliates                                        |  |  |   | 246,252            |   | 82,386            
|General and administrative expenses to affiliates                              |  |  |   | 155,834            |   | 147,482           
|General and administrative expenses to 
    non-affiliates                     |  |  |   | 71,357             |   | 96,259            
|Advisor asset management fee                                                   |  |  |   | 2,773,960          |   | 797,000           
|Property operating expenses to affiliates                                      |  |  |   | 2,293,893          |   | 951,672           
|Property operating expenses to non-affiliates                                  |  |  |   | 5,601,706          |   | 1,803,065         
|Real estate tax                                                                |  |  |   | 4,227,310          |   | 1,931,305         
|Mortgage interest to non-affiliates                                            |  |  |   | 9,433,907          |   | 4,576,616         
|Depreciation                                                                   |  |  |   | 11,930,472         |   | 4,740,114         
|Amortization                                                                   |  |  |   | 808,787            |   | 380,935           
|Acquisition cost expenses to affiliates                                        |  |  |   | 31,807             |   | --                
|Acquisition cost expenses to non-affiliates                                    |  |  |   | 139,270            |   | 26,571            
|                                                                               |  |  |   |                    |   |                   
|Total expenses                                                                 |  |  |   | 37,721,466         |   | 15,533,405        
|                                                                               |  |  |   |                    |   |                   
|Net income                                                                     |  |  | $ | 14,443,334         | $ | 5,281,120         
|                                                                               |  |  |   |                    |   |                   
|Other comprehensive income:                                                    |  |  |   |                    |   |                   
|Unrealized gain on investment securities                                       |  |  |   | 230,137            |   | 279,449           
|                                                                               |  |  |   |                    |   |                   
|Comprehensive income                                                           |  |  | $ | 14,673,471         | $ | 5,560,569         
|                                                                               |  |  |   |                    |   |                   
|                                                                               |  |  |   |                    |   |                   
|Net income per common share, basic and diluted                                 |  |  | $ | .11                | $ | .13               
|                                                                               |  |  |   |                    |   |                   
|Weighted average number of common shares outstanding, basic and diluted        |  |  | $ | 138,612,981        | $ | 41,254,793        
|                                                                               |  |  |   | =========          |   | ========          

See accompanying notes to consolidated financial statements



5.



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)



|                                                                                       | Number of Shares | CommonStock | Additional Paid-inCapital | Accumulated
Distributions in excess of Net Income | Accumulated Other Comprehensive
Loss | Total          
|-------------------------------------------------------------------------------------- | ---------------- | ----------- | ------------------------- | ------------------------------------------------- | ------------------------------------ | ---------------
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|Balance at December 31, 2002                                                           | 122,313,103      | $1,223,131  | $1,091,208,613            | $  (45,848,709)                                   | $ (906,684)                          | $1,045,676,351 
|                                                                                       |                  |             |                           |                                                   |                                      |                
|Net income                                                                             | --               | --          | --                        | 14,443,334                                        | --                                   | 14,443,334     
|Unrealized gain on investment securities                                               | --               | --          | --                        | --                                                | 230,137                              | 230,137        
|Distributions declared ($.20 per weighted average number of common shares outstanding) | --               | --          | --                        | (28,383,896)                                      | --                                   | (28,383,896)   
|Proceeds from Offering including DRP (net of Offering costs $31,820,189)               | 35,232,701       | 352,327     | 319,433,512               | --                                                | --                                   | 319,785,839    
|Shares repurchased                                                                     | (165,462)        | (1,656)     | (1,581,979)               | --                                                | --                                   | (1,583,635)    
|                                                                                       |                  |             |                           |                                                   |                                      |                
|Balance at March 31, 2003                                                              | 157,380,342      | 1,573,802   | 1,409,060,146             | $ (59,789,271)                                    | $        (676,547)                   | $ 1,350,168,130
|                                                                                       | ==========       | ========    | ===========               | ===========                                       | =============                        | ============   
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                
|                                                                                       |                  |             |                           |                                                   |                                      |                

See accompanying notes to consolidated financial statements.





6

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

(Unaudited)

|                                                                                                                              |  |  |   | March 31, 2003 |   | March 31, 2002
|----------------------------------------------------------------------------------------------------------------------------- |  |  | - | -------------- | - | --------------
|Cash flows from operating activities:                                                                                         |  |  |   |                |   |               
|Net income                                                                                                                    |  |  | $ | 14,443,334     | $ | 5,281,120     
|Adjustments to reconcile net income:                                                                                          |  |  |   |                |   |               
|Depreciation                                                                                                                  |  |  |   | 11,930,472     |   | 4,740,114     
|Amortization                                                                                                                  |  |  |   | 808,787        |   | 380,935       
|(Gain) loss on sale of investment securities                                                                                  |  |  |   | 5,722          |   | (35,715)      
|Rental income under master leases                                                                                             |  |  |   | 1,278,456      |   | 94,114        
|Straight line rental income                                                                                                   |  |  |   | (1,335,034)    |   | (380,217)     
|Amortization of above and below market lease intangibles                                                                      |  |  |   | 4,952          |   | --            
|Income from unconsolidated joint venture                                                                                      |  |  |   | --             |   | (105,781)     
|Changes in assets and liabilities:                                                                                            |  |  |   |                |   |               
|Accounts and rents receivable net of change in allowance of $444,403 and ($177,308) for 2003 and 2002, respectively           |  |  |   | (1,874,739)    |   | (295,542)     
|Other assets                                                                                                                  |  |  |   | (4,797,281)    |   | (76,755)      
|Accrued interest payable to non-affiliates                                                                                    |  |  |   | 248,346        |   | 302,293       
|Real estate tax payable                                                                                                       |  |  |   | 4,954,323      |   | 1,945,476     
|Accounts payable                                                                                                              |  |  |   | 1,439,338      |   | 829,837       
|Prepaid rental and recovery income                                                                                            |  |  |   | 557,063        |   | (101,697)     
|Other liabilities                                                                                                             |  |  |   | 414,179        |   | 1,843,017     
|Security deposits                                                                                                             |  |  |   | 641,616        |   | 139,244       
|Due to affiliates                                                                                                             |  |  |   | 3,099,756      |   | 1,091,339     
|Net cash provided by operating activities                                                                                     |  |  |   | 31,819,290     |   | 15,651,782    
|                                                                                                                              |  |  |   |                |   |               
|Cash flows from investing activities:                                                                                         |  |  |   |                |   |               
|Restricted escrows                                                                                                            |  |  |   | (1,212,635)    |   | (2,135,154)   
|Purchase of investment securities, net of change in margin account of $(71,007) and $359,434  for 2003 and 2002, respectively |  |  |   | (116,129)      |   | (476,274)     
|Proceeds from sale of investment securities                                                                                   |  |  |   | 155,977        |   | 497,387       
|Purchase of joint venture                                                                                                     |  |  |   | --             |   | (2,679)       
|Distributions from unconsolidated joint venture                                                                               |  |  |   | --             |   | 105,781       
|Purchase of investment properties                                                                                             |  |  |   | (377,101,917)  |   | (75,541,859)  
|Additions to investment properties                                                                                            |  |  |   | (19,381,995)   |   | (1,440,669)   
|Leasing fees                                                                                                                  |  |  |   | (348,915)      |   | (21,301)      
|Proceeds from (funding of) mortgages receivable                                                                               |  |  |   | (37,043,830)   |   | 1,100,000     
|                                                                                                                              |  |  |   |                |   |               
|Net cash used in investing activities                                                                                         |  |  |   | (435,049,444)  |   | (77,914,768)  



See accompanying notes to consolidated financial statements









7

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

|                                                  |  |  |   | March 31, 
2003 |   | March 31, 2002
|------------------------------------------------- |  |  | - | --------------- | - | --------------
|Cash flows from financing activities:             |  |  |   |                 |   |               
|Proceeds from offerings                           |  |  | $ | 351,606,027     | $ | 113,950,247   
|Repurchase of shares                              |  |  |   | (1,583,635)     |   | (122,402)     
|Payment of offering costs                         |  |  |   | (32,478,550)    |   | (11,098,852)  
|Proceeds from issuance of debt                    |  |  |   | 144,568,080     |   | 32,507,000    
|Principal payments of debt-balloon                |  |  |   | --              |   | (1,800,000)   
|Principal payments of debt-amortization           |  |  |   | (214,880)       |   | (67,556)      
|Proceeds from line of credit                      |  |  |   | 10,000,000      |   | --            
|Loan fees and deposits                            |  |  |   | (4,271,361)     |   | (775,820)     
|Distributions paid                                |  |  |   | (26,032,985)    |   | (7,502,684)   
|Net cash provided by financing activities         |  |  |   | 441,592,696     |   | 125,089,933   
|                                                  |  |  |   |                 |   |               
|Net increase in cash and cash equivalents         |  |  |   | 38,362,542      |   | 62,826,947    
|                                                  |  |  |   |                 |   |               
|Cash and cash equivalents, at beginning of period |  |  |   | 134,977,144     |   | 24,534,356    
|                                                  |  |  |   |                 |   |               
|Cash and cash equivalents, at end of period       |  |  | $ | 173,339,686     | $ | 87,361,303    
|                                                  |  |  |   | =========       |   | =========     

|Supplemental disclosure of cash flow information:                     |  |  |   |                |   |              
|--------------------------------------------------------------------- |  |  | - | -------------- | - | -------------
|                                                                      |  |  |   |                |   |              
|Cash paid for interest, net of $163,681 and $0                        |  |  |   |                |   |              
|capitalized at March 31, 2003 and 2002                                |  |  |   | 9,021,880      |   | 4,274,323    
|                                                                      |  |  |   | =========      |   | ========     
|                                                                      |  |  |   |                |   |              
|Restricted cash                                                       |  |  |   | (8,311,216)    |   | (1,709,424)  
|Restricted cash liability                                             |  |  |   | 8,311,216      |   | 1,709,424    
|                                                                      |  |  |   | =========      |   | ========     
|Supplemental schedule of non-cash investing and financing activities: |  | 
|                                                                      |  |  |   |                |   |              
|Purchase of investment properties                                     |  |  | $ | (470,912,858 ) | $ | (137,460,859)
|Assumption of mortgage debt                                           |  |  |   | 42,858,586     |   | 61,919,000   
|Conversion of mortgage receivable to investment property              |  |  |   | 53,000,000     |   | --           
|Net change in development payables                                    |  |  |   | 1,889,690      |   | --           
|Net change in development receivables                                 |  |  |   | (3,937,335)    |   | --           
|                                                                      |  |  |   |                |   |              
|Cash used to purchase investment properties                           |  |  | $ | (377,101,917 ) | $ | (75,541,859) 
|                                                                      |  |  |   | =========      |   | ========     
|Distributions payable                                                 |  |  | $ | 10,632,281     | $ | 3,111,662    
|                                                                      |  |  |   | =========      |   | ========     
|See accompanying notes to consolidated financial statements.         





8

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 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

Inland Retail Real Estate Trust, Inc. (the "Company") was formed on September 3, 1998 as a Maryland corporation to acquire and manage a diversified portfolio of real estate, primarily multi-tenant shopping centers. The Company has initially focused on acquiring properties in the southeastern states, primarily Florida, Georgia, North Carolina and South Carolina.  The Company may also acquire properties east of the Mississippi River in addition to single-user retail properties in locations throughout the United States, certain of which may be sale and leaseback transactions, net leased to creditworthy tenants.  Inland Retail Real Estate Advisory Services, Inc. (the "Advisor"), an affiliate of The Company, is the advisor to The Company.  On February 11, 1999, The Company commenced an initial public offering (the "Initial Offering"), on a best efforts basis of 50,000,000 shares of common stock ("Shares") at $10 per Share and 4,000,000 Shares at $9.50 per Share which may be distributed pursuant to The Company's Distribution Reinvestment Program ("DRP").  The Company terminated its Initial Offering on January 31, 2001. As of January 31, 2001, The Company had received subscriptions for a total of 13,687,349 Shares. The Company began an additional offering on February 1, 2001 (the "First Follow-On Offering") on a best efforts basis.  As of August 29, 2002, The Company sold 50,000,000 shares from the First Follow-On Offering resulting in gross proceeds of $497,842,917, thereby completing the second offering. Concurrent with the First Follow-On Offering, The Company began a third offering on June 7, 2002 (the "Second Follow-On Offering") on a best effort basis of 150,000,000 Shares of common stock at $10 per Share and 12,000,000 Shares at $9.50 per Share which may be distributed pursuant to the DRP.  As of March 31, 2003, The Company has received subscriptions for a total of 90,001,968 Shares in the Second Follow-On Offering. In addition, The Company has issued 4,261,636 Shares from all offerings pursuant to The Company's DRP.  The Initial Offering, the First Follow-On Offering and the Second Follow-On Offering are collectively referred to as the "Offerings".  As of March 31, 2003, The Company has repurchased a total of 590,611 Shares through The Company's Share Repurchase Program for $5,532,127.



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.



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.



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



9

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



The Company classifies its investment in securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which The Company has the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available for sale. Investment in securities at March 31, 2003 consist principally of preferred stock investments in various real estate investment trusts and are classified as available-for-sale securities and are recorded at fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification

basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Dividend income is recognized when earned.  Additionally, The Company has purchased its securities through a margin account.  As of March 31, 2003 and December 31, 2002, The Company has recorded a payable of $3,331,064 and $3,402,071, respectively, for securities purchased on margin.  During the three months ended March 31, 2003 and March 31, 2002 The Company realized gains (losses) of ($5,722) and $35,715 respectively, on sale of investment securities.  Of the investment securities held on March 31, 2003 and December 31, 2002, The Company has accumulated other comprehensive loss of $676,547 and $ 906,684 respectively.



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.





10



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

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. As a result of the interpretation, The Company was required to consolidate the Fountains as an investment property.  During the transition period, prior to the effective date on September 30, 2003, The Company continues to evaluate other fundings.  Currently, The Company has accounted for the remaining fundings issued to borrowers for the development or purchase of investment properties as development receivables or mortgage receivables, respectively.  These receivables are typically secured by the underlying investment property and guarantees of the borrowers.  The Company's maximum exposure to loss as a result of the notes receivable would be the amount of the receivable balance outstanding at March 31, 2003 less amounts paid after the quarter which amounts to approximately $38,965,000.



The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents and are carried at cost, which approximates market.



In conjunction with certain acquisitions, The Company receives payments under master lease agreements pertaining to certain, non-revenue producing spaces either at the time of, or subsequent to, the purchase of some of The Company's properties.  GAAP requires that upon receipt of these payments, the receipts are to be recorded as a reduction in the purchase price of the related properties rather than as rental income.  These master leases were established at the time of purchase in order to mitigate the potential negative effects of loss of rent and expense reimbursements.  Master lease payments are received through a draw of funds escrowed at the time of purchase and may cover a period from one to three years. These funds may be released to either The Company or the seller when certain leasing conditions are met.  Restricted cash includes funds received by third party escrow agents, from sellers, pertaining to master lease agreements. The Company records such escrows as both an asset and a corresponding liability, until certain leasing conditions are met.



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 $4,448,524 and $2,558,834 at March 31, 2003 and December 31, 2002, respectively. The development receivables consist of amounts due to The Company from accrued interest on certain development notes receivable net of interest capitalized, further described in footnote 7.  The Company maintained development receivables of $4,865,698 and $928,363 at March 31, 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.



















11



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



The Company performs impairment analysis for its long-lived assets in accordance with Statement of Financial Accounting Standards No. 144 ("SFAS 144") to ensure that the investment property's carrying value does not exceed its fair value.  The valuation analysis performed by The Company was based upon many factors which require difficult, complex or subjective judgments to be made.  Such assumptions include projecting vacancy rates, rental rates, operating expenses, lease terms, tenant financial strength, economy, demographics, property location, capital expenditures and sales value among other assumptions to be made upon valuing each property.   This valuation is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole.  The Company's judgment resulted in no permanent impairment at December 31, 2002.  As of March 31, 2003, no factors in the December 31, 2002 assumptions have significantly changed.  Therefore, no impairment is warranted at March 31, 2003.

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, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 144").  On January 1, 2002, The Company adopted SFAS 141.  Furthermore, any goodwill or intangible asset determined to have an indefinite useful life acquired in a purchase business combination completed after June 30, 2001 may not be amortized, but must be evaluated for permanent impairment. 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 additional intangible assets for acquired in-place lease origination costs and acquired above market leases and liabilities for acquired below market leases relating to The Company's real estate acquisitions of approximately $18,926,000, $21,144,000 and $24,463,000, respectively, cumulative as of March 31, 2003.  For the three months ended March 31, 2003 The Company recognized upon acquisition, additional intangible assets for acquired in-place lease origination costs and above market leases and liabilities for acquired below market leases of approximately $4,376,000, $8,819,000 and $13,769,000 respectively. The portion of the purchase price allocated to acquired above market leases and acquired below market leases 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 $352,432 was applied as a reduction to rental income for the period ending March 31, 2003.  Amortization pertaining to the liabilities for below market lease intangibles of  $347,480 was applied as an increase to rental income for the period ending March 31, 2003.

The portion of the purchase price allocated to acquired in-place lease origination costs are amortized on a straight-line basis over the life of the related lease.  The Company incurred amortization expense pertaining to acquired in-place lease origination costs of $348,953 for the period ending March 31, 2003.

Leasing fees are amortized on a straight-line basis over the life of the related lease.



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





12

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



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



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



The carrying amount of The Company's debt approximates fair value.  The carrying amount of The Company's other financial instruments, which includes mortgage notes receivable, approximates fair value because of the relatively short maturity of these instruments.



Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"), determined that a lessor should defer recognition of contingent rental income (i.e. percentage/excess rent) until the specified target (i.e. breakpoint) that triggers the contingent rental income is achieved.  The Company records percentage rental revenue in accordance with the SAB 101.

Notes receivable 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 is considered impaired pursuant to 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 collectibility 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 and are recognized as interest income, thereafter.  Based on The Company's judgment, no impairment was warranted for the periods ended March 31, 2003 and December 31, 2002.

(2)  Basis of Presentation

The accompanying Consolidated Financial Statements include the accounts of The Company, as well as all wholly owned subsidiaries and the accounts of the operating partnership. Wholly owned subsidiaries generally consist of limited liability companies ("LLC's") for which separate financial records are maintained.  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 is reflected as minority interest in the accompanying Consolidated Financial Statement.  The effects of all significant intercompany transactions have been eliminated.



Four individual LLCs formed by The Company each purchased a shopping center from an unaffiliated third party by paying cash and assuming the respective first mortgage financing for the properties known as Douglasville Pavilion, Southlake Pavilion, Fayetteville Pavilion and Sarasota Pavilion.  The Company formed the LLCs with Inland Real Estate Investment Corporation ("IREIC,") an affiliate of the Advisor, as an additional member in order to satisfy certain requirements of the lender.  This requirement resulted in IREIC guaranteeing the loans and holding a majority voting interest in each LLC; however The Company retained all economic burdens and benefits of ownership of the respective properties throughout the guarantee period.  As consideration for IREIC's guaranty of the loans, The Company paid IREIC an annual fee equal to 1/8% of the outstanding loan balance, paid monthly.  The Consolidated Financial Statements



13

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



include the accounts of the joint venture LLCs with IREIC and no provision for their minority interests have been reflected.  In June, 2002, the respective financing was repaid and the IREIC loan guarantee was extinguished.

(3)  Services Provided by Affiliates of the Advisor

As of March 31, 2003 and December 31, 2002, The Company had incurred $157,044,648 and $125,224,459, respectively, of offering costs, of which $141,545,334 and $111,594,678 was paid to affiliates. 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 March 31, 2003 and December 31, 2002, offering costs did not exceed the 5.5% and 15% limitations. The Company anticipates that these costs will not exceed these limitations upon completion of the Second Follow-On Offering. Any excess amounts at the completion of the Second Follow-On Offering will be reimbursed by the Advisor.



