##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
 þ
    
    Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended March 31, 2011
 or
 o
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from  to
 
 Commission File Number [000-54295]
 INREIT Real Estate Investment Trust
  North Dakota
    
    90-0115411(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)216 South Broadway, Suite 202, Minot, North Dakota
    
    58701(Address of principal executive offices)
    
    (Zip Code)
 (701) 837-1031
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer
o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  Class
    
    Outstanding at May 13, 2011Common Stock, $0.01 par value per share
    
    3,761,458.363




---



##### 



INREIT REAL ESTATE INVESTMENT TRUST
 INDEX
 PageNo.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Consolidated Balance Sheets
    
    
    2Consolidated Statements of Operations
    
    
    4Consolidated Statements of Shareholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    7Notes to Condensed Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Item 4. Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 3. Defaults Upon Senior Securities
    
    
    42Item 4. Removed and Reserved
    
    
    43Item 5. Other Information
    
    
    43Item 6. Exhibits
    
    
    43Signatures
    
    
    44Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 99.1




---



##### Table of Contents



Item 1.
    
    Financial Statements.
  
 CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2011 AND DECEMBER 31, 2010
 (unaudited)March 31,
    
    
    December 31,2011
    
    
    2010ASSETSPROPERTY AND
EQUIPMENT, less accumulated depreciation
    
    $
    318,889,395
    
    
    $
    312,567,343CASH AND CASH EQUIVALENTS
    
    
    10,736,918
    
    
    
    10,010,564RESTRICTED DEPOSITS AND FUNDED RESERVES
    
    
    5,944,265
    
    
    
    5,814,623DUE FROM RELATED PARTY
    
    
    68,867
    
    
    
    306,951RECEIVABLES
    
    
    2,139,818
    
    
    
    2,241,896PREPAID EXPENSES
    
    
    346,814
    
    
    
    474,602NOTES RECEIVABLE
    
    
    1,815,133
    
    
    
    1,917,573FINANCING COSTS, less accumulated amortization of $634,652 in 2011 and $559,017 in 2010
    
    
    1,883,057
    
    
    
    1,713,903ASSETS HELD FOR SALE
    
    
    1,108,938
    
    
    
    1,115,618RENT INCENTIVE, less accumulated amortization of $141,667 in 2011 and $116,667 in 2010
    
    
    1,358,333
    
    
    
    1,383,333INTANGIBLE ASSETS, less accumulated amortization of $1,120,252 in 2011 and $953,481 in
2010
    
    
    6,851,308
    
    
    
    6,290,576OTHER ASSETS
    
    
    170,201
    
    
    
    145,201$
    351,313,048
    
    
    $
    343,982,183
   2




---



##### Table of Contents



(unaudited)March, 31
    
    
    December 31,2011
    
    
    2010LIABILITIESMORTGAGE NOTES PAYABLE
    
    $
    195,735,493
    
    
    $
    192,171,523SPECIAL ASSESSMENTS PAYABLE
    
    
    1,651,240
    
    
    
    1,582,610DIVIDENDS PAYABLE
    
    
    2,803,071
    
    
    
    2,606,033DUE TO RELATED PARTY
    
    
    254,818
    
    
    
    544,988TENANT SECURITY DEPOSITS PAYABLE
    
    
    1,283,532
    
    
    
    1,213,102INVESTMENT CERTIFICATES
    
    
    2,457,990
    
    
    
    2,455,534UNFAVORABLE LEASES, net
    
    
    565,859
    
    
    
    583,350ACCOUNTS PAYABLE  TRADE
    
    
    2,258,541
    
    
    
    152,833LIABILITIES RELATED TO
ASSETS HELD FOR SALE
    
    
    31,230
    
    
    
    48,062FAIR VALUE OF INTEREST RATE SWAP
    
    
    174,431
    
    
    
    194,499DEFERRED INSURANCE PROCEEDS
    
    
    7,656
    
    
    
    6,816ACCRUED EXPENSES
    
    
    2,737,515
    
    
    
    2,759,658Total liabilities
    
    
    209,961,376
    
    
    
    204,319,008COMMITMENTS  Note 14SHAREHOLDERS EQUITYNONCONTROLLING INTEREST
IN OPERATING PARTNERSHIP
    
    
    105,425,781
    
    
    
    105,012,439BENEFICIAL INTEREST
    
    
    36,100,322
    
    
    
    34,845,235ACCUMULATED COMPREHENSIVE LOSS
    
    
    (174,431
    )
    
    
    (194,499
    )141,351,672
    
    
    
    139,663,175$
    351,313,048
    
    
    $
    343,982,183
  3




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED)
 Three Months EndedMarch 31,2011
    
    
    2010INCOME FROM RENTAL OPERATIONS
    
    $
    11,952,383
    
    
    $
    10,685,435EXPENSESExpenses from rental operationsInterest
    
    
    2,954,478
    
    
    
    2,927,798Depreciation and amortization
    
    
    2,431,970
    
    
    
    2,212,977Real estate taxes
    
    
    1,398,655
    
    
    
    1,220,165Property management fees
    
    
    920,628
    
    
    
    801,262Utilities
    
    
    981,417
    
    
    
    895,076Repairs and maintenance
    
    
    1,273,167
    
    
    
    1,082,481Insurance
    
    
    172,391
    
    
    
    156,529Salary and wages
    
    
    
    
    
    
    9,122Food costs for residents
    
    
    
    
    
    
    4,913Administrative
    
    
    4,454
    
    
    
    7,43210,137,160
    
    
    
    9,317,754Administration of REITAdministrative expenses
    
    
    23,784
    
    
    
    19,889Advisory fees
    
    
    188,570
    
    
    
    168,826Acquisition expenses
    
    
    137,182
    
    
    
    117,567Director fees
    
    
    9,900
    
    
    
    8,500Legal and accounting
    
    
    219,265
    
    
    
    99,271578,701
    
    
    
    414,053Total expenses
    
    
    10,715,861
    
    
    
    9,731,807INCOME FROM OPERATIONS
    
    
    1,236,522
    
    
    
    953,627OTHER INCOMEInterest income
    
    
    64,546
    
    
    
    55,910Insurance proceeds
    
    
    
    
    
    
    38,90064,546
    
    
    
    94,809INCOME FROM CONTINUING OPERATIONS
    
    
    1,301,068
    
    
    
    1,048,437DISCONTINUED OPERATIONSIncome from discontinued operations, including gain on
disposal of $180,374 in 2010 and depreciation
expense of $8,099 in 2011 and $1,342 in 2010
    
    
    20,428
    
    
    
    189,842NET INCOME
    
    
    1,321,496
    
    
    
    1,238,278NET INCOME ATTRIBUTABLE TO THE
NONCONTROLLING INTEREST
    
    
    972,111
    
    
    
    952,962NET INCOME ATTRIBUTABLE TO INREIT
REAL ESTATE INVESTMENT TRUST
    
    $
    349,385
    
    
    $
    285,317NET INCOME PER COMMON SHAREBasic and diluted
    
    $
    0.09
    
    
    $
    0.10
   4




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED)
 Common
    
    
    Accumulated
    
    
    Total
    
    
    
    
    
    
    AccumulatedCommon
    
    
    Shares
    
    
    Earnings
    
    
    Beneficial
    
    
    Noncontrolling
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    (Deficit)
    
    
    Interest
    
    
    Interest
    
    
    Loss
    
    
    TotalBALANCE,
DECEMBER 31, 2009
    
    
    2,859,039
    
    
    $
    32,038,916
    
    
    $
    (6,067,369
    )
    
    $
    25,971,547
    
    
    $
    100,046,173
    
    
    $
    (168,332
    )
    
    $
    125,849,388Issuance of common shares
    
    
    122,479
    
    
    
    1,714,700
    
    
    
    
    
    
    
    1,714,700
    
    
    
    
    
    
    
    
    
    
    
    1,714,700Contribution of assets in exchange for the
issuance of noncontrolling interest shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    946,336
    
    
    
    
    
    
    
    946,336Repurchase of shares
    
    
    (45,024
    )
    
    
    (583,632
    )
    
    
    
    
    
    
    (583,632
    )
    
    
    
    
    
    
    
    
    
    
    (583,632
    )DividendsDividends declared
    
    
    
    
    
    
    
    
    
    
    (572,694
    )
    