The Advisor and its affiliates are entitled to reimbursement for salaries and expenses of employees of the Advisor and its affiliates relating to the 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 $29,789,099 and $79,614,867 for the periods ended March 31, 2003 and December 31, 2002, respectively, of which $599,527 and $1,309,885 was unpaid at March 31, 2003 and December 31, 2002, respectively.



The Advisor and its affiliates are entitled to reimbursement for general and administrative expenses of the 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 March 31, 2003 and 2002, The Company incurred $582,749 and $147,482 respectively of these costs, of which $531,684 remained unpaid as of March 31, 2003.



An affiliate of the Advisor provides loan servicing to The Company for an annual fee.  Such costs are incurred 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 $52,718 and $30,174 for the three month periods ended March 31, 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 March 31, 2003 and 2002, The Company paid loan fees totaling $617,810 and $53,823 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 Company's total operating expenses, the sum of the advisor asset



14

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



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 months ended March 31, 2003 and 2002 The Company incurred approximately $2,774,000 and $797,000 of asset management fees, of which aggregate unpaid fees were approximately $4,774,000 and $2,000,000 at March 31, 2003, and December 31, 2002, respectively.



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 $ 2,241,176 and $921,498 for the three months ended March 31, 2003 and 2002, respectively.  All amounts have been paid.



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.  As of March 31, 2002, $ 28,320 of guarantee fees related to the LLC's had been incurred, of which none remained unpaid at March 31, 2002.  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 March 31, 2003 and December 31, 2002, options to acquire 13,500 and 13,500 Shares of common stock were outstanding.



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 dealers 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 reallow 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 March 31, 2003 and December 31, 2002, 6,150,784 and 4,788,966 warrants, respectively, had been issued.  At March 31, 2003, these warrants had nominal value and none had been exercised.





15

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 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 $5,272,202 and $3,993,746 as of March 31, 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       | $ | 176,667,948  
|2004       |   | 174,915,693  
|2005       |   | 164,923,997  
|2006       |   | 155,516,375  
|2007       |   | 141,078,379  
|Thereafter |   | 1,061,657,458
|Total      | $ | 1,874,759,850
|           |   | ===========  

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 $1,335,034 and $380,217 for the three months ended March 31, 2003 and 2002 respectively.  The related accounts and rents receivable as of March 31, 2003, and December 31, 2002 were $4,922,673 and $3,587,639, respectively.  The Company anticipates collecting these amounts over the terms of the related leases as scheduled rent payments are made.























16



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

(6)  Mortgages and Notes Payable

Mortgages payable consist of the following at March 31, 2003 and December 31, 2002:

Property as collateral:

|                                                                                                              | Interest                      |                                    |  | Balance at                                     
|------------------------------------------------------------------------------------------------------------- | ----------------------------- | ---------------------------------- |  | -----------------------------------------------
|                                                                                                              | Rate at                       | Maturity                           |  | March 31,                                      
|Fixed Rate Mortgages Payable                                                                                  | 03/31/03                      | Date                               |  | 2003                                           
|Aberdeen Square                                                                                               | 6.25%                         | Jan-07                             |  | $      3,670,000                               
|Abernathy Square                                                                                              | 6.29%                         | Mar-09                             |  | 13,392,000                                     
|Anderson Central                                                                                              | 7.63%                         | Sep-03                             |  | 11,000,000                                     
|Bass Pro Shops                                                                                                | 5.93%                         | Aug-09                             |  | 9,100,000                                      
|Brandon Blvd. Shoppes                                                                                         | 6.24%                         | Mar-09                             |  | 5,137,000                                      
|Brooker Creek                                                                                                 | 7.88%                         | Dec-04                             |  | 4,468,070                                      
|Casselberry Commons                                                                                           | 7.64%                         | Apr-06                             |  | 8,703,000                                      
|Chatham Crossing                                                                                              | 4.65%                         | Apr-10                             |  | 2,190,000                                      
|Chesterfield Crossing                                                                                         | 5.50%                         | Oct-09                             |  | 6,380,000                                      
|Chickasaw Trails Shopping Center
Circuit City- Cary                                                           | 6.26%
4.77%                   | Nov-06
Apr-10                      |  | 4,400,000
3,280,000                            
|Circuit City Plaza                                                                                            | 5.50%                         | Sep-09                             |  | 6,275,000                                      
|Circuit City -Rome                                                                                            | 5.50%                         | Sep-09                             |  | 2,470,000                                      
|Circuit City-Vero Beach                                                                                       | 5.50%                         | Sep-09                             |  | 3,120,000                                      
|Clayton Corners
Columbia Promenade
Comp USA                                                                   | 7.25%
7.61%
4.41%             | Apr-12
Feb-06
Apr-10               |  | 9,850,000
3,600,000
4,000,000                  
|Countryside                                                                                                   | 6.54%                         | Jun-06                             |  | 4,300,000                                      
|Cox Creek                                                                                                     | 7.09%                         | Mar-12                             |  | 15,212,567                                     
|Crystal Springs                                                                                               | 6.15%                         | Aug-09                             |  | 4,070,000                                      
|Duvall Village
Eckerds- Greenville                                                                            | 7.04%
6.30%                   | Oct-12
Aug-09                      |  | 9,441,045
      1,540,400                      
|Eckerds- Spartanburg                                                                                          | 6.30%                         | Aug-09                             |  | 1,541,600                                      
|Eckerds #5018- Millersport                                                                                    | 4.97%                         | Feb-10                             |  | 1,581,660                                      
|Eckerds #5661- Broad                                                                                          | 4.97%                         | Feb-10                             |  | 1,777,076                                      
|Eckerds #5786- Central                                                                                        | 4.97%                         | Feb-10                             |  | 905,364                                        
|Eckerds #5797- Genessee                                                                                       | 4.97%                         | Feb-10                             |  | 1,636,200                                      
|Eckerds #6007- Route 119                                                                                      | 4.97%                         | Feb-10                             |  | 1,636,200                                      
|Eckerds #6036- Route 51                                                                                       | 4.97%                         | Feb-10                             |  | 1,636,200                                      
|Eckerds #6040- Route 22 & Center                                                                              | 4.94%                         | Feb-10                             |  | 1,910,700                                      
|Eckerds #6043- Monroeville                                                                                    | 4.97%                         | Feb-10                             |  | 1,636,200                                      
|Eckerds #6062- Eastway Plaza                                                                                  | 4.94%                         | Feb-10                             |  | 1,418,040                                      
|Eckerds #6089- Route 22 & Cove                                                                                | 4.97%                         | Feb-10                             |  | 1,374,408                                      
|Eckerds #6095- Old Freeport                                                                                   | 4.97%                         | Feb-10                             |  | 1,570,752                                      
|Eckerds #6172- Washington                                                                                     | 4.94%                         | Feb-10                             |  | 1,636,200                                      
|Eckerds #6193- 26th & Parade                                                                                  | 4.94%                         | Feb-10                             |  | 1,636,200                                      
|Eckerds #6199- 26th & Sterrettainia                                                                           | 4.94%                         | Feb-10                             |  | 1,636,200                                      
|Eckerds #6257- Peach
Eckerds #6286- 12th
Eckerds #6334- 6th
Eckerds #6392- Route 130
Eckerds #6695- Route 286 | 5.18%
5.18%
4.94%
4.97%
4.97% | Apr-10
Apr-10
Feb-10
Feb-10
Feb-10 |  | 640,000
1,601,450
1,636,200
1,636,200
1,636,200

17



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                   | Interest |          |  | Balance at   
|---------------------------------- | -------- | -------- |  | -------------
|                                   | Rate at  | Maturity |  | March 31,    
|Fixed Rate Mortgages Payable       | 03/31/03 | Date     |  | 2003         
|Eisenhower Crossing I              | 6.09%    | Jan-07   |  | $  16,375,000
|Eisenhower Crossing II             | 6.12%    | Jan-07   |  | 7,425,000    
|Forestdale Plaza                   | 4.91%    | Jan-10   |  | 3,319,000    
|Forest Hills Center                | 4.49%    | Mar-10   |  | 3,660,000    
|Gateway Market Center              | 7.94%    | Aug-05   |  | 10,425,000   
|Gateway Plaza Shopping Center      | 4.82%    | Mar-10   |  | 6,500,000    
|Golden Gate                        | 4.74%    | Apr-10   |  | 6,378,550    
|Goldenrod Groves                   | 4.41%    | Apr-10   |  | 4,575,000    
|Hairston Crossing                  | 5.99%    | Jul-09   |  | 3,655,000    
|Hampton Point                      | 5.50%    | Oct-09   |  | 2,475,000    
|Harundale                          | 4.64%    | Apr-10   |  | 12,362,000   
|Hillsboro Square                   | 5.50%    | Oct-09   |  | 12,100,000   
|Kmart                              | 6.80%    | Jun-06   |  | 4,655,000    
|Lake Olympia Square                | 8.25%    | Apr-07   |  | 5,438,780    
|Lakeview Plaza                     | 8.00%    | Mar-18   |  | 3,613,236    
|Lake Walden Square                 | 7.63%    | Nov-07   |  | 9,666,890    
|Lowe's Home Improvement Center     | 6.80%    | Jun-06   |  | 4,845,000    
|Market Square                      | 7.02%    | Sep-08   |  | 8,369,892    
|McFarland Plaza                    | 5.50%    | Sep-09   |  | 8,425,000    
|Melbourne                          | 7.68%    | Mar-09   |  | 5,947,649    
|Merchants Square                   | 7.25%    | Nov-08   |  | 3,167,437    
|North Aiken Bi Lo                  | 4.64%    | Apr-10   |  | 2,900,000    
|Northpoint Marketplace             | 5.50%    | Sep-09   |  | 4,535,000    
|Oleander Shopping Center           | 7.80%    | Nov-11   |  | 3,000,000    
|Overlook King of Prussia           | 4.60%    | Mar-08   |  | 30,000,000   
|PETsMART- Chattanooga              | 7.37%    | Jun-08   |  | 1,303,800    
|PETsMART-Daytona Beach             | 7.37%    | Jun-08   |  | 1,361,200    
|PETsMART-Fredericksburg            | 7.37%    | Jun-08   |  | 1,435,000    
|Pleasant Hill                      | 7.35%    | Jun-05   |  | 17,120,000   
|Presidential Commons               | 6.80%    | Dec-07   |  | 24,066,555   
|Presidential Commons               | 2.50%    | Nov-06   |  | 2,000,000    
|Riverstone Plaza                   | 5.50%    | Sep-09   |  | 17,600,000   
|Rosedale Center                    | 7.94%    | Jun-11   |  | 13,300,000   
|Sand Lake Corners                  | 6.80%    | Jun-08   |  | 11,900,000   
|Sexton Commons                     | 4.50%    | Dec-09   |  | 4,400,000    
|Sharon Greens                      | 6.07%    | Sep-09   |  | 6,500,000    
|Shoppes of Lake Mary               | 4.91%    | Jan-10   |  | 6,250,000    
|Shops on the Circle                | 7.92%    | Nov-10   |  | 12,170,625   
|Southlake Shopping Center          | 7.25%    | Nov-08   |  | 7,659,185    
|Sycamore Commons                   | 5.11%    | Sep-09   |  | 20,000,000   
|Target Shopping Center             | 6.02%    | Aug-09   |  | 4,192,000    
|Town Center Commons                | 7.00%    | Apr-06   |  | 4,750,000    
|Walk at Highwood I                 | 5.50%    | Sep-09   |  | 13,230,000   
|Wakefield Crossing                 | 4.50%    | Dec-09   |  | 5,920,000    
|Wards Crossing                     | 5.50%    | Sep-09   |  | 6,090,000    
|West Oaks                          | 6.80%    | Jun-06   |  | 4,900,000    
|                                   |          |          |  |              
|Total Fixed Rate Mortgages Payable |          |          |  | 536,243,931  







18

INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                                      | Interest |          |  | Balance at       
|------------------------------------- | -------- | -------- |  | -----------------
|                                      | Rate at  | Maturity |  | March 31,        
|Variable Rate Mortgages payable       | 03/31/03 | Date     |  | 2003             
|Bartow Marketplace                    | 2.98%    | Sep-06   |  | $      13,475,000
|Boynton Commons                       | 2.97%    | Mar-08   |  | 15,125,000       
|Bridgewater Marketplace               | 3.10%    | Sep-06   |  | 2,987,500        
|Citrus Hills                          | 3.05%    | Feb-07   |  | 3,000,000        
|Conway Plaza                          | 2.99%    | Jun-05   |  | 5,000,000        
|Creekwood Crossing                    | 4.00%    | Mar-07   |  | 11,750,000       
|Douglasville Pavilion                 | 2.72%    | Jul-07   |  | 14,925,000       
|Douglasville Pavilion                 | 2.72%    | Jul-03   |  | 1,360,000        
|Fayetteville Pavilion                 | 2.72%    | Jul-07   |  | 15,940,000       
|Fayetteville Pavilion                 | 2.72%    | Jul-03   |  | 1,450,000        
|Fountains  (Line of Credit)           | 3.08%    | Mar-04   |  | 13,999,900       
|Jo-Ann Fabrics                        | 2.97%    | Aug-08   |  | 2,450,000        
|Just For Feet- Augusta                | 3.08%    | Mar-07   |  | 1,668,000        
|Just For Feet- Covington              | 3.08%    | Mar-07   |  | 1,885,000        
|Just For Feet- Daytona                | 3.09%    | Sep-06   |  | 2,000,000        
|Lakewood Ranch                        | 3.19%    | Oct-09   |  | 4,400,000        
|Marketplace at Mill Creek             | 3.19%    | Aug-03   |  | 28,900,000       
|Newnan Pavilion                       | 2.72%    | Jul-07   |  | 18,999,243       
|Newnan Pavilion                       | 2.72%    | Jul-03   |  | 1,727,128        
|Sarasota Pavilion                     | 3.03%    | Jul-07   |  | 19,000,000       
|Sarasota Pavilion                     | 4.03%    | Jul-07   |  | 2,000,000        
|Sarasota Pavilion                     | 4.03%    | Jul-03   |  | 8,850,000        
|Skyview Plaza                         | 2.95%    | Nov-06   |  | 10,875,000       
|Southlake Pavilion                    | 2.72%    | Jul-07   |  | 31,723,316       
|Southlake Pavilion                    | 2.72%    | Jul-03   |  | 2,879,393        
|Steeplechase                          | 2.84%    | Apr-07   |  | 4,651,350        
|Stonebridge                           | 3.08%    | Jul-07   |  | 10,900,000       
|Stonecrest Marketplace                | 3.19%    | Aug-03   |  | 20,000,000       
|Turkey Creek                          | 2.72%    | Jul-03   |  | 1,100,000        
|Turkey Creek                          | 2.72%    | Jul-07   |  | 12,120,000       
|Universal Plaza                       | 4.00%    | Apr-07   |  | 4,970,000        
|Venture Pointe                        | 2.72%    | Jul-07   |  | 14,475,000       
|Venture Pointe                        | 2.72%    | Jul-03   |  | 1,315,000        
|Woodstock Square                      | 3.00%    | Aug-08   |  | 14,000,000       
|Woodstock Square                      | 3.08%    | Feb-04   |  | 6,700,000        
|                                      |          |          |  |                  
|Total Variable Rate Mortgages Payable |          |          |  | $ 326,600,830    
|                                      |          |          |  |                  
|Total Mortgages Payable               |          |          |  | $862,844,761     
|                                      |          |          |  | ===========      
|Notes and Margin payable              |          |          |  |                  
|                                      |          |          |  |                  
|Unsecured Line of Credit- Key Bank    | 2.81%    | Sep-03   |  | $      10,000,000
|Margin Account                        |          |          |  | 3,331,064        
|                                      |          |          |  |                  
|                                      |          |          |  | $      13,331,064
|                                      |          |          |  | ===========      



19



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 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 three months ended March 31, 2003, The Company closed on or assumed debt with a principal amount of $187,426,616.  The average costs of funds for the first quarter of 2003 were approximately 4.98%.  The Company also maintained two lines of credit in the aggregate amount of $114 million, of which $24 million was outstanding as of March 31, 2003.  The first line of credit for $14 million is secured by the Fountains investment property.  A second $100 million line of credit was granted for which $10 million was outstanding as of March 31, 2003.  The $100 million line of credit maintains covenant requirements for which The Company was in compliance for the reporting period ending March 31, 2003



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.



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



The following table shows the debt maturing during the next five years and the weighted average interest rate as of March 31, 2003 related to that debt.



|                               | 2003        | 2004       | 2005        | 2006        | 2007        | Thereafter  
|------------------------------ | ----------- | ---------- | ----------- | ----------- | ----------- | ------------
|                               |             |            |             |             |             |             
|Maturing debt:                 |             |            |             |             |             |             
|Fixed rate debt                | $11,731,849 | $5,616,888 | $28,784,306 | $43,669,479 | $66,684,846 | $379,756,563
|Variable rate debt             | 77,581,521  | 20,699,900 | 5,000,000   | 29,337,500  | 168,006,909 | 35,975,000  
|                               |             |            |             |             |             |             
|Average interest rate on debt: |             |            |             |             |             |             
|Fixed rate debt                | 7.62%       | 7.79%      | 7.57%       | 6.80%       | 6.75%       | 5.80%       
|Variable rate debt             | 3.23%       | 3.08%      | 2.99%       | 2.99%       | 2.94%       | 3.01%       



The principal balance of $ 336,582,010 or 38% of The Company's mortgages payable at March 31, 2003, have variable interest rates averaging 3.02%.  An increase in the variable interest rate on certain mortgages payable constitutes a market risk.



20



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



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

(7) Development and Mortgage Notes Receivable



On April 29, 2002, The Company funded a $2,475,000 second mortgage note receivable, which will be used by the borrower for the redevelopment of a shopping center known as Midway Plaza.  The note maintains a stated interest rate of 10% per annum and matures the earlier of May 31, 2003 or the date upon which the property is sold, transferred or conveyed by the borrower.  The note requires monthly payments of interest only and a final balloon payment due at maturity.  Pursuant to the terms of the agreement, the monthly interest payments are 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 Company, at its option, may elect to purchase the shopping center upon completion of the redevelopment.



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 Centre Shopping Center in Huntsville, Alabama.  The note maintains a stated interest rate of 9.25% per annum and matures on April 2, 2003.  This mortgage receivable was fully repaid on April 9, 2003.  The note requires monthly interest payments only and a final balloon payment due at maturity.  Payments to reduce the outstanding principal are allowed, and additional draws are also possible, as long as the outstanding balance does not exceed $44,000,000.  The note receivable balance at March 31, 2003 is $44,000,000.  The Company, at its option, may elect to purchase the shopping center upon completion of the development.



On October 28, 2002, The Company agreed to fund a development receivable for a maximum of $1,295,000 for the tenant buildout at a shopping center known as 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.   This mortgage receivable was fully repaid as of March 31, 2003.



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 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 shopping center known as Westside Centre Shopping Center in Huntsville, Alabama.  The note maintains a stated rate of interest of 9.00% per annum and matures on April 2, 2003.  This mortgage receivable was fully repaid on April 9, 2003.  The note requires monthly interest payments only and a final balloon payment due at maturity.  Payments to reduce the outstanding principal are allowed, and additional draws are also possible, as long as the outstanding balance does not exceed $7,000,000.  The note receivable balance at March 31, 2003 is $2,053,960.  The Company, at its option, may elect to purchase the shopping center upon completion of the development.



On December 18, 2002, The Company agreed to fund a development receivable for a maximum of $2,100,000 for tenant buildout relating to H.H. Gregg at 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 required monthly interest payments only and a final balloon payment due at maturity.  Payments to reduce the outstanding principal are allowed, and additional draws are also possible, as long as the outstanding balance does not exceed $2,100,000.  The note receivable outstanding balance at March 31, 2003 is $1,909,956.



21

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

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 March 31, 2003 was $36,029,455.  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 and Wisconsin.  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.



































































22



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)



The property revenues and net property operations are summarized in the following tables for the three months ended March 31, 2003 and 2002, along with reconciliation to net income.  Property asset information is as of March 31, 2003 and March 31, 2002.



|                                                          |   | March 31,
2003 |   | March 31,
2002
|--------------------------------------------------------- | - | -------------- | - | --------------
|                                                          |   |                |   |               
|Property and additional rental income                     | $ | 50,164,027     | $ | 20,314,258    
|Other property operating income                           |   | 213,840        |   | 3,550         
|Total property operating expenses                         |   | 12,122,909     |   | 4,686,042     
|Mortgage interest                                         |   | 9,433,907      |   | 4,576,616     
|                                                          |   |                |   |               
|Net property operations                                   |   | 28,821,051     |   | 11,055,150    
|                                                          |   |                |   |               
|Interest and dividend income                              |   | 1,773,817      |   | 330,832       
|Other income                                              |   | 18,838         |   | 130,170       
|Gain (loss) on sale of investment securities              |   | (5,722)        |   | 35,715        
|Less non property expenses:                               |   |                |   |               
|Professional services                                     |   | 253,163        |   | 82,386        
|General and administrative and acquisition costs expensed |   | 398,268        |   | 270,312       
|Advisor asset management fee                              |   | 2,773,960      |   | 797,000       
|Depreciation and amortization                             |   | 12,739,259     |   | 5,121,049     
|                                                          |   |                |   |               
|Net income                                                | $ | 14,443,334     | $ | 5,281,120     
|                                                          |   | ==========     |   | ==========    
|Total Assets                                              |   |                |   |               
|Investment properties                                     | $ | 1,936,610,642  | $ | 715,671,061   
|Non-segment assets                                        |   | 369,379,760    |   | 115,671,022   
|                                                          | $ | 2,305,990,402  | $ | 831,342,083   
|                                                          |   | ==========     |   | ==========    

(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.



As of March 31, 2003 and December 31, 2002, warrants to purchase 6,150,784 and 4,788,966, respectively, shares of common stock at a price of $12.00 per share were outstanding.  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 138,612,981 and 70,243,809 for the period ended March 31, 2003 and December 31, 2002, respectively.









23

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

(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.  Phase I costs are expected to be approximately $119 per square foot of leasable space; these costs include the developer's profit and the costs of the land for Phase II.  Total costs incurred through March 31, 2003 including land, amounted to $11,275,000 of which $127,000 remained unpaid at March 31, 2003.  The total cost may be adjusted upward or downward based on the actual lease rates achieved.  Phase II development is contingent upon the satisfaction of certain conditions including, but not limited to, a minimum percentage leased and The Company's approval of the Phase II construction budget.  Phase II will consist of approximately 44,400 square feet of leasable space.  The Company funded the purchase of the land and the development costs; however, The Company expects to place financing on the property at a later date.

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 City, South Carolina.  Both stores were placed in service on February 28, 2003 and maintain no amounts unpaid at March 31, 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.  Total costs incurred through March 31, 2003, including land, amounted to approximately $2,821,000 of which $259,000 remained unpaid at March 31, 2003.



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.  Total costs incurred through March 31, 2003, including land, amounted to approximately $2,795,000 of which $570,000 remained unpaid at March 31, 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.  Total costs incurred through March 31, 2003, including land, amounted to approximately $2,246,000 of which $937,000 remained unpaid at March 31, 2003.













24

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



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 $9,010,787 for 77,900 gross leasable square feet.  The parcel is located in Tyrone, Georgia.  Total costs incurred through March 31, 2003, including land, amounted to approximately $4,087,000 of which $915,000 remained unpaid at March 31, 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 $2,813,000 for 13,813 gross leasable square feet.  The parcel is located in Gaffney, South Carolina.  Total costs incurred through March 31, 2003, including land, amounted to approximately $2,374,000 of which $503,000 remained unpaid at March 31, 2003.



On December 12, 2002, The Company acquired 15.27 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 $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 $12,973,300 for 91,165 gross leasable square feet.  The parcel is located in Lake Wales, Florida.  Total costs incurred through March 31, 2003, including land, amounted to approximately $3,620,000 of which $92,070 remained unpaid at March 31, 2003.



On March 27, 2003, The Company acquired 6.5 acres of land and simultaneously contracted for the development of a shopping center.  The parcel was acquired from an unaffiliated third party for approximately $500,000.  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 $6,818,363 for 43,200 gross leasable square feet.  The parcel is located in Watercolor, Florida.  Total costs incurred through March 31, 2003, including land, amounted to approximately $1,142,000 of which none remained unpaid at March 31, 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

The Company paid distributions of $10,632,281 and $11,320,603 to its stockholders in April and May 2003, respectively.



The Company issued 23,991,065 Shares of Common Stock from April 1, 2003 through May 8, 2003, resulting in a total of 181,371,407 Shares of Common Stock outstanding. As a result, as of May 8, 2003, subscriptions for a total of 176,650,571 Shares were received resulting in total gross offering proceeds of $1,765,939,836 and an additional 5,350,347 Shares were issued pursuant to the DRP for $50,828,301 of additional gross proceeds.  The Company has repurchased 629,511 Shares through its Share Repurchase Program for $5,901,303.



25



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

As of March 31, 2003, The Company had been extended a line of credit for $100 million with Key Bank, of which $100,000,000 was outstanding.  Subsequent to March 31, 2003 The Company has been extended an additional $100,000,000 for a total of $200,000,000 available on the line of credit.  Fundings under the line of credit will require interest payments based on a margin range depending upon certain provisions contained in the credit agreement.  Subsequent to March 31, 2003, The Company was funded an additional $90,000,000 for a total outstanding of $100,000,000 of the $200,000,000 available on the line of credit.

























































































26



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)



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





|Date     |                                                                                 |      | Year       | Approximate Purchase Price | Gross Leasable Area |                                               
|-------- | ------------------------------------------------------------------------------- | ---- | ---------- | -------------------------- | ------------------- | ----------------------------------------------
|Acquired | Property                                                                        | Type | Built      | ($)                        | (Sq. Ft.)           | Major Tenants                                 
|         |                                                                                 |      |            |                            |                     |                                               
|04/03/03 | Glenmark Centre
Route 857 and I-68
Morgantown, WV                               | NC   | 1999/ 2000 | 13,312,000                 | 122,167             | Shop 'n Save
Michaels Crafts                  
|         |                                                                                 |      |            |                            |                     |                                               
|04/15/03 | Flamingo Falls Town Center
Flamingo Road and Sheridan Street
Pembroke Pines, FL | NC   | 2001       | 23,850,000                 | 108,565             | Fresh Market
Eckerds                          
|         |                                                                                 |      |            |                            |                     |                                               
|04/15/03 | Creeks at Virginia Center
Brook Road and Jeb Stuart Parkway
Richmond, VA        | NC   | 2002       | 39,000,000                 | 266,266             | Bed, Bath & Beyond
Dick's Sporting Goods      
|         |                                                                                 |      |            |                            |                     |                                               
|04/09/03 | Westside Centre
University Drive
Huntsville, AL                                 | NC   | 2002       | 53,368,000                 | 490,784             | Babies 'R Us
Marshall's                       
|         |                                                                                 |      |            |                            |                     |                                               
|04/28/03 | Bi-Lo Southern Pines
Hwy. 15 and Hwy. 501
Southern Pines, NC                    | NC   | 2002       | 8,180,000                  | 57,404              | Bi-Lo                                         
|         |                                                                                 |      |            |                            |                     |                                               
|04/22/03 | River Run Shopping Center
Miramar Parkway and Palm
Avenue
Miramar, FL           | NC   | 1989       | 11,800,000                 | 93,643              | Publix
Walgreen                               
|         |                                                                                 |      |            |                            |                     |                                               
|05/02/03 | Barrett Pavilion Shopping Center
Kennesaw, GA                                   | NC   | 1994/ 1998 | 80,000,000                 | 460,755             | Best Buy
Old Navy
Goody's
Shoe Carnival
Target
|         |                                                                                 |      |            |                            |                     |                                               
|05/02/03 | Goody's Shopping Center
Augusta, GA                                             | SU   | 1999       | 2,154,113                  | 22,560              | Goody's
Super Walmart                         
|         |                                                                                 |      |            |                            |                     |                                               
|05/07/03 | BJ's Wholesale Club
Charlotte, NC                                               | SU   | 2002       | 13,000,000                 | 99,792              | BJ's Wholesale                                
|         |                                                                                 |      |            |                            |                     |                                               



|Type of Property
|----------------
|NC              
|SU              
|D               



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)



Mortgage debt and financings closed subsequent to March 31, 2003, are detailed in the list below.



|Date Funded | Mortgage Payable        | Annual Interest Rate at 3/31/03 | Maturity Date | Principal Borrowed($)
|----------- | ----------------------- | ------------------------------- | ------------- | ---------------------
|            |                         |                                 |               |                      
|04/11/03    | Gateway Plaza II        | 4.65%                           | 05/01/10      | 3,480,000            
|            |                         |                                 |               |                      
|04/01/03    | Jones Bridge            | 4.38%                           | 04/01/10      | 4,350,000            
|            |                         |                                 |               |                      
|04/11/03    | Plant City              | 4.70%                           | 04/01/10      | 5,900,000            
|            |                         |                                 |               |                      
|04/28/03    | Shops at Citiside       | 4..37%                          | 05/01/10      | 5,600,000            
|            |                         |                                 |               |                      
|04/02/03    | Village Center          | 4.44%                           | 04/01/10      | 13,200,000           
|            |                         |                                 |               |                      
|04/01/03    | CompUSA Center          | 4.41%                           | 04/01/10      | 4,000,000            
|            |                         |                                 |               |                      
|04/01/03    | Chatham Crossing        | 4.65%                           | 04/01/10      | 2,190,000            
|            |                         |                                 |               |                      
|04/09/03    | Westside Pavilion       | Prime +.25%                     | 04/09/10      | 10,000,000           
|            |                         |                                 |               |                      
|04/15/03    | The Creeks              | 6.37%                           | 08/11/12      | 27,803,666           
|            |                         |                                 |               |                      
|04/17/03    | River Ridge             | 4.16%                           | 04/01/08      | 14,500,000           
|            |                         |                                 |               |                      
|04/25/03    | Golden Gate             | 4.74%                           | 04/01/10      | 12,027,855           
|            |                         |                                 |               |                      
|05/08/03    | Line of Credit-Key Bank | LIBOR + 150 to 300bp            | 09/30/03      | 90,000,000           
|            |                         |                                 |               |                      















































28

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 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.



|                                                   |      | Year        | Estimated Purchase Price including expenses | Gross Leasable Area |         |                                                       
|-------------------------------------------------- | ---- | ----------- | ------------------------------------------- | ------------------- | ------- | ------------------------------------------------------
|Property                                           | Type | Built       | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)                                     
|                                                   |      |             |                                             |                     |         |                                                       
|Belmont Village Square
Rock Mount NC               | NC   | 2001        | 4,900,000                                   | 52,200              |         | Food Lion
Dollar General                              
|                                                   |      |             |                                             |                     |         |                                                       
|Berry Town Center
  Davenport, FL                  | D    | To be built | 8,118,000                                   | 61,421              |         | Publix                                                
|                                                   |      |             |                                             |                     |         |                                                       
|Bi-Lo Ashville
Chandler, NC                        | NC   | 2003        | 7,700,000                                   | 54,319              |         | Bi-Lo                                                 
|                                                   |      |             |                                             |                     |         |                                                       
|Bi-Lo at Shellmore
Mt. Pleasant, SC                | NC   | 2002        | 11,806,000                                  | 61,705              |         | Bi-Lo                                                 
|                                                   |      |             |                                             |                     |         |                                                       
|Bi-Lo Sylvania
Sylvania, GA                        | SU   | 2002        | 4,200,000                                   | 36,000              |         | Bi-Lo                                                 
|                                                   |      |             |                                             |                     |         |                                                       
|Birkdale Village
Charlotte, NC                     | NC   | 2002/2003   | 105,259,000                                 | 653,503             | (6)     | Barnes & Noble
Dick's Sporting Goods                  
|                                                   |      |             |                                             |                     |         |                                                       
|Carlisle Commons
Carlisle PA                       | NC   | 2001        | 39,200,000                                  | 400,640             |         | WalMart Super Center                                  
|                                                   |      |             |                                             |                     |         |                                                       
|Cedar Springs Crossing
  Spartanburg, SC           | NC   | 2001        | 10,150,000                                  | 86,312              |         | Bi-Lo
Eckerds
Dollar Tree                             
|                                                   |      |             |                                             |                     |         |                                                       
|Costco Plaza
White Marsh, MD                       | NC   | 1987/1992   | 16,900,000                                  | 209,831             |         | Costco
Sports Authority
PETsMART
Pep Boys             
|                                                   |      |             |                                             |                     |         |                                                       
|Eckerd Drug Stores
Fort Meyers, FL                 | SU   | To be built | 4,400,000                                   | 13,824              |         | Eckerd Drug Store                                     
|                                                   |      |             |                                             |                     |         |                                                       
|Hartsville Crossing Shopping Center
Hartsville, SC | NC   | 2001        | 7,384,000                                   | 71,120              |         | Cato Dollar Tree                                      
|                                                   |      |             |                                             |                     |         |                                                       
|Killearn Shopping Center
Tallahassee, FL           | NC   | 1980        | 10,850,000                                  | 95,229              | (8)     | Publix                                                
|                                                   |      |             |                                             |                     |         |                                                       
|Largo Towne Center
Largo, MD                       | NC   | 1991        | 30,500,000                                  | 260,825             |         | Shoppers Food   Warehouse
Marshall's
Regency Furniture
|                                                   |      |             |                                             |                     |         |                                                       







29

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



|                                               |      | Year           | Estimated Purchase Price including expenses | Gross Leasable Area |         |                                           
|---------------------------------------------- | ---- | -------------- | ------------------------------------------- | ------------------- | ------- | ------------------------------------------
|Property                                       | Type | Built          | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)                         
|                                               |      |                |                                             |                     |         |                                           
|Legacy Place
  Palm Beach Gardens, FL          | D    | To be built    | 73,480,000                                  | 308,500             |         | Linens N Things                           
|                                               |      |                |                                             |                     |         |                                           
|Lexington Place
Lexington, SC                  | NC   | To be built    | 8,397,000                                   | 83,167              |         | TJ Maxx
Ross                              
|                                               |      |                |                                             |                     |         |                                           
|Stockbridge   Commons
Tega Cay, SC             | NC   | To be built    | 11,925,000                                  | 79,100              |         | Lowe's Food                               
|                                               |      |                |                                             |                     |         |                                           
|Midway Plaza
Tamarac, FL                       | NC   | 1985           | 26,200,000                                  | 220,259             | (8)     | Publix
Ross                               
|                                               |      |                |                                             |                     |         |                                           
|North Hill Commons
Anderson, SC                | NC   | 2000/2003      | 4,496,000                                   | 42,942              |         | Michael's
PETsMART                        
|                                               |      |                |                                             |                     |         |                                           
|Publix Center
  Easley, SC                     | NC   | 2003           | 11,828,000                                  | 100,838             |         | Publix
Ross                               
|                                               |      |                |                                             |                     |         |                                           
|River Walk
River Ridge, FL                     | NC   | 2001           | 6,937,000                                   | 65,282              |         | Publix                                    
|                                               |      |                |                                             |                     |         |                                           
|Sandy Plains Village
Roswell, GA               | NC   | 1978/1993/1995 | 18,535,000                                  | 175,035             | (7) (8) | Kroger
Stein Mart                         
|                                               |      |                |                                             |                     |         |                                           
|Shoppes at Wendover Village
  Greensboro, NC   | D    | To be built    | 29,500,000                                  | 165,932             |         | Ross
Home Goods
A.C. Moore                
|                                               |      |                |                                             |                     |         |                                           
|Turkey Creek Pavilion
Phase II
  Knoxville, TN | NC   | 2002           | 12,270,000                                  | 85,040              |         | Ross
Pier One                             
|                                               |      |                |                                             |                     |         |                                           
|Village Crossing
Skokie, IL                    | NC   | 1989           | 81,250,000                                  | 427,722             | (8)     | Crown Theaters
Best Buy                   
|                                               |      |                |                                             |                     |         |                                           
|Walk at Highwood   Preserve Phase II
Tampa, FL | NC   | To be built    | 6,577,000                                   | 28,427              |         | Boston Market                             
|                                               |      |                |                                             |                     |         |                                           
|Westin Center
Fayetteville, NC                 | NC   | 1995           | 5,800,000                                   | 69,950              | (3)     | Food Lion
CVS/Pharmacy
Family Dollar Store
|                                               |      |                |                                             |                     |         |                                           
|Starwood Heller New Jersey Portfolio           |      |                |                                             |                     |        
|                                               |      |                |                                             |                     |         |                                           
|440 Commons
  Jersey City, NJ                  | NC   | 1997           | 18,085,000                                  | 162,533             | (8)     | Home Depot
Seaman's Furniture   Store     
|                                               |      |                |                                             |                     |         |                                           







30

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



|                                                   |      | Year        | Estimated Purchase Price including expenses | Gross Leasable Area |         |                                                                                 
|-------------------------------------------------- | ---- | ----------- | ------------------------------------------- | ------------------- | ------- | --------------------------------------------------------------------------------
|Property                                           | Type | Built       | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)                                                               
|                                                   |      |             |                                             |                     |         |                                                                                 
|Brick Center Plaza
  Brick, NJ                     | NC   | 1999        | 19,392,000                                  | 114,028             | (8)     | Bed, Bath & Beyond
Best Buy
Seaman's Furniture
Christian Fine Home
  Furnishings
|                                                   |      |             |                                             |                     |         |                                                                                 
|Edgewater Towne Center
  Edgewater, NJ             | NC   | 2000        | 27,218,000                                  | 77,446              | (4) (8) | Whole Foods   Supermarket
Annie Sez                                             
|                                                   |      |             |                                             |                     |         |                                                                                 
|East Hanover Plaza
  East Hanover, NJ              | NC   | 1994        | 17,267,000                                  | 97,660              | (8)     | Sport Authority
Office Max
Chili's & Macaroni   Grill
NJ Pet Supply             
|                                                   |      |             |                                             |                     |         |                                                                                 
|Route 22 Retail Center
  Union, NJ                 | NC   | 1997        | 18,887,000                                  | 110,453             | (5) (8) | Circuit City
Baby Superstore
The Furniture King                                 
|                                                   |      |             |                                             |                     |         |                                                                                 
|Sony Theatre Complex
  East Hanover, NJ            | NC   | 1993        | 12,023,000                                  | 70,549              | (8)     | Chuck E. Cheese
Lowes Cinema                                                    
|                                                   |      |             |                                             |                     |         |                                                                                 
|West Falls Plaza
  West Paterson, NJ               | NC   | 1995        | 21,164,000                                  | 88,913              | (8)     | A & P
6th Avenue Electronics                                                    
|                                                   |      |             |                                             |                     |         |                                                                                 
|Paradise Portfolio                                 |      |             |                                             |                     |         |                                                                                 
|                                                   |      |             |                                             |                     |         |                                                                                 
|Paradise Place
  West Palm Beach, FL               | NC   | To be built | 10,873,000                                  | 74,620              |         | Publix                                                                          
|                                                   |      |             |                                             |                     |         |                                                                                 
|Paradise Shoppes of   Ellenwood
  Ellenwood, GA    | NC   | To be built | 10,354,000                                  | 67,721              |         | Publix                                                                          
|                                                   |      |             |                                             |                     |         |                                                                                 
|Paradise Promenade
  Davie, FL                     | NC   | To be built | 12,530,000                                  | 70,291              |         | Publix                                                                          
|                                                   |      |             |                                             |                     |         |                                                                                 
|Plaza Del Paraiso
  Miami, FL                      | NC   | To be built | 14,050,000                                  | 82,291              |         | Publix                                                                          
|                                                   |      |             |                                             |                     |         |                                                                                 
|Shoppes at Lake Dow
  McDonough, GA                | NC   | To be built | 10,281,000                                  | 73,270              |         | Publix                                                                          
|                                                   |      |             |                                             |                     |         |                                                                                 
|Shoppes of Lithia
  Brandon, FL                    | NC   | To be built | 14,173,000                                  | 79,161              |         | Publix                                                                          
|                                                   |      |             |                                             |                     |         |                                                                                 
|Shoppes at Paradise   Point
  Ft. Walton Beach, FL | NC   | To be built | 11,934,000                                  | 83,965              |         | Publix                                                                          
|                                                   |      |             |                                             |                     |         |                                                                                 