    
    (572,694
    )
    
    
    (1,904,547
    )
    
    
    
    
    
    
    (2,477,241
    )Dividends reinvested
    
    
    25,664
    
    
    
    341,329
    
    
    
    
    
    
    
    341,329
    
    
    
    
    
    
    
    
    
    
    
    341,329UPREIT units converted to REIT common shares
    
    
    12,888
    
    
    
    162,384
    
    
    
    
    
    
    
    162,384
    
    
    
    (162,384
    )
    
    
    
    
    
    
    Increase in fair value of interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,860
    
    
    
    10,860Syndication costs
    
    
    
    
    
    
    
    
    
    
    (128,165
    )
    
    
    (128,165
    )
    
    
    (39,978
    )
    
    
    
    
    
    
    (168,120
    )Net income
    
    
    
    
    
    
    
    
    
    
    285,317
    
    
    
    285,317
    
    
    
    952,962
    
    
    
    
    
    
    
    1,238,276BALANCE, March 31, 2010
    
    
    2,975,046
    
    
    $
    33,673,697
    
    
    $
    (6,482,911
    )
    
    $
    27,190,786
    
    
    $
    99,838,562
    
    
    $
    (157,472
    )
    
    $
    126,871,876
   5




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY  page 2
 Common
    
    
    Accumulated
    
    
    Total
    
    
    
    
    
    
    AccumulatedCommon
    
    
    Shares
    
    
    Earnings
    
    
    Beneficial
    
    
    Noncontrolling
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    (Deficit)
    
    
    Interest
    
    
    Interest
    
    
    Loss
    
    
    TotalBALANCE, DECEMBER 31, 2010
    
    
    3,602,853
    
    
    $
    42,284,483
    
    
    $
    (7,439,249
    )
    
    $
    34,845,235
    
    
    $
    105,012,439
    
    
    $
    (194,499
    )
    
    $
    139,663,175Issuance of common shares
    
    
    123,521
    
    
    
    1,712,311
    
    
    
    
    
    
    
    1,712,311
    
    
    
    
    
    
    
    
    
    
    
    1,712,311Contribution of assets in exchange for the
issuance of noncontrolling interest shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,698,549
    
    
    
    
    
    
    
    1,698,549Repurchase of shares
    
    
    (34,171
    )
    
    
    (430,560
    )
    
    
    
    
    
    
    (430,560
    )
    
    
    
    
    
    
    
    
    
    
    (430,560
    )DividendsDividends declared
    
    
    
    
    
    
    
    
    
    
    (750,775
    )
    
    
    (750,775
    )
    
    
    (2,106,867
    )
    
    
    
    
    
    
    (2,857,642
    )Dividends reinvested
    
    
    31,806
    
    
    
    423,016
    
    
    
    
    
    
    
    423,016
    
    
    
    
    
    
    
    
    
    
    
    423,016UPREIT units converted to REIT common shares
    
    
    6,548
    
    
    
    82,509
    
    
    
    
    
    
    
    82,509
    
    
    
    (82,509
    )
    
    
    
    
    
    
    Syndication costs
    
    
    
    
    
    
    
    
    
    
    (130,799
    )
    
    
    (130,799
    )
    
    
    (67,942
    )
    
    
    
    
    
    
    (198,741
    )Increase in fair value of interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,068
    
    
    
    20,068Net income
    
    
    
    
    
    
    
    
    
    
    349,385
    
    
    
    349,385
    
    
    
    972,111
    
    
    
    
    
    
    
    1,321,496BALANCE, March 31, 2011
    
    
    3,730,557
    
    
    $
    44,071,759
    
    
    $
    (7,971,438
    )
    
    $
    36,100,322
    
    
    $
    105,425,781
    
    
    $
    (174,431
    )
    
    $
    141,351,672
   6




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED)
 Three Months EndedMarch 31,2011
    
    
    2010OPERATING ACTIVITIESNet income
    
    $
    1,321,496
    
    
    $
    1,238,279Adjustments to reconcile net income to net cash
from operating activitiesGain on sale of property and equipment
    
    
    
    
    
    
    (189,374
    )Gain due to insurance proceeds
    
    
    
    
    