31

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



|                                               |           | Year             | Estimated Purchase Price including expenses | Gross Leasable Area |         |                                               
|---------------------------------------------- | --------- | ---------------- | ------------------------------------------- | ------------------- | ------- | ----------------------------------------------
|Property                                       | Type      | Built            | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)                             
|                                               |           |                  |                                             |                     |         |                                               
|Milt Turner Portfolio                          |           |                  |                                             |                     |         |                                               
|                                               |           |                  |                                             |                     |         |                                               
|Colonial Plaza 
Lebanon, VA                    | NC        | 2003             | 2,485,000                                   | 27,604              |         | Dollar Tree
Cato's                            
|                                               |           |                  |                                             |                     |         |                                               
|Oak Summit
Winston-Salem, NC                   | NC        | 2003             | 24,468,000                                  | 180,774             |         | Staples
Goody's                               
|Squire Wood Villge
Dandridge, TN               | NC        | 2003             | 4,166,000                                   | 46,150              |         | Food City                                     
|                                               |           |                  |                                             |                     |         |                                               
|The Crossings
Crossville, TN                   | NC        | 1999             | 6,879,000                                   | 62,278              |         | Goody's                                       
|                                               |           |                  |                                             |                     |         |                                               
|Town & Country Center
Knoxville, TN            | NC        | 1985/1987/ 1997  | 56,244,000                                  | 639,135             | (8)     | Lowes Superstore
Carmike Cinemas              
|                                               |           |                  |                                             |                     |         |                                               
|Wytheville Commons
Phase I & II
Wytheville, VA | NC        | 2003
To be built | 20,019,000                                  | 150,267             |         | Goody's
Dollar Tree
Old Navy                  
|                                               |           |                  |                                             |                     |         |                                               
|Stan Thomas Portfolio                          |           |                  |                                             |                     |         |                                               
|                                               |           |                  |                                             |                     |         |                                               
|Heritage Pavilion
Smyrna, GA                   | NC        | 1995             | 39,937,000                                  | 262,933             |         | Marshall's
TJ Maxx
Media Play
Rhodes Furniture
|                                               |           |                  |                                             |                     |         |                                               
|Hiram Pavilion
Hiram, GA                       | NC        | 2001/2002        | 45,508,000                                  | 367,407             |         | Kohl's
Goody's                                
|                                               |           |                  |                                             |                     |         |                                               
|                                               |           |                  |                                             |                    
|Eckerd Drug Store - 19 Store Portfolio         | 1995-1997 | 40,858,000       |                                             |                     |        
|                                               |           |                  |                                             |                     |         |                                               
|Dallas, TX                                     |           |                  |                                             | 9,504               |         |                                               
|Dallas, TX                                     |           |                  |                                             | 9,504               |         |                                               
|Ft. Worth, TX                                  |           |                  |                                             | 9,504               |         |                                               
|Wichita, TX                                    |           |                  |                                             | 10,800              |         |                                               
|Wichita Falls, TX                              |           |                  |                                             | 9,504               |         |                                               
|Lake Worth, TX                                 |           |                  |                                             | 9,504               |         |                                               
|Tyler, TX                                      |           |                  |                                             | 9,504               |         |                                               
|Ft. Worth, TX                                  |           |                  |                                             | 10,908              |         |                                               
|Richardson, TX                                 |           |                  |                                             | 10,560              |         |                                               
|River Oaks, TX                                 |           |                  |                                             | 10,908              |         |                                               
|Richardson, TX                                 |           |                  |                                             | 10,560              |         |                                               
|Plano, TX                                      |           |                  |                                             | 10,908              |         |                                               
|Richland Hills, TX                             |           |                  |                                             | 10,908              |         |                                               
|Marietta, GA                                   |           |                  |                                             | 10,880              |         |                                               
|Lawrenceville, GA                              |           |                  |                                             | 9,504               |         |                                               
|Gainsville, GA                                 |           |                  |                                             | 10,594              |         |                                               
|Snellville, GA                                 |           |                  |                                             | 10,594              |         |                                               
|Oklahoma City, OK                              |           |                  |                                             | 9,504               |         |                                               
|Kissimmee, FL                                  |           |                  |                                             | 9,504               |         |                                               



32

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)





(6)	This property is a multi-use development containing retail, office and apartments.  The office space is currently being completed and 306 of 320 apartments have been completed.   The remaining apartments will be completed in May 2003.  The seller will have two years to lease the currently vacant retail, office and apartment spaces.  Our purchase price is allocated as follows: $66,490,000 to retail and office and $38,768,000 to the apartments, and may be adjusted upward, based on the final rental rates achieved, for the multi-family.



(7)	The acquisition cost includes $535,000, which will be spent on new roofs and other rehab work after the acquisition of the property.

1. Property was acquired between the period of 05/08/03 and 05/15/03.



Type of Property

NC   Neighborhood and Community Multi-Tenant Retail Shopping Center

SU   Single User Property

D    Development Project







































33

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

|                                      |               | Initial Costs (A) |                   | 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 (C)                                      | Land       | Improvements     
|                                      |               |                   |                   |                                                |            |                  
|Aberdeen Square                       |               |                   |                   |                                                |            |                  
|Boynton Beach, FL                     | $   3,670,000 | $ 1,948,473       | $       4,768,166 | $       (125,266)                              | $1,948,473 | $       4,642,900
|Abernathy Square                      |               |                   |                   |                                                |            |                  
|Atlanta, GA                           | 13,392,000    | 8,054,652         | 16,076,111        | (326,858)                                      | 8,054,652  | 15,749,253       
|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       
|Bartow Marketplace                    |               |                   |                   |                                                |            |                  
|Cartersville, GA                      | 13,475,000    | 6,098,178         | 18,308,271        | 78,338                                         | 6,098,178  | 18,386,609       
|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                 |               |                   |                   |                                                |            |                  
|Brandon, FL                           | 5,137,000     | 1,894,787         | 7,587,323         | (145,568)                                      | 1,894,787  | 7,441,755        
|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         | (49,629)                                       | 1,126,880  | 6,609,697        
|Capital Crossing                      |               |                   |                   |                                                |            |                  
|Raleigh, NC                           | --            | 2,394,055         | 7,590,288         | (340,313)                                      | 2,394,055  | 7,249,975        
|Casselberry Commons                   |               |                   |                   |                                                |            |                  
|Casselberry, FL                       | 8,703,000     | 6,702,658         | 11,191,912        | 268,416                                        | 6,702,658  | 11,460,328       
|Chatham Crossing                      |               |                   |                   |                                                |            |                  
|Siler City, NC                        | 2,190,000     | 971,620           | 2,992,100         | (94,552)                                       | 971,620    | 2,897,548        











34



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                       |                 | Initial Costs (A) |                 | Gross amount at which carried at end of period |            |                 
|---------------------- | --------------- | ----------------- | --------------- | ---------------------------------------------- | ---------- | ----------------
|                       |                 |                   |                 |                                                |            |                 
|                       |                 |                   | Buildings       | Adjustments                                    |            | Buildings       
|                       |                 |                   | And             | To                                             |            | And             
|Multi-tenant Retail    | Encumbrance     | Land              | Improvements    | Basis (C)                                      | Land       | Improvements    
|                      
|Chesterfield Crossings |                 |                   |                 |                                                |            |                 
|Richmond, VA,          | $     6,380,000 | $ 2,791,620       | $     8,190,130 | $       (88,763)                               | $2,791,620 | $      8,101,367
|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       | (201,645)                                      | 841,567    | 4,983,941       
|City Crossing          |                 |                   |                 |                                                |            |                 
|Warner Robins, GA      | --              | 1,893,133         | 12,750,925      | (252,985)                                      | 1,893,133  | 12,497,940      
|Clayton Corners        |                 |                   |                 |                                                |            |                 
|Clayton, NC            | 9,850,000       | 1,615,060         | 13,379,346      | (518,357)                                      | 1,615,060  | 12,860,989      
|Colonial Promenade     |                 |                   |                 |                                                |            |                 
|Bardmore Center        |                 |                   |                 |                                                |            |                 
|Largo, FL              | --              | 8,745,733         | 8,405,232       | (536,478)                                      | 8,745,733  | 7,868,754       
|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           | --              | 7,486,111         | 39,128,619      | (633,025)                                      | 7,486,111  | 38,495,594      
|Commonwealth Center II |                 |                   |                 |                                                |            |                 
|Richmond, VA           | --              | 4,509,455         | 17,768,396      | 562,716                                        | 4,509,455  | 18,331,112      
|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            | --              | 816,686           | 4,513,910       | 227,613                                        | 816,686    | 4,741,523       





35

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

|                           |              | Initial Costs (A) |               | Gross amount at which carried at end of period |             |              
|-------------------------- | ------------ | ----------------- | ------------- | ---------------------------------------------- | ----------- | -------------
|                           |              |                   |               |                                                |             |              
|                           |              |                   | Buildings     | Adjustments                                    |             | Buildings    
|                           |              |                   | And           | To                                             |             | And          
|Multi-tenant Retail        | Encumbrance  | Land              | Improvements  | Basis (C)                                      | Land        | Improvements 
|                          
|Conway Plaza               |              |                   |               |                                                |             |              
|Orlando, FL                | $  5,000,000 | $ 2,215,324       | $   6,332,434 | $   328,743                                    | $  ,215,324 | $   6,661,177
|Countryside                |              |                   |               |                                                |             |              
|Naples, FL                 | 4,300,000    | 1,117,428         | 7,478,173     | 9,571                                          | 1,117,428   | 7,487,744    
|Cox Creek                  |              |                   |               |                                                |             |              
|Florence, AL               | 15,212,567   | 4,256,549         | 14,974,285    | (249,143)                                      | 4,256,549   | 14,725,142   
|Creekwood Crossing         |              |                   |               |                                                |             |              
|Bradenton, FL              | 11,750,000   | 6,376,185         | 17,239,607    | (214,023)                                      | 6,376,185   | 17,025,584   
|Crystal Springs            |              |                   |               |                                                |             |              
|Shopping Center            |              |                   |               |                                                |             |              
|Crystal Springs, FL        | 4,070,000    | 1,064,112         | 6,413,838     | (132,598)                                      | 1,064,112   | 6,281,240    
|Douglasville Pavilion      |              |                   |               |                                                |             |              
|Douglasville, GA           | 16,285,000   | 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    | 3,093,990                                      | 8,045,152   | 28,564,031   
|Duvall Village             |              |                   |               |                                                |             |              
|Bowie, MD                  | 9,441,045    | 4,000,000         | 9,045,904     | (575,425)                                      | 4,000,000   | 8,470,479    
|Eisenhower Crossing I & II |              |                   |               |                                                |             |              
|Macon, GA                  | 23,800,000   | 7,487,472         | 35,804,354    | (650,258)                                      | 7,487,472   | 35,154,096   
|Fayetteville Pavilion      |              |                   |               |                                                |             |              
|Fayetteville, NC           | 17,390,000   | 7,114,584         | 19,783,655    | 471,612                                        | 7,446,420   | 19,923,431   
|Forest Hills Centre        |              |                   |               |                                                |             |              
|Wilson, NC                 | 3,660,000    | 1,582,094         | 5,093,270     | (62,148)                                       | 868,647     | 5,744,569    
|Forestdale Plaza           |              |                   |               |                                                |             |              
|Jamestown, NC              | 3,319,000    | 1,262,754         | 5,407,118     | (89,895)                                       | 1,262,754   | 5,317,223    
|Gateway Market Center      |              |                   |               |                                                |             |              
|St. Petersburg, FL         | 10,425,000   | 6,351,847         | 14,576,808    | 114,644                                        | 6,351,847   | 14,691,452   



36



INLAND RETAIL REAL ESTATE TRUST, INC.

(unaudited)

|                             |             | Initial Costs (A) |               | Gross amount at which carried at end of period |            |                
|---------------------------- | ----------- | ----------------- | ------------- | ---------------------------------------------- | ---------- | ---------------
|                             |             |                   |               |                                                |            |                
|                             |             |                   | Buildings     | Adjustments                                    |            | Buildings      
|                             |             |                   | And           | To                                             |            | And            
|Multi-tenant Retail          | Encumbrance | Land              | Improvements  | Basis (C)                                      | Land       | Improvements   
|                             |             |                   |               |                                                |            |                
|Gateway Plaza - Conway       |             |                   |               |                                                |            |                
|Conway, SC                   | $     --    | $    912,466      | $   5,382,247 | $       (104,967)                              | $  912,466 | $     5,277,280
|Gateway Plaza - Jacksonville |             |                   |               |                                                |            |                
|Jacksonville, NC             | 6,500,000   | 2,906,103         | 8,959,217     | 1,151,503                                      | 2,906,103  | 10,110,720     
|Golden Gate                  |             |                   |               |                                                |            |                
|Greensboro, NC               | 6,378,550   | 3,644,643         | 6,899,915     | 840,869                                        | 3,644,643  | 7,740,784      
|Goldenrod Groves             |             |                   |               |                                                |            |                
|Orlando, FL                  | 4,575,000   | 3,048,044         | 6,128,605     | 315,213                                        | 3,048,044  | 6,443,818      
|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     | (30,717)                                       | 1,072,903  | 3,422,678      
|Harundale Plaza              |             |                   |               |                                                |            |                
|Glen Burnie, MD              | 12,362,000  | 9,869,539         | 14,882,463    | (759,808)                                      | 9,869,539  | 14,122,655     
|Hillsboro Square             |             |                   |               |                                                |            |                
|Deerfield Beach, FL          | 12,100,000  | 6,157,134         | 12,828,066    | 2,326,154                                      | 5,780,000  | 15,531,354     
|Jones Bridge Plaza           |             |                   |               |                                                |            |                
|Norcross, GA                 | --          | 1,791,065         | 5,734,426     | 325,445                                        | 1,885,398  | 5,965,538      
|Lake Olympia Square          |             |                   |               |                                                |            |                
|Ocoee, FL                    | 5,438,780   | 2,567,471         | 7,306,483     | (20,238)                                       | 2,562,471  | 7,291,245      
|Lake Walden Square           |             |                   |               |                                                |            |                
|Plant City, FL               | 9,666,890   | 3,006,662         | 11,549,586    | 222,953                                        | 3,006,662  | 11,772,539     
|Lakeview Plaza               |             |                   |               |                                                |            |                
|Kissimmee, FL                | 3,613,236   | 842,077           | 5,345,819     | (95,542)                                       | 842,077    | 5,250,277      
|Lakewood Ranch               |             |                   |               |                                                |            |                
|Bradenton, FL                | 4,400,000   | 3,426,105         | 6,067,556     | (233,942)                                      | 3,426,105  | 5,833,614      
|Logger Head Junction         |             |                   |               |                                                |            |                
|Sarasota, FL                 | --          | 344,321           | 320,738       | (14,646)                                       | 344,321    | 306,092        

37



(unaudited)



|                          |                | Initial Costs (A) |                  | Gross amount at which carried at end of period |               |                 
|------------------------- | -------------- | ----------------- | ---------------- | ---------------------------------------------- | ------------- | ----------------
|                          |                |                   |                  |                                                |               |                 
|                          |                |                   | Buildings        | Adjustments                                    |               | Buildings       
|                          |                |                   | And              | To                                             |               | And             
|Multi-tenant Retail       | Encumbrance    | Land              | Improvements     | Basis (C)                                      | Land          | Improvements    
|                          |                |                   |                  |                                                |               |                 
|Marketplace at Mill Creek |                |                   |                  |                                                |               |                 
|Buford, GA                | $   28,900,000 | $ 14,457,044      | $     35,660,892 | $          209,554                             | $  14,457,044 | $     35,870,446
|Market Square             |                |                   |                  |                                                |               |                 
|Douglasville, GA          | 8,369,892      | 2,309,461         | 10,595,333       | 667,445                                        | 2,309,461     | 11,262,778      
|McFarland Plaza           |                |                   |                  |                                                |               |                 
|Tuscaloosa, AL            | 8,425,000      | 2,325,039         | 12,933,566       | (315,355)                                      | 2,325,039     | 12,618,211      
|Meadowmont Village Center |                |                   |                  |                                                |               |                 
|Chapel Hill, NC           | --             | 2,948,143         | 23,860,318       | (964,848)                                      | 2,948,143     | 22,895,470      
|Melbourne Shopping Center |                |                   |                  |                                                |               |                 
|Melbourne, FL             | 5,947,649      | 2,382,330         | 7,459,634        | 569,248                                        | 2,382,330     | 8,028,882       
|Merchants Square          |                |                   |                  |                                                |               |                 
|Zephyrhills, FL           | 3,167,437      | 992,225           | 4,749,818        | 40,123                                         | 992,225       | 4,789,941       
|Monroe Shopping Center    |                |                   |                  |                                                |               |                 
|Monroe, NC                | --             | 714,882           | 2,833,326        | (32,995)                                       | 714,882       | 2,800,331       
|Newnan Pavilion           |                |                   |                  |                                                |               |                 
|Newnan, GA                | 20,726,371     | 8,560,550         | 24,553,440       | 731,800                                        | 8,987,539     | 24,858,251      
|North Aiken Bi-Lo Center  |                |                   |                  |                                                |               |                 
|Aiken, SC                 | 2,900,000      | 660,000           | 5,156,040        | (96,807)                                       | 660,000       | 5,059,233       
|Northpoint Marketplace    |                |                   |                  |                                                |               |                 
|Spartanburg, SC           | 4,535,000      | 809,351           | 7,459,725        | (376,035)                                      | 809,351       | 7,083,690       
|Oakley Plaza              |                |                   |                  |                                                |               |                 
|Ashville, NC              | --             | 2,013,562         | 7,455,436        | (837,890)                                      | 2,013,562     | 6,617,546       
|Oleander Shopping Center  |                |                   |                  |                                                |               |                 
|Wilmington, NC            | 3,000,000      | 794,912           | 4,425,726        | (121,373)                                      | 794,912       | 4,304,353       
|Paraiso Plaza             |                |                   |                  |                                                |               |                 
|Hialeah, FL               | --             | 2,789,414         | 6,692,059        | 20,001                                         | 2,789,414     | 6,712,060       
|Plant City Crossing       |                |                   |                  |                                                |               |                 
|Plant City, FL            | --             | 2,660,804         | 8,218,061        | (301,896)                                      | 2,660,804     | 7,916,165       



38





(unaudited)

|                         |                | Initial Costs (A) |                 | Gross amount at which carried at end of period |            |                 
|------------------------ | -------------- | ----------------- | --------------- | ---------------------------------------------- | ---------- | ----------------
|                         |                |                   |                 |                                                |            |                 
|                         |                |                   | Buildings       | Adjustments                                    |            | Buildings       
|                         |                |                   | And             | To                                             |            | And             
|Multi-tenant Retail      | Encumbrance    | Land              | Improvements    | Basis (C)                                      | Land       | Improvements    
|                         |                |                   |                 |                                                |            |                 
|Pleasant Hill            |                |                   |                 |                                                |            |                 
|Duluth, GA               | $   17,120,000 | $ 4,805,830       | $    29,526,305 | $       (244,578)                              | $4,805,830 | $     29,281,727
|Presidential Commons     |                |                   |                 |                                                |            |                 
|Snellville, GA           | 26,066,555     | 9,001,185         | 36,030,481      | (712,012)                                      | 9,001,185  | 35,318,469      
|Publix Brooker Creek     |                |                   |                 |                                                |            |                 
|Palm Harbor, FL          | 4,468,070      | 2,931,581         | 5,787,185       | (64,785)                                       | 2,931,581  | 5,722,400       
|River Ridge              |                |                   |                 |                                                |            |                 
|Birmingham, AL           | --             | 6,487,314         | 20,004,535      | (437,103)                                      | 6,487,314  | 19,567,432      
|Riverstone Plaza         |                |                   |                 |                                                |            |                 
|Canton, GA               | 17,600,000     | 5,672,769         | 26,270,288      | (755,504)                                      | 5,672,769  | 25,514,784      
|Rosedale Shopping Center |                |                   |                 |                                                |            |                 
|Huntersville, NC         | 13,300,000     | 2,913,676         | 16,630,071      | (49,441)                                       | 2,913,676  | 16,580,630      
|Sand Lake Corners        |                |                   |                 |                                                |            |                 
|Orlando, FL              | 11,900,000     | 6,091,246         | 16,164,600      | (105,878)                                      | 6,091,246  | 16,058,722      
|Sarasota Pavilion        |                |                   |                 |                                                |            |                 
|Sarasota, FL             | 29,850,000     | 17,273,845        | 24,826,101      | (297,297)                                      | 17,273,845 | 24,528,804      
|Sexton Commons           |                |                   |                 |                                                |            |                 
|Fuquay Varina, NC        | 4,400,000      | 799,852           | 7,223,004       | (147,398)                                      | 799,852    | 7,075,606       
|Sharon Greens            |                |                   |                 |                                                |            |                 
|Cumming, GA              | 6,500,000      | 3,593,247         | 9,468,907       | (349,983)                                      | 3,593,247  | 9,118,924       
|Sheridan Square          |                |                   |                 |                                                |            |                 
|Dania, FL                | --             | 2,425,266         | 5,160,970       | 374                                            | 2,425,266  | 5,161,344       
|Shoppes at Citiside      |                |                   |                 |                                                |            |                 
|Charlotte, NC            | --             | 2,009,614         | 7,696,077       | 252,007                                        | 2,009,614  | 7,948,084       
|Shoppes at Lake Mary     |                |                   |                 |                                                |            |                 
|Lake Mary, FL            | 6,250,000      | 3,618,581         | 7,521,439       | (43,493)                                       | 3,618,581  | 7,477,946       
|Shoppes at New Tampa     |                |                   |                 |                                                |            |                 
|Wesley Chapel, FL        | --             | 6,007,635         | 13,187,920      | 515,358                                        | 6,007,635  | 13,703,278      



39



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

|                          |                      | Initial Costs (A) |                   | Gross amount at which carried at end of period |            |                  
|------------------------- | -------------------- | ----------------- | ----------------- | ---------------------------------------------- | ---------- | -----------------
|                          |                      |                   |                   |                                                |            |                  
|                          |                      |                   | Buildings         | Adjustments                                    |            | Buildings        
|                          |                      |                   | And               | To                                             |            | And              
|Multi-tenant Retail       | Encumbrance          | Land              | Improvements      | Basis (C)                                      | Land       | Improvements     
|                          |                      |                   |                   |                                                |            |                  
|Shoppes of Golden Acres   |                      |                   |                   |                                                |            |                  
|Newport Richey, FL        | $                 -- | $ 3,900,000       | $       6,930,734 | $          481,528                             | $3,900,000 | $       7,412,262
|Shoppes on the Circle     |                      |                   |                   |                                                |            |                  
|Dothan, AL                | 12,170,625           | 1,544,088         | 13,468,413        | 14,071                                         | 1,544,088  | 13,482,484       
|Skyview Plaza             |                      |                   |                   |                                                |            |                  
|Orlando, FL               | 10,875,000           | 7,460,820         | 13,871,448        | 658,143                                        | 7,460,820  | 14,529,591       
|Southlake Pavilion        |                      |                   |                   |                                                |            |                  
|Morrow, GA                | 34,602,709           | 7,830,718         | 48,545,944        | 2,734,644                                      | 8,402,373  | 50,708,933       
|Southlake Shopping Center |                      |                   |                   |                                                |            |                  
|Cornelius, NC             | 7,659,185            | 3,633,377         | 9,999,573         | (103,915)                                      | 3,633,377  | 9,895,658        
|Springfield Park          |                      |                   |                   |                                                |            |                  
|Lawrenceville, GA         | --                   | 1,980,202         | 8,943,936         | 874,441                                        | 1,980,202  | 9,818,377        
|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        | 105,604                                        | 4,865,527  | 14,769,390       
|Stonecrest Marketplace    |                      |                   |                   |                                                |            |                  
|Lithonia, GA              | 20,000,000           | 7,463,134         | 27,278,964        | 2,275,071                                      | 7,463,134  | 29,554,035       
|Suwanee Crossroads        |                      |                   |                   |                                                |            |                  
|Suwanee, GA               | --                   | 2,481,318         | 9,586,230         | 21,728                                         | 2,481,318  | 9,607,958        
|Sycamore Commons          |                      |                   |                   |                                                |            |                  
|Matthews, NC              | 20,000,000           | 7,995,359         | 30,188,891        | (304,012)                                      | 7,995,359  | 29,884,879       
|Target Center             |                      |                   |                   |                                                |            |                  
|Columbia, SC              | 4,192,000            | 1,994,642         | 5,677,919         | (93,846)                                       | 1,994,642  | 5,584,073        
|Tequesta Shoppes Plaza    |                      |                   |                   |                                                |            |                  
|Tequesta, FL              | --                   | 2,898,918         | 8,539,792         | 360,208                                        | 2,898,918  | 8,900,000        
|The Overlook at           |                      |                   |                   |                                                |            |                  
|King of Prussia           |                      |                   |                   |                                                |            |                  
|King of Prussia, PA       | 30,000,000           | 32,402,117        | 24,643,324        | (3,769,088)                                    | 32,402,117 | 20,874,236       

40



(unaudited)



|                       |                | Initial Costs (A) |                  | Gross amount at which carried at end of period |             |                 
|---------------------- | -------------- | ----------------- | ---------------- | ---------------------------------------------- | ----------- | ----------------
|                       |                |                   |                  |                                                |             |                 
|                       |                |                   | Buildings        | Adjustments                                    |             | Buildings       
|                       |                |                   | And              | To                                             |             | And             
|Multi-tenant Retail    | Encumbrance    | Land              | Improvements     | Basis (C)                                      | Land        | Improvements    
|                       |                |                   |                  |                                                |             |                 
|The Fountains          |                |                   |                  |                                                |             |                 
|Plantation, FL         | $   13,999,900 | $ 15,920,000      | $     28,492,462 | $       (638,468)                              | $15,920,000 | $     27,853,994
|Town Center Commons    |                |                   |                  |                                                |             |                 
|Kennesaw, GA           | 4,750,000      | 3,293,792         | 6,350,835        | (31,262)                                       | 3,293,792   | 6,319,573       
|Turkey Creek Phase I   |                |                   |                  |                                                |             |                 
|Knoxville, TN          | 13,220,000     | 3,973,419         | 17,788,597       | 130,707                                        | 4,054,200   | 17,838,523      
|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         | --             | 1,822,018         | 9,495,115        | (104,531)                                      | 1,822,018   | 9,390,584       
|Venture Pointe         |                |                   |                  |                                                |             |                 
|Duluth, GA             | 15,790,000     | 10,878,572        | 15,654,530       | 185,203                                        | 10,878,571  | 15,839,734      
|Village Center         |                |                   |                  |                                                |             |                 
|Mt. Pleasant, WI       | --             | 5,511,994         | 18,474,755       | (903,291)                                      | 5,511,994   | 17,571,464      
|Village Square at Golf |                |                   |                  |                                                |             |                 
|Boynton Beach, FL      | --             | 4,536,806         | 14,000,584       | (151,735)                                      | 4,536,806   | 13,848,849      
|Wakefield Crossing     |                |                   |                  |                                                |             |                 
|Raleigh, NC            | 5,920,000      | 2,151,750         | 8,642,715        | (227,109)                                      | 2,151,750   | 8,415,606       
|Walk at Highwoods I    |                |                   |                  |                                                |             |                 
|Tampa, FL              | 13,230,000     | 7,423,113         | 16,575,476       | (535,958)                                      | 7,423,113   | 16,039,518      
|Ward's Crossing        |                |                   |                  |                                                |             |                 
|Lynchburg, VA          | 6,090,000      | 2,661,733         | 8,438,070        | (203,802)                                      | 2,661,733   | 8,234,268       
|West Oaks              |                |                   |                  |                                                |             |                 
|Ocoee, FL              | 4,900,000      | 4,514,559         | 6,706,310        | 27,585                                         | 4,514,559   | 6,733,895       
|Windsor Court          |                |                   |                  |                                                |             |                 
|Shopping Center        |                |                   |                  |                                                |             |                 
|Windsor Court, CT      | --             | 4,315,529         | 10,323,403       | (86,389)                                       | 4,315,529   | 10,237,014      
|Woodstock Square       |                |                   |                  |                                                |             |                 
|Atlanta, GA            | 20,700,000     | 5,516,733         | 22,079,359       | (63,928)                                       | 5,516,733   | 22,015,431      

41



(unaudited)

|                          |                 | Initial Costs (A) |                  | Gross amount at which carried at end of period |            |                 
|------------------------- | --------------- | ----------------- | ---------------- | ---------------------------------------------- | ---------- | ----------------
|                          |                 |                   |                  |                                                |            |                 
|                          |                 |                   | Buildings        | Adjustments                                    |            | Buildings       
|                          |                 |                   | And              | To                                             |            | And             
|Single-User Retail        | Encumbrance     | Land              | Improvements     | Basis (C)                                      | Land       | Improvements    
|                          |                 |                   |                  |                                                |            |                 
|Bass Pro Outdoor World    |                 |                   |                  |                                                |            |                 
|Dania Beach, FL           | $     9,100,000 | $ 6,938,145       | $     11,281,774 | $       (187,305)                              | $6,938,145 | $     11,094,469
|Circuit City-Cary         |                 |                   |                  |                                                |            |                 
|Cary, NC                  | 3,280,000       | 1,876,188         | 3,773,564        | (33,065)                                       | 1,876,188  | 3,740,499       
|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 - #5018 |                 |                   |                  |                                                |            |                 
|Amherst, 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 |                 |                   |                  |                                                |            |                 
|Connelsville, 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 |                 |                   |                  |                                                |            |                 
|Harborcreek, PA           | 1,418,040       | 771,094           | 1,755,759        | (18,453)                                       | 771,094    | 1,737,306       



42



INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

|                               |                 | Initial Costs (A) |                   | Gross amount at which carried at end of period |             |                  
|------------------------------ | --------------- | ----------------- | ----------------- | ---------------------------------------------- | ----------- | -----------------
|                               |                 |                   |                   |                                                |             |                  
|                               |                 |                   | Buildings         | Adjustments                                    |             | Buildings        
|                               |                 |                   | And               | To                                             |             | And              
|Single-User Retail             | Encumbrance     | Land              | Improvements      | Basis (C)                                      | 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      |                 |                   |                   |                                                |             |                  
|New Castle, 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      |                 |                   |                   |                                                |             |                  
|Millcreek, PA                  | 1,636,200       | 1,138,640         | 2,590,478         | (18,362)                                       | 1,138,640   | 2,572,116        
|Eckerd Drug Store - #6257      |                 |                   |                   |                                                |             |                  
|Millcreek, 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      |                 |                   |                   |                                                |             |                  
|Penn, PA                       | 1,636,200       | 900,264           | 2,049,110         | (19,543)                                       | 900,264     | 2,029,567        
|Eckerd Drug Store - #6695      |                 |                   |                   |                                                |             |                  
|Plum Borough, PA               | 1,636,200       | 1,120,237         | 2,548,682         | (18,634)                                       | 1,120,237   | 2,530,048        
|Eckerd Drug Store - Blackstock |                 |                   |                   |                                                |             |                  
|Spartanburg, SC                | --              | 850,144           | 1,872,737         | (21,725)                                       | 850,144     | 1,851,012        
|Eckerd Drug Store - Concord    |                 |                   |                   |                                                |             |                  
|Concord, NC                    | --              | 725,000           | 1,313,566         | 134,970                                        | 725,000     | 1,448,536        
|Eckerd Drug Store - Greenville |                 |                   |                   |                                                |             |                  
|Greenville, SC                 | 1,540,400       | 1,470,306         | 1,357,205         | (37,269)                                       | 1,470,306   | 1,319,936        

43

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

|                                |                       | Initial Costs (A) |                   | Gross amount at which carried at end of period |            |                  
|------------------------------- | --------------------- | ----------------- | ----------------- | ---------------------------------------------- | ---------- | -----------------
|                                |                       |                   |                   |                                                |            |                  
|                                |                       |                   | Buildings         | Adjustments                                    |            | Buildings        
|                                |                       |                   | And               | To                                             |            | And              
|Single-User Retail              | Encumbrance           | Land              | Improvements      | Basis (C)                                      | Land       | Improvements     
|                                |                       |                   |                   |                                                |            |                  
|Eckerd Drug Store -             |                       |                   |                   |                                                |            |                  
|Perry Creek                     |                       |                   |                   |                                                |            |                  
|Raleigh, NC                     | $                  -- | $ 1,010,000       | $       1,784,871 | $                    --                        | $1,010,000 | $       1,784,871
|Eckerd Drug Store - Piedmont    |                       |                   |                   |                                                |            |                  
|Piedmont, SC                    | --                    | 602,021           | 1,365,882         | (19,271)                                       | 602,021    | 1,346,611        
|Eckerd Drug Store - Spartanburg |                       |                   |                   |                                                |            |                  
|Spartanburg, SC                 | 1,541,600             | 757,850           | 2,049,000         | (11,061)                                       | 757,850    | 2,037,939        
|Eckerd Drug Store - Tega Cay    |                       |                   |                   |                                                |            |                  
|Tega Cay, SC                    | --                    | 1,156,000         | 1,388,212         | 516,992                                        | 1,156,000  | 1,905,204        
|Eckerd Drug Store - Woodruff    |                       |                   |                   |                                                |            |                  
|Woodruff, SC                    | --                    | 950,000           | 1,525,208         | 345,349                                        | 950,000    | 1,870,557        
|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        





44





(unaudited)

|                         |                 | Initial Costs (A) |                   | Gross amount at which carried at end of period |             |                  
|------------------------ | --------------- | ----------------- | ----------------- | ---------------------------------------------- | ----------- | -----------------
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   | Buildings         | Adjustments                                    |             | Buildings        
|                         |                 |                   | And               | To                                             |             | And              
|Single-User Retail       | Encumbrance     | Land              | Improvements      | Basis (C)                                      | Land        | Improvements     
|                         |                 |                   |                   |                                                |             |                  
|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        
|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        
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   |                   |                                                |             |                  
|                         |                 |                   |                   |                                                |             |                  























45





(unaudited)



|                            |                       | Initial Costs (A)   |                  | Gross amount at which carried at end of period |                     |                 
|--------------------------- | --------------------- | ------------------- | ---------------- | ---------------------------------------------- | ------------------- | ----------------
|                            |                       |                     |                  |                                                |                     |                 
|                            |                       |                     | Buildings        | Adjustments                                    |                     | Buildings       
|                            |                       |                     | And              | To                                             |                     | And             
|Development Projects        | Encumbrance           | Land                | Improvements     | Basis (C)                                      | Land                | Improvements    
|                            |                       |                     |                  |                                                |                     |                 
|Citrus Hills - Blockbuster  |                       |                     |                  |                                                |                     |                 
|Citrus Hills, FL            | $                  -- | $                -- | $        250,026 | $                    --                        | $                -- | $        250,026
|Eckerd Drug Store - Gaffney |                       |                     |                  |                                                |                     |                 
|Gaffney, SC                 | --                    | 1,038,631           | 1,335,395        | --                                             | 1,038,631           | 1,335,395       
|Sharon Greens               |                       |                     |                  |                                                |                     |                 
|Cumming, GA                 | --                    | 631,920             | --               | --                                             | 631,920             | --              
|Shoppes at Chalet Suzanne   |                       |                     |                  |                                                |                     |                 
|Lake Wales, FL              | --                    | 3,101,850           | 518,427          | --                                             | 3,101,850           | 518,427         
|Southampton Village         |                       |                     |                  |                                                |                     |                 
|Tyrone, GA                  | --                    | 2,183,059           | 1,904,039        | --                                             | 2,183,059           | 1,904,039       
|Southwood Plantation        |                       |                     |                  |                                                |                     |                 
|Tallahassee, FL             | --                    | 847,540             | 1,398,422        | --                                             | 847,540             | 1,398,422       
|Watercolor Crossing         |                       |                     |                  |                                                |                     |                 
|Tallahassee, FL             | --                    | 510,227             | 631,983          | --                                             | 510,227             | 631,983         
|                            |                       |                     |                  |                                                |                     |                 
|Total:                      | $ 862,844,761         | $518,584,463        | $1,471,150,701   | $       (456,911)                              | $519,340,741        | $1,469,937,512  
|                            | ==========            | =========           | ==========       | ===========                                    | =========           | ==========      























46

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)



Notes:

1. The initial cost to The Company represents the original purchase price of the property, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
2. The aggregate cost of real estate owned at December 31, 2002 for Federal income tax purposes was approximately $1,518,758,000 (unaudited).
3. 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 from one to two years or until the spaces are leased.  GAAP requires that as these payments are received, they be recorded as a reduction in the purchase price of the properties rather than as rental income.  The adjustment to basis also includes intangible costs associated with the acquisition of investment properties.  Intangible costs reflected as an adjustment to increase the initial investment costs consists of acquired in-place lease origination costs and acquired above market lease intangibles.  Adjustments for acquired below market lease intangibles are reflected as an adjustment to reduce the initial cost.
4. Reconciliation of real estate owned:



|                                                           |   | March 31,
2003   |   | December 31,
2002
|---------------------------------------------------------- | - | ---------------- | - | -----------------
|                                                           |   |                  |   |                  
|Balance at beginning of year                               | $ | 1,499,681,096    | $ | 595,738,856      
|Purchases of property                                      |   | 470,919,210      |   | 909,909,220      
|Additions                                                  |   | 19,381,995       |   | 11,994,653       
|Payments received under master leases and principal escrow |   | (     1,278,456) |   | (1,780,102)      
|Acquired in-place lease origination costs                  |   | (     4,375,881) |   | (14,550,506)     
|Acquired above market lease intangibles                    |   | (     8,818,599) |   | (12,325,336)     
|Acquired below market lease intangibles                    |   | 13,768,888       |   | 10,694,311       
|                                                           |   |                  |   |                  
|Balance at end of year                                     | $ | 1,989,278,253    | $ | 1,499,681,096    
|                                                           |   | ============     |   | ===========      



|Balance at beginning of year | $ | 40,737,139  | $ | 14,135,094
|---------------------------- | - | ----------- | - | ----------
|Depreciation expense         |   | 11,930,472  |   | 26,602,045
|                             |   |             |   |           
|Balance at end of year       | $ | 52,667,611  | $ | 40,737,139
|                             |   | =========== |   | ==========



47





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



The following discussion and analysis compares the three month period ended March 31, 2003 to the three month periods ended March 31, 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."





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 begun to acquire and plan to continue acquiring 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. or our Advisor has been retained to manage, for a fee, our day-to-day affairs, subject to the supervision of our Board of Directors.



The terrorist attacks that occurred in the United States on September 11, 2001 caused periodic major instability in the United States and other financial markets.  Possible further acts of terrorism and current and future war risks could have a similar impact.  The United States continues to take military action against terrorism and has initiated a military action with Iraq, where major hostilities have ceased.  Terrorist attacks and military conflict in the Middle East may lead to additional armed hostilities or to further acts of terrorism and civil disturbance in the United States or elsewhere, which may further contribute to economic instability.  Any such attacks could, among other things, cause further instability in financial markets and could directly or indirectly negatively affect our tenants or properties and their operations and our profitability.