    
    (38,900
    )Loss on impairment of property
    
    
    
    
    
    
    Depreciation
    
    
    2,193,722
    
    
    
    2,018,493Amortization
    
    
    246,347
    
    
    
    181,855Effects on operating cash flows due to changes inTenant security deposits
    
    
    (59,930
    )
    
    
    30,463Due from related party
    
    
    238,084
    
    
    
    841,962Receivables
    
    
    102,078
    
    
    
    94,472Prepaid expenses
    
    
    127,788
    
    
    
    166,182Other assets
    
    
    (25,000
    )
    
    
    (24,225
    )Due to related party
    
    
    21,722
    
    
    
    56,299Tenant security deposits payable
    
    
    70,430
    
    
    
    20,252Accounts payable
    
    
    (92,160
    )
    
    
    1,076Liabilities related to assets held for sale
    
    
    (16,832
    )
    
    
    Accrued expenses
    
    
    (74,063
    )
    
    
    (337,626
    )NET CASH FROM OPERATING ACTIVITIES
    
    
    4,053,682
    
    
    
    4,059,208INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (188,794
    )
    
    
    (4,335,138
    )Purchase of intangible assets
    
    
    (727,501
    )
    
    
    (1,935,564
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    693,217Insurance proceeds received
    
    
    
    
    
    
    414,463Real estate tax and insurance escrows
    
    
    (802,082
    )
    
    
    (549,932
    )Notes receivable payments received
    
    
    13,091
    
    
    
    9,909Deferred insurance proceeds
    
    
    840
    
    
    
    (141,436
    )Net payments from (deposits to) replacement reserve
    
    
    (32,442
    )
    
    
    105,765Net payments from exchange escrow
    
    
    764,306
    
    
    
    653,043NET CASH USED FOR INVESTING ACTIVITIES
    
    
    (972,582
    )
    
    
    (5,085,673
    )
   7




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS  page 2
 2011
    
    
    2010FINANCING ACTIVITIESPayments for financing costs
    
    
    (244,790
    )
    
    
    (167,894
    )Proceeds from investment certificates issued
    
    
    2,456
    
    
    
    12,877Payments on investment certificates
    
    
    
    
    
    
    Proceeds from issuance of mortgage notes payable
    
    
    1,287,000
    
    
    
    3,472,000Principal payments on mortgage notes payable
    
    
    (1,987,512
    )
    
    
    (4,950,074
    )Net change in notes payable
    
    
    
    
    
    
    3,880,196Payments on construction payable
    
    
    
    
    
    
    (332,116
    )Proceeds from issuance of shares
    
    
    1,712,311
    
    
    
    1,714,700Repurchase of shares
    
    
    (430,560
    )
    
    
    (583,632
    )Distributions paid
    
    
    (2,183,017
    )
    
    
    (2,031,878
    )Payment of syndication costs
    
    
    (510,634
    )
    
    
    (183,780
    )NET CASH FLOWS FROM FINANCING ACTIVITIES
    
    
    (2,354,746
    )
    
    
    830,399NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    726,354
    
    
    
    (196,066
    )CASH AND
CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    10,010,564
    
    
    
    8,702,274CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    10,736,918
    
    
    $
    8,479,916SCHEDULE OF CASH FLOW INFORMATIONCash paid during the period for interest
    
    $
    2,915,341
    
    
    $
    2,914,647SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIESDistributions reinvested
    
    $
    423,016
    
    
    $
    341,329Distributions declared and not paid
    
    $
    750,775
    
    
    $
    572,694UPREIT distributions declared and not paid
    
    $
    2,106,867
    
    
    $
    1,904,547UPREIT units converted to REIT common shares
    
    $
    82,509
    
    
    $
    162,384Acquisition of assets in exchange for the issuance of noncontrolling interest shares
in UPREIT
    
    $
    1,698,549
    
    
    $
    946,336Acquisition of assets through assumption of debt and property purchased with financing
    
    $
    4,264,480
    
    
    $
    Acquisition of assets included in payables
    
    $
    
    
    
    $
    578,746Increase in land improvements due to increase in special assessments payable
    
    $
    68,630
    
    
    $
    23,219Unrealized (gain) loss on interest rate swap
    
    $
    (20,068
    )
    
    $
    (10,860
    )Accounts payable relating to the acquisition assets
    
    $
    2,197,872
    
    
    $
    Acquisition of assets with reduction of notes receivable
    
    $
    89,349
    
    
    $
    
   8




---



##### Table of Contents



Notes to Consolidated Financial Statements
 NOTE 1  ORGANIZATION
   NOTE 2  PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation
     9




---



##### Table of Contents



Notes to Consolidated Financial Statements
 Principles of Consolidation
  Principal Business Activity
  Residential Property
 
    
    2,219 and 204 units respectively in Fargo and West Fargo, North Dakota.
    