Many of our properties are located in the southeastern states.  During the first quarter 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 these three properties and affirmed the lease at the fourth property. As of May 8, 2003, the Kmart stores represent approximately 2.4% of the gross leasable area of the properties.  We believe that the diversification of creditworthy tenants provides additional mitigation of risks.  As of May 8, 2003, the largest tenant, Publix, in the portfolio comprises approximately 89% of the properties GLA and approximately 5.7% of the properties rental income.



As of March 31, 2003, our operating partnership owned a portfolio of 149 properties has agreements with unaffiliated third parties to develop four land parcels and made six loans totaling $86,928,803 to unaffiliated third parties secured by mortgages on the properties.  Each of the properties is a shopping center located in Florida, Georgia, North Carolina, South Carolina, Virginia, Tennessee, Alabama, Louisiana, Maryland, Texas, New York, Pennsylvania, West Virginia,

Connecticut, and Wisconsin.  and containing an aggregate of approximately 16,891,005 square feet of GLA.  As of March 31, 2003, approximately 96% of GLA in the properties was leased.

48

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, and 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 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, acquired above market and below market leases, lease origination value (the market cost avoidance of executing each acquired lease), and any assumed financing that is determined to be above or below market terms.  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 similar financing terms for similar investment properties.  We also allocate a portion of the purchase price to the estimated acquired in-place lease origination costs based on estimated lease execution costs for similar leases and we consider various factors including geographic location and size of leased space.  We also evaluate each acquired lease based upon current market rates at the acquisition date and we consider various factors including geographical location, size and 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 lease intangibles.  After an acquired lease is determined to be above or below market lease intangibles, we allocate a portion of the purchase price to such above or below acquired lease costs 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, economics, demographics, location, visibility, location, age and physical condition of the property.



On a quarterly basis, 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.







49





Cost Capitalization and Depreciation Policies. Our policy is to review all 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 properties 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 certificate 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.  The portion of the purchase price allocated to acquired above market lease costs and acquired below market lease costs are amortized on a straight-line basis over the life of the related lease as an adjustment to net rental income.  Acquired in-place lease origination costs, other 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.



On January 1, 2002, The Company adopted SFAS 141 and SFAS 142. The adoption of these standards resulted in the recognition upon acquisition of additional intangible assets and liabilities relating to The Company's 2002 and 2003 real estate acquisitions.  The 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 $352,432 was applied as a reduction to rental income for the three month period ending March 31, 2003.  Amortization pertaining to the below market lease intangibles of $347,480 was applied as an increase to rental income for the three month period ending March 31, 2003.  The portion of the purchase price allocated to acquired in-place lease origination costs are amortized on a straight line basis over the life of the related lease.  We incurred amortization expense pertaining to acquired in-place lease origination costs of $348,953 for the three month period ending March 31, 2003.

Cost capitalization and the estimate of useful lives requires our judgment and includes significant estimates that can and do change based on our process which periodically analyzes each property and on our assumptions about uncertain inherent factors.



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.









50





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 amounts outstanding, payment history, and financial strength of the 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.



REIT status.  In order to maintain our status as a REIT, we are required to distribute at least 90% of our REIT taxable income to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.



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 as well as personal guarantees by 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.  On a quarterly basis 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 required certain disclosures in the financial statements as of December 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 borrowers for the development or purchase of investment properties as development receivables or mortgage receivables, respectively.  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 regards to the underlying investment properties' financial position when the statement becomes effective.  Our maximum exposure to loss as a result of the notes receivable would be the amount of the receivable balance outstanding at March 31, 2003 less amounts paid after period end which amounts to approximately $38,965,000.

Valuation of investments in securities



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.





51





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 the public or private offering of our debt or equity securities, 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 mainly from proceeds of our public offerings of shares, 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 $136,454,648.  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 May 8, 2003 we have received subscriptions for a total of 116,803,164 shares sold from the Second Follow-On Offering



52





resulting in gross proceeds of $1,168,741,400 and repurchased 386,718 shares for $3,634,075 pursuant to the Share Repurchase Program.  As a result, we could sell another 33,196,836 shares in 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 March 31, 2003 and December 31, 2002, subscriptions for a total of 153,709,317 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 4,261,636 and 3,025,137 shares pursuant to our DRP as of March 31, 2003 and 2002, respectively.  As of March 31, 2003 we have repurchased 590,611 shares and have issued soliciting dealer warrants to acquire 6,150,784 shares.  As a result of such sales and repurchases, we have received a net total of $1,567,678,596 of gross offering proceeds as of March 31, 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 March 31, 2003 and December 31, 2002, organizational and offering costs totaling $157,044,795 and $125,224,459, respectively, did not exceed these limitations.  These costs did not exceed such limitations upon completion of the Initial Offering and First Follow-On Offering and we anticipate that these costs will not exceed these limitations upon completion of the Second Follow-On Offering.  Any excess amounts at the completion of the Second Follow-On Offering will be reimbursed by our Advisor.



As of March 31, 2003, 6,150,784 soliciting dealer warrants were sold to the managing dealer for a total of $4,921 and none of the soliciting dealer warrants had been exercised for shares.

Line of Credit.  On December 20, 2001, we secured an acquisition line of credit in the amount of $14,000,000 withSouthTrust Bank.  This line of credit had a maturity date of March 27, 2002, which has been extended to March 27, 2004 and carries interest at the rate which ranges from 1.75% to 1.85% over LIBOR per annum.  The funds from this line of credit were used as financing related to The Fountains on February 18, 2003.  In addition, we entered into a $200 million equity line of credit with Key Bank, of which $10 million has been drawn and $90 million was available as of March 31, 2003.  Subsequent to March 31, 2003, The Company was extended an additional $100 million to the original $100 million an additional $90,000,000 was drawn on May, 8, 2003 for a total of $100,000,000 outstanding.



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 March 31, 2003, we distributed 4,261,636 shares pursuant to the DRP for an aggregate of $40,485,540.

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 March 31, 2003, 590,611 shares have been repurchased for an aggregate cost of $5,532,127.









53





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 that we should leverage 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 225 basis points.  Fixed-rate loans bear interest based on corresponding treasury instruments plus a spread of 130 to 190 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 the first quarter we closed on or assumed debt with a principal amount of $187,426,666 and retired debt in the amount of $0.  The average cost of funds for 2003 was approximately 4.97%.  We also maintain two lines of credit in the aggregate amount of $214 million, of which approximately $24 million was outstanding as of March 31, 2003.



Although the loans we acquired 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 our 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 often based on the condition of the financial markets at the time the debt is incurred, which conditions may vary from time to time.



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 $31,819,290 and $15,226,052 for the three month periods ended March 31, 2003 and 2002, respectively.  The increase in net cash provided by operating activities for the three month period ended March 31, 2003 compared to prior periods is due primarily to the additional rental revenues and income generated from the operations of 106 properties owned at the beginning of the quarter plus 43 properties purchased during theperiod ended March 31, 2003, compared to the rental revenues and income generated from the operations of 39 properties owned for the period ended March 31, 2002 plus 9 properties purchased during 2002.

As of May 8, 2003, we had approximately $173,000,000 available for investment in additional properties.  As of May 8, 2003 we are considering the acquisition of approximately $1.12 billion in properties.  We are currently in the process of obtaining financings on properties which have been purchased, as well as certain of the properties which we anticipate purchasing.  It is our intention to finance each of our acquisitions either at closing or subsequent to closing.  As a result of the intended financings and based on our experience in raising money in our current offering, we believe that we will have sufficient resources to acquire these properties.



54





Cash Flows From Investing Activities

Cash flows used in investing activities were $435,049,494 and $77,914,768   for the three month periods ended March 31, 2003 and 2002, respectively.  The cash flows used in investing activities were primarily due to the acquisition of 43 and 9 properties for approximately $377,101,167 and $75,542,000 during the three-month periods ended March 31, 2003 and 2002, respectively.



Our investment in securities at March 31, 2003 and 2002 consists principally of equity investments in various real estate investment trusts and energy related trusts and is classified as available-for-sale securities, recorded at fair value.  We purchased investment securities in the three-month period ended March 31, 2003 in the amount of approximately $45,122, decreasing our margin account by approximately $71,007.  We purchased investment securities of approximately $1,775,720, and increased our margin account by approximately $359,434 for the year ended in December 2002.



In 2003, we anticipate that construction costs related to several development projects which were in progress as of March 31, 2003 as well as others which will commence in 2003. The expected aggregate costs to be paid related to the projects in process at March 31, 2003 are approximately $55,809,000 of which approximately $30,360,000 had been incurred as of March 31, 2003.



Cash Flows From Financing Activities

Cash provided by financing activities was $441,592,746 and $125,089,933 for the three month periods ended March 31, 2003 and 2002, respectively.  We generated proceeds from the sale of shares, net of offering costs and the repurchase of shares, of approximately $317,544,000 and $102,729,000 for the three month periods ended March 31, 2003 and 2002, respectively.  We also generated approximately $144,568,000 and $32,507,000 from the issuance of new mortgages secured by thirty-five and six of our properties for the three-month periods ended March 31, 2003 and 2002, respectively.  We paid approximately $26,033,000 and $7,503,000 in dividends to our stockholders for the three month periods ended March 31, 2003 and 2002, respectively.  The increased capital balances and increased dividend rate from $.81 per Share to $.83 per Share for the three month period ended March 31, 2003 resulted in the increases in dividends declared.  We also used approximately none and $1,800,000 for the paydown of none and one mortgages secured by our properties for the three month periods ended March 31, 2003 and 2002, respectively.

Given the current size of our offerings, as of May 8, 2003, we could raise approximately $332,000,000 in additional capital.  However, there can be no assurance that we will raise this amount of money or that we will be able to acquire additional attractive properties.



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                | $11,731,849 | $5,616,888 | $28,784,306 | $43,669,479 | $ 66,684,846 | $379,756,563
|Variable rate debt             | 77,581,521  | 20,699,900 | 5,000,000   | 29,337,500  | 168,006,909  | 35,975,000  
|                               |             |            |             |             |              |             
|Average interest rate on debt: |             |            |             |             |              |             
|Fixed rate debt                | 7.62%       | 7.79%      | 7.57%       | 6.80%       | 6.75%        | 5.80%       
|Variable rate debt             | 3.23%       | 3.08%      | 2.99%       | 2.99%       | 2.94%        | 3.01%       

55





Approximately $336,582,010, or 38%, of our mortgages payable at March 31, 2003 have variable interest rates averaging 3.02%.  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 March 31, 2003, interest expense increases by $3,266,000 on an annual basis.



As we continue to raise capital and acquire properties, matching our capital sources and uses is an important aspect of our business.  As of May 8, 2003, we are considering the acquisition of $1.12 billion of properties.   As of May 8, 2003, we have approximately $283,000,000 in cash available to acquire properties.  We believe these funds, together with capital to be raised, anticipated borrowings under available credit lines and other borrowings will be sufficient to fund these proposed acquisitions.

Effects of Transactions with Related and Certain Other Parties

Services Provided by Affiliates of the Advisor As of March 31, 2003 and December 31, 2002, we had incurred $157,044,648 and $125,224,459 of offering costs, of which $141,659,213 and $111,594,678 was paid to affiliates. In accordance with 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 or gross offering proceeds or all organization and offering expenses (including selling commissions) which together exceed 15% of gross offering proceeds.  As of March 31, 2003 and December 31, 2002, offering costs did not exceed the 5.5% and 15% limitations. We anticipate that these costs will not exceed these limitations upon completion of the second follow-on offering. Any excess amounts at the completion of the second follow-on offering will be reimbursed by the Advisor.



The Advisor and its affiliates are entitled to reimbursement for salaries and expenses of employees of the Advisor and its affiliates relating to the offerings.  In addition, an affiliate of the 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 $29,789,099 and $ 79,614,867 for the periods ended March 31, 2003 and December 31, 2002, respectively, of which $599,527 and $1,309,885 was unpaid at March 31, 2003, and December 31, 2002.



The Advisor and its affiliates are entitled to reimbursement for general and administrative expenses of the 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 periods ended March 31, 2003 and December 31, 2002 we incurred $582,749 of these costs, of which $147,482 remained unpaid as of March 31, 2003.



An affiliate of the Advisor provides loan servicing to us for an annual fee.  Such costs are incurred 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 $52,718 and $ 30,174, for the three month periods ended March 31, 2003 and December 31, 2002.

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

We used the services of an affiliate of the 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 March 31, 2003 and 2002 we paid loan fees totaling $617,810 and $58,823 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



56



following amounts if any: (1) the amounts by which 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 periods ended March 31, 2003 and 2002 we incurred $ 2,774,000 and $797,000 of asset management fees, of which $4,774,000 was unpaid at March 31, 2003.  We neither paid nor accrued such fees, for the year ended December 31, 2001 because the Advisor indicated that it would forego such fees.

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.  We incurred and paid property management fees of $2,241,176 and $921,498 for the three-month periods ended March 31, 2003 and 2002.  None remained unpaid as of March 31, 2003.

Related Party Transactions.  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.  We agreed to pay the affiliate 1/8% per annum of the guaranteed amount for providing such a guarantee.  As of March 31, 2003, $28,320 of guarantee fees had been incurred, of which none remained unpaid at March 31, 2003.  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 March 31, 2003 and December 31, 2002 and for the three month periods ended March 31, 2003 and 2002.  The schedule excludes the following development projects: Blockbuster at Citrus Hills, Shoppes at Chalet Suzanne, Eckerd Drug Store-Gaffney, Southampton Village, Southwood Plantation, Watercolor and Village Square at Golf.



|Quarter Ended      | Properties Purchased per Quarter | Square Feet Acquired | 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     
|Total              | 149                              | 16,858,713           | $1,975,383,645  
|                   | ====                             | ========             | ===========     

57



Rental Income.  Rental income consists of basic monthly rent and percentage rental income due pursuant to tenant leases.  Rental income increased to $42,039,988 for the three month period ended March 31, 2003 from $16,517,438 for the three month period ended March 31, 2002.  This increase is due primarily to 149 properties owned and operated throughout the three month period ended March 31, 2003 compared to 39 properties for the three month period ended March 31, 2002.



Real Estate Tax Recovery, Common Area Cost Recovery and Additional Rental Income.  Real estate tax recovery, common area cost recovery and additional rental income consist of property operating expenses recovered from the tenants including real estate taxes, property management fees and insurance.  Real estate tax recovery income increased to $3,681,570 from $1,906,265 for the three-month period ended March 31, 2003 and 2002 respectively.  Common area cost recovery income increased to $4,240,909 from $1,654,349 for the three-month period ended March 31, 2003 and 2002 respectively.  Additional rental income increased to $201,560 for the three-month period ended March 31, 2003 from $236,206 for the three month period ended March 31, 2002. These increases are due primarily to 149 properties owned and operated throughout the three month period ended March 31, 2003 compared to 39 properties for the three month period ended March 31, 2002.



Interest and Dividend Income.  Interest and dividend income consists of interest earned from short term investments and investments in securities that are held by us.  Interest and dividend income increased to $1,773,817 for the three-month period ended March 31, 2003 from $330,832 for the three-month period ended March 31, 2002.  This results primarily from increases in income and dividends from investment in securities, as well as interest earned on mortgage notes receivable funded.



Other Income.  Other income increased to $226,956 for the three-month period ended March 31, 2003 from $169,435 for the three-month period ended March 31, 2002.  This increase is due to income realized on the sale of investment securities as well as losses realized due to other than temporary impairment of certain investment securities.



Professional Services.  Professional services consist of fees to accountants and lawyers. Professional services expense increased to $253,163 for the three-month period ended March 31, 2003 from $82,386 for the three-month period ended March 31, 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 $155,834 for the three month period ended March 31, 2003 from $147,482 for the three month period ended March 31, 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 $71,357 for the three month period ended March 31, 2003 from $96,259 for the three month period ended March 31, 2002. This cost is consistent with that of prior years.  The expense results from services required as we grow our portfolio of investment properties.

Property Operating Expenses to Affiliates.  Property operating expenses consists of property management fees and mortgage servicing fees.  These expenses to affiliates increased to $2,293,893 for the three-month period ended March 31, 2003 from $951,672 for the three-month period ended March 31, 2002. This increase is due to the additional properties owned and operated as well as additional servicing fees related to mortgages obtained during the three-month period ended March 31, 2003 as compared to March 31, 2002.

Property Operating Expenses to Non-Affiliates, including Real Estate Tax.

58



Mortgage Interest to Non-Affiliates.  Mortgage interest to non-affiliates increased to $9,433,907 for the three-month period ended March 31, 2003 from $4,576,616 for the three-month period ended March 31, 2002.  This increase is due to the financing of additional properties owned and operated during the three-month period ended March 31, 2003 as compared to the three-month period ended March 31, 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.



Depreciation.



Amortization.

Additional Information

In the ordinary course of business, some of our tenants have announced that they have filed for bankruptcy or commenced financial restructuring.  Under bankruptcy laws, tenants have the right to affirm or reject their leases with us.  If a tenant rejects a lease, the tenant will no longer be required to pay rent on the property.  If a tenant affirms its lease, the tenant will be required to perform all obligations under the original lease.  If a tenant does not reject or affirm their lease at the beginning of the bankruptcy process, there is no assurance that the leases will not be rejected in the future.  In addition, certain tenants may undergo restructuring and may close some unprofitable stores.  Once a space is vacated by a bankrupt

or restructured tenant, our policy is to actively attempt to re-lease the available space.  Given this policy, and based on our experience, we believe that our reserves against the loss of the rent as a receivable are adequate.



As of May 8, 2003, eight tenants individually occupying in excess of 10,000 square feet at eight 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.









































59











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 3/31/03 | ReserveBalance* | Occupancy Status
|----------------------- | -------------------- | ------------------------- | ----------- | ---------- | ---------------------------- | --------------- | ----------------
|Columbiana Station      | Zany Brainy          | Bankruptcy                | 10,600      | 151,050    | $  27,624                    | $  27,624       | Occupied (1)    
|Creekwood Crossing      | Kmart                | Bankruptcy                | 103,015     | 875,628    | 115,750                      | 115,750         | Vacant          
|Gateway Market Center   | Waccamaw's HomePlace | Bankruptcy (2)            | 35,000      | 344,919    | 48,867                       | 48,867          | Vacant          
|Kmart / Macon           | Kmart                | Bankruptcy                | 102,098     | 907,349    | --                           | --              | Vacant          
|Lake Walden Square      | Kmart                | Bankruptcy                | 91,266      | 383,317    | --                           | --              | Vacant          
|Skyview Plaza           | Kmart                | Bankruptcy                | 95,810      | 271,979    | --                           | --              | Occupied (3)    
|Rainbow Foods - Garland | Rainbow Foods        | Bankruptcy                | 63,117      | 426,040    | --                           | --              | Occupied (4)    
|Rainbow Foods - Rowett  | Rainbow Foods        | Bankruptcy                | 70,576      | 476,388    | --                           | --              | Occupied (4)    

*  The amount shown represents the amount reserves recorded by us against tenant receivables at March 31, 2003.

1. The tenant has been paying rent on a consistent basis, but the seller has guaranteed a portion of the rent payments.
2. The tenant has rejected the remainder of its lease, but the majority of space has been re-leased.
3. The tenant has affirmed the lease.
4. 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.













60







Funds from Operations



Cash generated from operations is not equivalent to our net operating income as determined under Generally Accepted Accounting Principles ("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 and FAD are calculated as follows:





|                                              |   | 2003       |   | 2002      
|--------------------------------------------- | - | ---------- | - | ----------
|Net income                                    | $ | 14,443,334 | $ | 5,281,120 
|Depreciation                                  |   | 11.930,472 |   | 4,740,114 
|Amortization related to investment properties |   | 377,859    |   | --        
|Funds from operations (1)                     | $ | 26,751,665 | $ | 10,021,234
|                                              |   | ========   |   | ========  

(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.















































61







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

|                                                     | March 31 | December 31
|---------------------------------------------------- | -------- | -----------
|                                                     | 2003     | 2002       
|Properties:                                          | (%)      | (%)        
|                                                     |          |            
|Aberdeen Square, Boynton Beach, FL                   | 100*     | 100*       
|Abernathy Square, Atlanta, GA                        | 96       | 91         
|Acworth Avenue Retail Shopping Center, Acworth, GA   | 73       | 73         
|Anderson Central, Anderson, SC                       | 99       | 99         
|Bartow Marketplace, Cartersville, GA                 | 100      | 100        
|Bass Pro Outdoor World, Dania Beach, FL              | 100      | 100        
|Boynton Commons, Boynton Beach, FL                   | 100      | 100        
|Brandon Boulevard Shoppes, Brandon, FL               | 93*      | 89*        
|Bridgewater Marketplace, Orlando, FL                 | 100      | 96         
|Camp Hill, Camp Hill, PA                             | 100      | N/A        
|Capital Crossing, Raleigh, NC                        | 100      | N/A        
|Casselberry Commons, Casselberry, FL                 | 95       | 94         
|Chatham Crossing, Siler City, FL                     | 100      | 100        
|Chesterfield Crossings, Richmond, VA                 | 100      | 100        
|Chickasaw Trails Shopping Center, Orlando, FL        | 100      | 100        
|Circuit City - Cary, Cary, NC                        | 100      | 100        
|Circuit City Plaza, Orlando, FL                      | 100      | 100*       
|Circuit City - Rome, Rome, GA                        | 100      | 100        
|Circuit City - Vero Beach, Vero Beach, FL            | 100      | 100        
|Citrus Hills, Citrus Hills, FL                       | 97*      | 91*        
|City Crossing, Warner Robins, GA                     | 96       | 100*       
|Clayton Corners, Clayton, NC                         | 97       | 97*        
|Colonial Bardmoor, Largo, FL                         | 88       | N/A        
|Columbia Promenade, Kissimmee, FL                    | 99       | 93*        
|Columbiana Station I, Columbia, SC                   | 100      | 98         
|Commonwealth Center, Midlothian, VA                  | 94       | N/A        
|Concord Crossing, Concord, NC                        | 100      | N/A        
|Comp USA Retail Center, Newport News, VA             | 100      | 100        
|Conway Plaza, Orlando, FL                            | 99       | 99         
|Countryside, Naples, FL                              | 85       | 85         
|Cox Creek, Florence, AL                              | 100*     | 100*       
|Creekwood Crossing, Bradenton, FL                    | 99       | 100        
|Crystal Springs Shopping Center, Crystal Springs, FL | 100*     | 100*       
|Douglasville Pavilion, Douglasville, GA              | 100      | 100        
|Downtown Short Pump, Richmond, VA                    | 96       | N/A        
|Duvall Village, Bowie, MD                            | 100*     | 100*       
|Eckerd Drug Store - Blackstock, Spartanburg, SC      | 100      | 100        
|Eckerd Drug Store - Concord, Concord, NC             | 100      | 100        
|Eckerd Drug Store - Greenville, Greenville, SC       | 100      | 100        
|Eckerd Drug Store - Piedmont, Piedmont, SC           | 100      | N/A        
|Eckerd Drug Store - Perry Creek, Raleigh, NC         | 100      | N/A        
|Eckerd Drug Store - Spartanburg, Spartanburg, SC     | 100      | 100        
|Eckerd Drug Store - Tega Cay, Tega Cay, SC           | 100      | 100        
|Eckerd Drug Store - Woodruff, Woodruff, SC           | 100      | 100        
|Eckerd's #5018, Getzville, NY                        | 100      | N/A        
|Eckerd's #5661, Buffalo, NY                          | 100      | N/A        
|Eckerd's #5786, Dunkirk, NY                          | 100      | N/A        



62





|                                                  | March 31, | December 31
|------------------------------------------------- | --------- | -----------
|                                                  | 2003      | 2002       
|Properties:                                       | (%)       | (%)        
|                                                  |           |            
|Eckerd's #5797, Cheektowaga, NY                   | 100       | N/A        
|Eckerd's #6007, Connellsville, PA                 | 100       | N/A        
|Eckerd's #6036, Pittsburgh, PA                    | 100       | N/A        
|Eckerd's #6040, Monroeville, PA                   | 100       | N/A        
|Eckerd's #6043, Monroeville, PA                   | 100       | N/A        
|Eckerd's #6062, Erie, PA                          | 100       | N/A        
|Eckerd's #6089, Weirton, WV                       | 100       | N/A        
|Eckerd's #6095, Cheswick, PA                      | 100       | N/A        
|Eckerd's #6172, Newcastle, PA                     | 100       | N/A        
|Eckerd's #6193, Erie, PA                          | 100       | N/A        
|Eckerd's #6199, Erie, PA                          | 100       | N/A        
|Eckerd's #6257, Erie, PA                          | 100       | N/A        
|Eckerd's #6286, Erie, PA                          | 100       | N/A        
|Eckerd's #6334, Erie, PA                          | 100       | N/A        
|Eckerd's #6392, Irwin, PA                         | 100       | N/A        
|Eckerd's #6695, Pittsburgh, PA                    | 100       | N/A        
|Eisenhower Crossing, Macon, GA                    | 97*       | 97*        
|Fayetteville Pavilion, Fayetteville, NC           | 100       | 100*       
|Forest Hills Centre, Wilson, NC                   | 100*      | 97*        
|Forestdale Plaza, Jamestown, NC                   | 85*       | 85*        
|Gateway Market Center, St. Petersburg, FL         | 85        | 90         
|Gateway Plaza - Jacksonville, Jacksonville, NC    | 96        | 96*        
|Gateway Plaza - Conway, Conway, SC                | 96        | 96*        
|Golden Gate, Greensboro, NC                       | 95        | 90         
|Goldenrod Groves, Orlando, FL                     | 88        | 90         
|Hairston Crossing, Decatur, GA                    | 100*      | 100*       
|Hampton Point, Taylors, SC                        | 100       | 100        
|Harundale Plaza, Glen Burnie, MD                  | 100*      | 97*        
|Hillsboro Square, Deerfield Beach, FL             | 100*      | 100*       
|Jo-Ann Fabrics, Alpharetta, GA                    | 100       | 100        
|Jones Bridge Plaza, 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        
|Kmart, Macon, GA                                  | 100       | 100        
|Lake Olympia Square, Ocoee, FL                    | 97        | 97         
|Lake Walden Square, Plant City, FL                | 94        | 94         
|Lakeview Plaza, Kissimmee, FL                     | 100       | 98         
|Lakewood Ranch, Bradenton, FL                     | 100       | 98*        
|Logger Head Junction, Sarasota, FL  (1)           | 67        | 81         
|Lowe's Home Improvement Center, Warner Robins, GA | 100       | 100        
|Market Square, Douglasville, GA                   | 100       | N/A        
|Marketplace at Millcreek, Buford, GA              | 100       | N/A        
|McFarland Plaza, Tuscaloosa, AL                   | 97        | 97         
|Meadowmont Village Center, Chapel Hill, NC        | 76        | 76*        
|Melbourne Shopping Center, Melbourne, FL          | 98        | 97         
|Merchants Square, Zephyrhills, FL                 | 100       | 100        
|Monroe Shopping Center, Monroe, NC                | 100       | N/A        
|Newnan Pavilion, Newnan, GA                       | 98        | 98         
|North Aiken Bi-Lo Center, Aiken, SC               | 100       | 100        
|Northpoint Marketplace, Spartanburg, SC           | 86*       | 90*        
|Oakley Plaza, Asheville, NC                       | 98        | N/A        
|Oleander Shopping Center, Wilmington, NC          | 100       | 100        

63



|                                              | March 31, | December 31
|--------------------------------------------- | --------- | -----------
|                                              | 2003      | 2002       
|Properties:                                   | (%)       | (%)        
|                                              |           |            
|Overlook King of Prussia, King of Prussia, PA | 100       | N/A        
|Paraiso Plaza, Hialeah, FL                    | 96        | N/A        
|Plant City Crossing, Plant City, FL           | 98        | 93*        
|Pleasant Hill, Duluth, GA                     | 98*       | 96*        
|Presidential Commons, Snellville, GA          | 100       | 100        
|Publix at Brooker Creek, Palm Harbor, FL      | 100       | N/A        
|PETsMART - Chattanooga, Chattanooga, TN       | 100       | 100        
|PETsMART - Daytona Beach, Daytona Beach, FL   | 100       | 100        
|PETsMART - Fredericksburg, Fredericksburg, VA | 100       | 100        
|Rainbow Foods - Garland, Garland, TX          | 100       | 100        
|Rainbow Foods - Rowlett, Rowlett, TX          | 100       | 100        
|River Ridge, Birmingham, AL                   | 100       | 100        
|Riverstone Plaza, Canton, GA                  | 99*       | 99*        
|Rosedale Shopping Center, Huntersville, NC    | 94        | 96*        
|Sand Lake Corners, Orlando, FL                | 97*       | 99*        
|Sarasota Pavilion, Sarasota, FL               | 100       | 100*       
|Sexton Commons, Fuquay Varina, NC             | 91*       | 91*        
|Sharon Greens, Atlanta, GA                    | 83*       | 82*        
|Sheridan Square, Dania, FL                    | 96        | N/A        
|Shoppes at Citiside, Charlotte, NC            | 92        | 90*        
|Shoppes of Golden Acres, Newport Richey, FL   | 84        | 74         
|Shoppes at Lake Mary, Lake Mary, FL           | 98        | 100*       
|Shoppes at New Tampa, Wesley Chapel, FL       | 69        | 94*        
|Shoppes on the Circle, Dolton, AL             | 96*       | 96*        
|Skyview Plaza, Orlando, FL                    | 100       | 100        
|Southlake Pavilion, Morrow, GA                | 100       | 99*        
|Southlake Shopping Center, Cornelius, NC      | 98*       | 97*        
|Springfield Park, Lawrenceville, GA           | 100       | N/A        
|Steeplechase Plaza, Ocala, FL                 | 99        | 100        
|Stonebridge Square, Roswell, GA               | 99        | 99         
|Stonecrest Marketplace, Lithonia, GA          | 97        | N/A        
|Suwanee Crossroads, Suwanee, GA               | 69        | N/A        
|Sycamore Commons, Matthews, NC                | 93*       | 93*        
|Target Center, Columbia, SC                   | 100       | 100        
|The Fountains, Plantation, FL                 | 64        | N/A        
|Tequesta Shoppes, Tequesta, FL                | 86        | N/A        
|Town Center Commons, Kennesaw, GA             | 93        | 93         
|Turkey Creek Phase I, Knoxville, TN           | 100*      | 100*       
|Universal Plaza, Lauderhill, FL               | 100*      | 99*        
|Valley Park Commons, Hagarstown, MD           | 89        | N/A        
|Venture Pointe, Duluth, GA                    | 100       | 100*       
|Village Center, Mt. Pleasant, WI              | 92        | N/A        
|Village Square at Golf, Boynton Beach, FL     | 91        | 92         
|Wakefield Crossing, Raleigh, NC               | 80*       | 98*        
|Walks at Highwoods I, Tampa, FL`              | 98*       | 96*        
|Ward's Crossing, Lynchburg, VA                | 98*       | 98*        
|West Oaks, Ocoee, FL                          | 100       | 95         
|Windsor Court, Windsor, CT                    | 100       | N/A        
|Woodstock Square, Atlanta, GA                 | 100*      | 100*       











64





*As part of the purchase of these Properties, The Company is 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 83% to 100% at March 31, 2003.

(1) Vacancy rate is net of square footage attributable to corporate office space.





Subsequent Events

We paid distributions of $10,632,281 and $11,320,603 to our stockholders in April and May 2003.



We issued 23,991,065 shares of common stock from March 31, 2003 through May 8, 2003, resulting in a total of 181,371,407 shares of common stock outstanding. As a result, as of May 8, 2003, subscriptions for a total of 176,650,571 shares were received resulting in total gross offering proceeds of $1,765,939,836 and an additional 5,350,347 shares were issued pursuant to the DRP for $50,828,301 of additional gross proceeds.  We have repurchased 629,511 shares through our share repurchase program for $5,901,303.



The Company has been extended an additional $100,000,000 to the original $100,000,000 line of credit with Key Bank.  Fundings under the line of credit will require interest payments based on a margin range depending upon certain provisions contained in the credit agreement. To date, The Company has drawn $100,000,000 of the $200,000,000 on the line of credit.



























































65











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





|Date             |                                                                                 |      | Year       | Approximate Purchase Price | Gross Leasable Area |                                               
|---------------- | ------------------------------------------------------------------------------- | ---- | ---------- | -------------------------- | ------------------- | ----------------------------------------------
|Acquired         | Property                                                                        | Type | Built      | ($)                        | (Sq. Ft.)           | Major Tenants                                 
|                 |                                                                                 |      |            |                            |                     |                                               
|04/03/03         | Glenmark Centre
Route 857 and I-68
Morgantown, WV                               | NC   | 1999/2000  | 13,312,000                 | 122,167             | Shop 'n Save
Michaels Crafts                  
|                 |                                                                                 |      |            |                            |                     |                                               
|04/15/03         | Flamingo Falls Town Center
Flamingo Road and Sheridan Street
Pembroke Pines, FL | NC   | 2001       | 23,850,000                 | 108,565             | Fresh Market
Eckerds                          
|                 |                                                                                 |      |            |                            |                     |                                               
|04/15/03         | Creeks at Virginia Center
Brook Road and Jeb Stuart
Parkway
Richmond, VA        | NC   | 2002       | 39,000,000                 | 266,266             | Bed, Bath & Beyond
Dick's Sporting Goods      
|                 |                                                                                 |      |            |                            |                     |                                               
|04/09/03         | Westside Centre
University Drive
Huntsville, AL                                 | NC   | 2002       | 53,368,000                 | 490,784             | Babies 'R Us
Marshall's                       
|                 |                                                                                 |      |            |                            |                     |                                               
|04/28/03         | Bi-Lo Southern Pines
Hwy. 15 and Hwy. 501
Southern Pines, NC                    | NC   | 2002       | 8,180,000                  | 57,404              | Bi-Lo                                         
|                 |                                                                                 |      |            |                            |                     |                                               
|04/22/03         | River Run Shopping Center
Miramar Parkway and Palm
Avenue
Miramar, FL           | NC   | 1989       | 11,800,000                 | 93,643              | Publix
Walgreen                               
|                 |                                                                                 |      |            |                            |                     |                                               
|05/02/03         | Barrett Pavilion Shopping Center
Kennesaw, GA                                   | NC   | 1994/ 1998 | 80,000,000                 | 460,755             | Best Buy
Old Navy
Goody's
Shoe Carnival
Target
|                 |                                                                                 |      |            |                            |                     |                                               
|05/02/03         | Goody's Shopping Center
Augusta, GA                                             | SU   | 1999       | 2,154,113                  | 22,560              | Goody's
Super Walmart                         
|                 |                                                                                 |      |            |                            |                     |                                               
|05/07/03         | BJ's Wholesale Club
Charlotte, NC                                               | SU   | 2002       | 13,000,000                 | 99,792              | BJ's Wholesale                                
|                 |                                                                                 |      |            |                            |                     |                                               
|                
|Type of Property
|NU               | Neighborhood and Community Multi-Tenant Retail Shopping Center                 
|SU               | Single User Retail Property                                                    
|D                | Development Project                                                            















66

INLAND RETAIL REAL ESTATE TRUST, INC.(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 2003

(unaudited)

Mortgage debt and financings closed subsequent to March 31, 2003, are detailed in the list below.



|Date Funded | Mortgage Payable        | Annual Interest Rate at 3/31/03 | Maturity Date | Principal Borrowed($)
|----------- | ----------------------- | ------------------------------- | ------------- | ---------------------
|            |                         |                                 |               |                      
|04/11/03    | Gateway Plaza II        | 4.65%                           | 05/01/10      | 3,480,000            
|            |                         |                                 |               |                      
|04/01/03    | Jones Bridge            | 4.38%                           | 04/01/10      | 4,350,000            
|            |                         |                                 |               |                      
|04/11/03    | Plant City              | 4.70%                           | 04/01/10      | 5,900,000            
|            |                         |                                 |               |                      
|04/28/03    | Shops at Citiside       | 4..37%                          | 05/01/10      | 5,600,000            
|            |                         |                                 |               |                      
|04/02/03    | Village Center          | 4.44%                           | 04/01/10      | 13,200,000           
|            |                         |                                 |               |                      
|04/01/03    | CompUSA Center          | 4.41%                           | 04/01/10      | 4,000,000            
|            |                         |                                 |               |                      
|04/01/03    | Chatham Crossing        | 4.65%                           | 04/01/10      | 2,190,000            
|            |                         |                                 |               |                      
|04/09/03    | Westside Pavilion       | Prime +.25%                     | 04/09/10      | 10,000,000           
|            |                         |                                 |               |                      
|04/15/03    | The Creeks              | 6.37%                           | 08/11/12      | 27,803,666           
|            |                         |                                 |               |                      
|04/17/03    | River Ridge             | 4.16%                           | 04/01/08      | 14,500,000           
|            |                         |                                 |               |                      
|04/25/03    | Golden Gate             | 4.74%                           | 04/01/10      | 12,027,855           
|            |                         |                                 |               |                      
|05/08/03    | Line of Credit-Key Bank | LIBOR + 150 to 300bp            | 09/30/03      | 90,000,000           
|            |                         |                                 |               |                      



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.



|                                      |      | Year        | Estimated Purchase Price including expenses | Gross Leasable Area |         |                         
|------------------------------------- | ---- | ----------- | ------------------------------------------- | ------------------- | ------- | ------------------------
|Property                              | Type | Built       | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)       
|                                      |      |             |                                             |                     |         |                         
|Belmont Village Square
 Rock Mount NC | NC   | 2001        | 4,900,000                                   | 52,200              |         | Food Lion
Dollar General
|                                      |      |             |                                             |                     |         |                         
|Berry Town Center
  Davenport, FL     | D    | To be built | 8,118,000                                   | 61,421              |         | Publix                  
|                                      |      |             |                                             |                     |         |                         
|Bi-Lo Ashville
Chandler, NC           | NC   | 2003        | 7,700,000                                   | 54,319              |         | Bi-Lo                   
|                                      |      |             |                                             |                     |         |                         
|Bi-Lo at Shellmore
Mt. Pleasant, SC   | NC   | 2002        | 11,806,000                                  | 61,705              |         | Bi-Lo                   
|                                      |      |             |                                             |                     |         |                         
|Bi-Lo Sylvania
Sylvania, GA           | SU   | 2002        | 4,200,000                                   | 36,000              |         | Bi-Lo                   