    533 units in Grand Forks, North Dakota.
    
    470 units in Bismarck, North Dakota.
    
    316 units in Omaha, Nebraska.
    
    14 units in Hawley, Minnesota.
    
    16 unit assisted living facility in Williston, North Dakota.
    
    193 unit assisted living facility in Bismarck, North Dakota.
 Commercial Property
 
    
    15,010 square foot office building in Minot, North Dakota.
    
    38,300 square foot retail complex in Norfolk, Nebraska.
    
    15,000 square foot office and retail complex in Fargo, North Dakota.
    
    28,500 square foot office and retail complex in Fargo, North Dakota.
    
    30,200 square foot retail facility in Waite Park, Minnesota.
    
    17,000 square foot office building in Fargo, North Dakota.
    
    124,306 square foot office complex in Fargo, North Dakota.
    
    10,810 square foot office building in St. Cloud, Minnesota.
    
    95,961 square foot office building in Duluth, MN.
    
    11,973 square foot office building in Fargo, North Dakota.
    
    21,492 square foot office building and 1,625 square foot storage area in Grand Forks, North Dakota.
    
    102,448 square foot office building in Edina, Minnesota.
    
    5,043 square foot restaurant in Bloomington, Minnesota.
    
    5,576 square foot restaurant in Coon Rapids, Minnesota.
    
    4,936 square foot restaurant in Savage, Minnesota.
    
    7,296 square foot restaurant in Austin, Texas.
    
    15,400 square foot commercial building in Mandan, North Dakota.
    
    4,997 square foot restaurant in Apple Valley, Minnesota.
   10




---



##### Table of Contents



Notes to Consolidated Financial Statements
  nd
            11




---



##### Table of Contents



Notes to Consolidated Financial Statements
 Concentration of Credit Risk
  Use of Estimates
  Property and Equipment
    Buildings and improvements
    
    
    40 yearsFurniture and fixtures
    
    
    9 years
   Cash and Cash Equivalents
    12




---



##### Table of Contents



Notes to Consolidated Financial Statements
 Receivables
  Other assets
   Rental Incentives
  Noncontrolling Interest
  Financing Costs
  Syndication Costs
    13




---



##### Table of Contents



Notes to Consolidated Financial Statements
 Federal Income Taxes
     Recent Accounting Pronouncements
  Revenue Recognition
     14




---



##### Table of Contents



Notes to Consolidated Financial Statements
 Earnings per Common Share
   NOTE 3  PROPERTY AND EQUIPMENT
  2011
    
    
    2010Land and land improvements
    
    $
    43,316,971
    
    
    $
    42,021,838Building and improvements
    
    
    288,494,686
    
    
    
    281,669,671Furniture and fixtures
    
    
    13,377,205
    
    
    
    12,989,679345,188,862
    
    
    
    336,681,188Less accumulated depreciation
    
    
    (25,215,457
    )
    
    
    (23,021,736
    )$
    319,973,405
    
    
    $
    313,659,452Less: property and equipment
included in assets held for sale
    
    
    (1,084,010
    )
    
    
    (1,092,109
    )$
    318,889,395
    
    
    $
    312,567,343
  NOTE 4  HEDGING ACTIVITIES
    15




---



##### Table of Contents



Notes to Consolidated Financial Statements
 NOTE 5  LEASE INTANGIBLES
  March 31, 2011Lease
    
    
    Accumulated
    
    
    LeaseIntangibles
    
    
    Amortization
    
    
    Intangibles, netIn-place leases
    
    $
    6,439,516
    
    
    $
    (1,048,397
    )
    