67





|                                                        |      | Year           | Estimated Purchase Price including expenses | Gross Leasable Area |         |                                                       
|------------------------------------------------------- | ---- | -------------- | ------------------------------------------- | ------------------- | ------- | ------------------------------------------------------
|Property                                                | Type | Built          | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)                                     
|                                                        |      |                |                                             |                     |         |                                                       
|Birkdale Village
Charlotte, NC                          | NC   | 2002/2003      | 105,259,000                                 | 653,503             | (6)     | Barnes & Noble
Dick's Sporting Goods                  
|                                                        |      |                |                                             |                     |         |                                                       
|Carlisle Commons
Carlisle PA                            | NC   | 2001           | 39,200,000                                  | 400,640             |         | WalMart Super Center                                  
|                                                        |      |                |                                             |                     |         |                                                       
|Cedar Springs Crossing
  Spartanburg, SC                | NC   | 2001           | 10,150,000                                  | 86,312              |         | Bi-Lo
Eckerds
Dollar Tree                             
|                                                        |      |                |                                             |                     |         |                                                       
|Costco Plaza
White Marsh, MD                            | NC   | 1987/1992      | 16,900,000                                  | 209,831             |         | Costco
Sports Authority
PETsMART
Pep Boys             
|                                                        |      |                |                                             |                     |         |                                                       
|Eckerd Drug Stores
Fort Meyers, FL                      | SU   | To be built    | 4,400,000                                   | 13,824              |         | Eckerd Drug Store                                     
|                                                        |      |                |                                             |                     |         |                                                       
|Hartsville Crossing 
  Shopping Center
  Hartsville, SC | NC   | 2001           | 7,384,000                                   | 71,120              |         | Cato Dollar Tree                                      
|                                                        |      |                |                                             |                     |         |                                                       
|Killearn Shopping Center
Tallahassee, FL                | NC   | 1980           | 10,850,000                                  | 95,229              | (8)     | Publix                                                
|                                                        |      |                |                                             |                     |         |                                                       
|Largo Towne Center
  Largo, MD                          | NC   | 1991           | 30,500,000                                  | 260,825             |         | Shoppers Food   Warehouse
Marshall's
Regency Furniture
|                                                        |      |                |                                             |                     |         |                                                       
|Legacy Place
  Palm Beach Gardens, FL                   | D    | To be built    | 73,480,000                                  | 308,500             |         | Linens N Things                                       
|                                                        |      |                |                                             |                     |         |                                                       
|Lexington Place
  Lexington, SC                         | NC   | To be built    | 8,397,000                                   | 83,167              |         | TJ Maxx
Ross                                          
|                                                        |      |                |                                             |                     |         |                                                       
|Stockbridge   Commons
  Tega Cay, SC                    | NC   | To be built    | 11,925,000                                  | 79,100              |         | Lowe's Food                                           
|                                                        |      |                |                                             |                     |         |                                                       
|Midway Plaza
Tamarac, FL                                | NC   | 1985           | 26,200,000                                  | 220,259             | (8)     | Publix
Ross                                           
|                                                        |      |                |                                             |                     |         |                                                       
|North Hill Commons
Anderson, SC                         | NC   | 2000/2003      | 4,496,000                                   | 42,942              |         | Michael's
PETsMART                                    
|                                                        |      |                |                                             |                     |         |                                                       
|Publix Center
  Easley, SC                              | NC   | 2003           | 11,828,000                                  | 100,838             |         | Publix
Ross                                           
|                                                        |      |                |                                             |                     |         |                                                       
|River Walk
River Ridge, FL                              | NC   | 2001           | 6,937,000                                   | 65,282              |         | Publix                                                
|                                                        |      |                |                                             |                     |         |                                                       
|Sandy Plains Village
Roswell, GA                        | NC   | 1978/1993/1995 | 18,535,000                                  | 175,035             | (7) (8) | Kroger
Stein Mart                                     
|                                                        |      |                |                                             |                     |         |                                                       
|Shoppes at Wendover Village
  Greensboro, NC            | D    | To be built    | 29,500,000                                  | 165,932             |         | Ross
Home Goods
A.C. Moore                            





68





|                                                |      | Year        | Estimated Purchase Price including expenses | Gross Leasable Area |         |                                                                                 
|----------------------------------------------- | ---- | ----------- | ------------------------------------------- | ------------------- | ------- | --------------------------------------------------------------------------------
|Property                                        | Type | Built       | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)                                                               
|                                                |      |             |                                             |                     |         |                                                                                 
|Turkey Creek Pavilion Phase II
  Knoxville, TN  | NC   | 2002        | 12,270,000                                  | 85,040              |         | Ross
Pier One                                                                   
|                                                |      |             |                                             |                     |         |                                                                                 
|Village Crossing
Skokie, IL                     | NC   | 1989        | 81,250,000                                  | 427,722             | (8)     | Crown Theaters
Best Buy                                                         
|                                                |      |             |                                             |                     |         |                                                                                 
|Walk at Highwood   Preserve Phase II
Tampa, FL  | NC   | To be built | 6,577,000                                   | 28,427              |         | Boston Market                                                                   
|                                                |      |             |                                             |                     |         |                                                                                 
|Westin Center
  Fayetteville, NC                | NC   | 1995        | 5,800,000                                   | 69,950              | (3)     | Food Lion
CVS/Pharmacy
Family Dollar Store                                      
|                                                |      |             |                                             |                     |         |                                                                                 
|Starwood Heller New Jersey Portfolio            |      |             |                                             |                     |        
|                                                |      |             |                                             |                     |         |                                                                                 
|440 Commons
  Jersey City, NJ                   | NC   | 1997        | 18,085,000                                  | 162,533             | (8)     | Home Depot
Seaman's Furniture   Store                                           
|                                                |      |             |                                             |                     |         |                                                                                 
|Brick Center Plaza
  Brick, NJ                  | NC   | 1999        | 19,392,000                                  | 114,028             | (8)     | Bed, Bath & Beyond
Best Buy
Seaman's Furniture
Christian Fine Home
  Furnishings
|                                                |      |             |                                             |                     |         |                                                                                 
|Edgewater Towne Center
  Edgewater, NJ          | NC   | 2000        | 27,218,000                                  | 77,446              | (4) (8) | Whole Foods   Supermarket
Annie Sez                                             
|                                                |      |             |                                             |                     |         |                                                                                 
|East Hanover Plaza
  East Hanover, NJ           | NC   | 1994        | 17,267,000                                  | 97,660              | (8)     | Sport Authority
Office Max
Chili's & Macaroni   Grill
NJ Pet Supply             
|                                                |      |             |                                             |                     |         |                                                                                 
|Route 22 Retail Center
  Union, NJ              | NC   | 1997        | 18,887,000                                  | 110,453             | (5) (8) | Circuit City
Baby Superstore
The Furniture King                                 
|                                                |      |             |                                             |                     |         |                                                                                 
|Sony Theatre Complex
  East Hanover, NJ         | NC   | 1993        | 12,023,000                                  | 70,549              | (8)     | Chuck E. Cheese
Lowes Cinema                                                    
|                                                |      |             |                                             |                     |         |                                                                                 
|West Falls Plaza
  West Paterson, NJ            | NC   | 1995        | 21,164,000                                  | 88,913              |         | A & P
6th Avenue Electronics                                                    
|                                                |      |             |                                             |                     |         |                                                                                 
|Paradise Portfolio                              |      |             |                                             |                     |         |                                                                                 
|                                                |      |             |                                             |                     |         |                                                                                 
|Paradise Place
  West Palm Beach, FL            | NC   | To be built | 10,873,000                                  | 74,620              |         | Publix                                                                          
|                                                |      |             |                                             |                     |         |                                                                                 
|Paradise Shoppes of   Ellenwood
  Ellenwood, GA | NC   | To be built | 10,354,000                                  | 67,721              |         | Publix                                                                          
|                                                |      |             |                                             |                     |         |                                                                                 
|Paradise Promenade
  Davie, FL                  | NC   | To be built | 12,530,000                                  | 70,291              |         | Publix                                                                          
|                                                |      |             |                                             |                     |         |                                                                                 





69









|                                                   |      | Year             | Estimated Purchase Price including expenses | Gross Leasable Area |         |                                               
|-------------------------------------------------- | ---- | ---------------- | ------------------------------------------- | ------------------- | ------- | ----------------------------------------------
|Property                                           | Type | Built            | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)                             
|                                                   |      |                  |                                             |                     |         |                                               
|Plaza Del Paraiso
  Miami, FL                      | NC   | To be built      | 14,050,000                                  | 82,291              |         | Publix                                        
|                                                   |      |                  |                                             |                     |         |                                               
|Shoppes at Lake Dow
  McDonough, GA                | NC   | To be built      | 10,281,000                                  | 73,270              |         | Publix                                        
|                                                   |      |                  |                                             |                     |         |                                               
|Shoppes of Lithia
  Brandon, FL                    | NC   | To be built      | 14,173,000                                  | 79,161              |         | Publix                                        
|                                                   |      |                  |                                             |                     |         |                                               
|Shoppes at Paradise   Point
  Ft. Walton Beach, FL | NC   | To be built      | 11,934,000                                  | 83,965              |         | Publix                                        
|                                                   |      |                  |                                             |                     |         |                                               
|Milt Turner Portfolio                              |      |                  |                                             |                     |         |                                               
|                                                   |      |                  |                                             |                     |         |                                               
|Colonial Plaza 
Lebanon, VA                        | NC   | 2003             | 2,485,000                                   | 27,604              |         | Dollar Tree
Cato's                            
|                                                   |      |                  |                                             |                     |         |                                               
|Oak Summit
Winston-Salem, NC                       | NC   | 2003             | 24,468,000                                  | 180,774             |         | Staples
Goody's                               
|                                                   |      |                  |                                             |                     |         |                                               
|Squire Wood Villge
Dandridge, TN                   | NC   | 2003             | 4,166,000                                   | 46,150              |         | Food City                                     
|                                                   |      |                  |                                             |                     |         |                                               
|The Crossings
Crossville, TN                       | NC   | 1999             | 6,879,000                                   | 62,278              |         | Goody's                                       
|                                                   |      |                  |                                             |                     |         |                                               
|Town & Country Center
Knoxville, TN                | NC   | 1985/1987/ 1997  | 56,244,000                                  | 639,135             | (8)     | Lowes Superstore
Carmike Cinemas              
|                                                   |      |                  |                                             |                     |         |                                               
|Wytheville Commons Phase I & II
Wytheville, VA     | NC   | 2003
To be built | 20,019,000                                  | 150,267             |         | Goody's
Dollar Tree
Old Navy                  
|                                                   |      |                  |                                             |                     |         |                                               
|Stan Thomas Portfolio                              |      |                  |                                             |                     |         |                                               
|                                                   |      |                  |                                             |                     |         |                                               
|Heritage Pavilion
Smyrna, GA                       | NC   | 1995             | 39,937,000                                  | 262,933             |         | Marshall's
TJ Maxx
Media Play
Rhodes Furniture
|Hiram Pavilion
Hiram, GA                           | NC   | 2001/2002        | 45,508,000                                  | 367,407             |         | Kohl's
Goody's                                
|                                                   |      |                  |                                             |                     |         |                                               
|                                                   |      |                  |                                             |                    





























70





|                                       |           | Year       | Estimated Purchase Price including expenses | Gross Leasable Area |         |                  
|-------------------------------------- | --------- | ---------- | ------------------------------------------- | ------------------- | ------- | -----------------
|Property                               | Type      | Built      | ($) (1)                                     | (Sq. Ft.)           | Comment | Major Tenants (2)
|                                       |           |            |                                             |                     |         |                  
|Eckerd Drug Store - 19 Store Portfolio | 1995-1997 | 40,858,000 |                                             |                     |        
|                                       |           |            |                                             |                     |         |                  
|Dallas, TX                             |           |            |                                             | 9,504               |         |                  
|Dallas, TX                             |           |            |                                             | 9,504               |         |                  
|Ft. Worth, TX                          |           |            |                                             | 9,504               |         |                  
|Wichita, TX                            |           |            |                                             | 10,800              |         |                  
|Wichita Falls, TX                      |           |            |                                             | 9,504               |         |                  
|Lake Worth, TX                         |           |            |                                             | 9,504               |         |                  
|Tyler, TX                              |           |            |                                             | 9,504               |         |                  
|Ft. Worth, TX                          |           |            |                                             | 10,908              |         |                  
|Richardson, TX                         |           |            |                                             | 10,560              |         |                  
|River Oaks, TX                         |           |            |                                             | 10,908              |         |                  
|Richardson, TX                         |           |            |                                             | 10,560              |         |                  
|Plano, TX                              |           |            |                                             | 10,908              |         |                  
|Richland Hills, TX                     |           |            |                                             | 10,908              |         |                  
|Marietta, GA                           |           |            |                                             | 10,880              |         |                  
|Lawrenceville, GA                      |           |            |                                             | 9,504               |         |                  
|Gainsville, GA                         |           |            |                                             | 10,594              |         |                  
|Snellville, GA                         |           |            |                                             | 10,594              |         |                  
|Oklahoma City, OK                      |           |            |                                             | 9,504               |         |                  
|Kissimmee, FL                          |           |            |                                             | 9,504               |         |                  



(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)	As part of the purchase of Westin Center, we will assume the existing debt with a remaining balance of approximately $4,068,000.  The loan requires principal and interest payment based on an annual rate of 7.36% and matures in 2011.

(4)	The gross leasable area includes 57,984 square feet of residential space, containing 64 apartment units.

(5)	As part of the acquisition of the Route 22 Retail Center, we will assume the existing debt with a remaining principal balance of approximately $10,413, 000, after a $914,000 prepayment of principal.  The loan requires interest only payments at a rate of 7.49% per annum and matures in 2008.



(6)	This property is a multi-use development containing retail, office and apartments.  The office space is currently being completed and 306 of 320 apartments have been completed.   The remaining apartments will be completed in May 2003.  The seller will have two years to lease the currently vacant retail, office and apartment spaces.  Our purchase price is allocated as follows: $66,490,000 to retail and office and $38,768,000 to the apartments, and may be adjusted upward, based on the final rental rates achieved, for the multi-family.



1. (7)	The acquisition cost includes $535,000, which will be spent on new roofs and other rehab work after the acquisition of the property.
2. Property was acquired between the period of 05/08/03 and 05/15/03





Type of Property

NC   Neighborhood and Community Multi-Tenant Retail Shopping Center

SU   Single User Property

D    Development Project



71





As of May 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

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.  As a result of the interpretation, we consolidated the Fountains as an investment property.  We have accounted for the remaining fundings issued to borrowers for the development or purchase of investment properties as development receivables or mortgage receivables, respectively.  These receivables are typically secured by the underlying investment property and guarantees of the borrowers.  The Company's maximum exposure to loss as a result of the notes receivable would be the amount of the receivable balance outstanding at March 31, 2003 less amounts paid after the quarter which amounts to approximately $38,965,000.



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 March 31, 2003, we owned 43 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                | $11,731,849 | $5,616,888 | $28,784,306 | $43,669,479 | $66,684,846 | $379,756,563
|Variable rate debt             | 77,581,521  | 20,699,900 | 5,000,000   | 29,337,500  | 168,006,909 | 35,975,000  
|                               |             |            |             |             |             |             
|Average interest rate on debt: |             |            |             |             |             |             
|Fixed rate debt                | 7.62%       | 7.79%      | 7.57%       | 6.80%       | 6.75%       | 5.80%       
|Variable rate debt             | 3.23%       | 3.08%      | 2.99%       | 2.99%       | 2.94%       | 3.01%       



The fair value of our debt approximates its carrying amount.





72





The principal balance of $336,582,010 or 38% of our mortgages payable at March 31, 2003, have variable interest rates averaging 3.02%.  An increase in the variable interest rate on certain mortgages payable constitutes a market risk.



We are currently working with lenders to obtain new financing to pay off certain of the loans that mature in 2003.  We also expect to use proceeds from the offering to payoff a portion of the loans maturing in 2003.  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.  The packages covering the majority of properties whose debt matures in 2003 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



We have established a Management Committee, which conducted an evaluation of the effectiveness of The Company's disclosure contents and procedures pursuant to the Securities Exchange Act Rule 13A-14 within 90 days of filing this report. Our Chief Executive Officer and Chief Financial Officer have concluded, based on the Disclosure Committee's evaluation and their evaluation within 90 days of the filing of this report, that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934. As of the date of this report, there have been no known significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the previously mentioned evaluation, nor were there any corrective actions with regard to significant deficiencies and material weaknesses.





PART II - Other Information



Item 5

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.

























73









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.

























74













As of March 31, 2003, we have sold the following securities in the second follow-on offering for the following aggregate offering prices:

|*                                                                  | 90,001,968 | shares on a best efforts basis for $898,227,318;                                                                                                                                                                   
|------------------------------------------------------------------ | ---------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*                                                                  | 2,771,231  | shares pursuant to the DRP for $26,326,688;                                                                                                                                                                        
|                                                                   | 3,604,026  | soliciting dealer warrants for $2,883; and                                                                                                                                                                         
|*                                                                  | 0          | shares pursuant to the exercise of soliciting dealer warrants,                                                                                                                                                     
|and repurchased the following securities for the following amount:
|*                                                                  | (347,818)  | shares purchased pursuant to the share repurchase program for $3,264,899; for a net total of 92,425,381 shares for $921,289,107 of gross offering proceeds from the second follow-on offering as of March 31, 2003.

The net total of shares and gross offering proceeds from all offerings as of March 31, 2003 is 157,360,342 shares for $1,567,478,596. 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 March 31, 2003, 6,150,784 soliciting dealer warrants have been issued; and the $4,921 of gross proceeds received for their issuance is not included in the above $1,567,478,596 of gross offering proceeds.



Options to purchase an aggregate of 13,500 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 three 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  |                     



The net offering proceeds to us for the initial offering cumulative period, after deducting the total expenses paid described above, are $121,038,216.











75













From February 1, 2001, which was the effective date of the first follow-on offering through August 29, 2002 or the 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           | 806,069      | A                   
|Other expenses paid to non-affiliates  | 5,310,940    | A                   
|Total expenses                         | $ 49,862,078 |                     



The net offering proceeds to us for the first follow-on offering cumulative period, after deducting the total expenses paid as described above, are $457,742,426.



From June 7, 2002, which was the effective date of the second follow-on offering through March 31, 2003 or the second 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 | $          83,846,690 | A                   
|Finders' fees                          | --                    | A                   
|Expenses paid to or for underwriters   | --                    | A                   
|Other expenses to affiliates           | 778,621               | A                   
|Other expenses paid to non-affiliates  | 5,010,490             | A                   
|Total expenses                         | $         89,635,801  | A                   



The net offering proceeds to us for the second follow-on offering cumulative period, after deducting the total expenses paid as described above, are $831,653,306.  The net offering proceeds for all offerings, after deducting total expenses paid as described above, are $1,410,433,948.



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 | $         33,835,644 | A                   
|Purchase of real estate                        | 882,743,024          | A                   
|Acquisition of other businesses                | --                   | A                   
|Repayment of indebtedness                      | 211,045,428          | A                   
|Working capital (currently)                    | 51,185,704           | E                   
|Temporary investments (currently)              | 265.459.792          | A                   
|Other uses                                     | --                   | A                   







76











Of the amount used for purchases of real estate, $10,502,117 was paid to affiliates of the Advisor in connection with the acquisition of properties from such affiliates. Pending purchases of real estate, we temporarily invested net offering proceeds in short-term, interest-bearing accounts.



























































































77













Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits required by the Securities and Exchange Commission Regulations S-K. Item 601.

None

(b) Reports on Form 8-K:

The following reports on Form 8-K were filed during the quarter of the period covered by this report.

Report on Form 8-K dated April 18, 2003

Item 5	Other Items

Item 7	Financial Statements and Exhibits

Report on Form 8-K dated May 2, 2003

Item 5	Other Items

Item 7	Financial Statements and Exhibits

































































78











SIGNATURES





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: May 8, 2003





/S/ BARRY L. LAZARUS

By: Barry L. Lazarus

President and Chief Operating Officer

Treasurer and Chief Financial Officer

Date: May 8, 2003



















































79













Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Inland Retail Real Estate Trust, Inc. (the "Company") for the quarterly period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert D. Parks, as Chief Executive Officer of The Company, and Barry L. Lazarus, as Chief Financial Officer of The Company, each hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to  906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

1. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of The Company.





|/s/ ROBERT D. PARKS    
|-----------------------
|                       
|Name: Robert D. Parks  
|Chief Executive Officer
|Date:	May 8, 2003      
|                       
|                       
|/s/ BARRY L. LAZARUS   
|                       
|Name: Barry L. Lazarus 
|Chief Financial Officer
|Date:	May 8, 2003      
|                       



This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by The Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.  A signed original of this written statement required by Section 906 has been provided to The Company and will be retained by The Company and furnished to the Securities and Exchange Commission or its staff upon request.

























80