    $
    5,391,119Above-market leases
    
    
    1,532,042
    
    
    
    (71,853
    )
    
    
    1,460,189Below-market leases
    
    
    (682,497
    )
    
    
    116,638
    
    
    
    (565,859
    )$
    7,289,061
    
    
    $
    (1,003,612
    )
    
    $
    6,285,449
 December 31, 2010Lease
    
    
    Accumulated
    
    
    LeaseIntangibles
    
    
    Amortization
    
    
    Intangibles, netIn-place leases
    
    $
    6,116,650
    
    
    $
    (902,685
    )
    
    $
    5,213,965Above-market leases
    
    
    1,127,407
    
    
    
    (50,796
    )
    
    
    1,076,611Below-market leases
    
    
    (682,497
    )
    
    
    99,147
    
    
    
    (583,350
    )$
    6,561,560
    
    
    $
    (854,334
    )
    
    $
    5,707,226
  Years ending March 31,
    
    Amount2012
    
    $
    596,9702013
    
    
    596,9702014
    
    
    596,9702015
    
    
    596,9702016
    
    
    596,970Thereafter
    
    
    3,300,599$
    6,285,449
    16




---



##### Table of Contents



Notes to Consolidated Financial Statements
 NOTE 6  SHORT TERM NOTES PAYABLE
  NOTE
7  MORTGAGE NOTES PAYABLE
  2011
    
    
    20105.26% mortgage note payable, due in monthly installments
of $38,283, including interest until July 2013, secured by a
mortgage on property, security agreement, and an assignment
of rents (Note 14)
    
    $
    6,076,832
    
    
    $
    6,111,4507.15% mortgage note payable, due in monthly installments of
$5,439, including interest, unpaid principal and interest due
March 2011, secured by a mortgage on property and a
security interest in cash or investment accounts with the
lender
    
    
    
    
    
    
    722,6037.25% mortgage note payable, due in varying monthly
installments of approximately $9,500, including interest,
unpaid principal and interest due April 2020, secured by
a mortgage on property and a security interest in cash or
investment accounts held with the lender
    
    
    1,158,238
    
    
    
    1,165,072Variable rate mortgage note payable, interest fixed at 6.00%
through June 2010, thereafter adjusted every 5 years, due in
monthly installments of $15,356 until July 2025, secured by
a mortgage on property and an assignment of rents
    
    
    1,744,429
    
    
    
    1,763,8035.74% mortgage note payable, due in monthly installments of
$18,945, including interest, until January 2016, secured by a
mortgage on property, security agreement, and an assignment
of rents
    
    
    3,019,913
    
    
    
    3,033,277
   17




---



##### Table of Contents



Notes to Consolidated Financial Statements
 2011
    
    
    20105.92% mortgage note payable, due in monthly installments of
$22,291, including interest, until November 2019, secured by
a mortgage on property and guaranty of owners
    
    
    3,535,642
    
    
    
    1,183,3485.46% mortgage note payable, due in monthly installments of
$17,524, including interest, until August 2019, secured by a
mortgage on property
    
    
    2,832,900
    
    
    
    948,8927.00% mortgage note payable, due in monthly installments of
$35,628, including interest, until May 2022, secured by a
mortgage on property (Note 14)
    
    
    5,105,065
    
    
    
    5,121,8975.93% mortgage note payable, due in monthly installments of
$45,224, including interest, until August 2017, secured by a
mortgage on property and assignment of rents and leases
    
    
    7,258,519
    
    
    
    7,286,2886.65% mortgage note payable, due in monthly installments of
$9,798, including interest, until May 2014, remainder due
at that time, secured by a mortgage on property
    
    
    1,322,927
    
    
    
    1,330,2405.33% mortgage note payable, due in monthly installments of
$68,688, including interest, until September 2020, secured
by a mortgage on property
    
    
    6,133,681
    
    
    
    6,256,9165.96% mortgage note payable, due in monthly installments of
$20,297, including interest, until July 2021, secured by a
mortgage on property, security agreement, and an assignment
of rents
    
    
    3,180,420
    
    
    
    3,193,7916.67% mortgage note payable, due in monthly installments of
$21,872, including interest, until December 2013, secured by
a mortgage on property, security agreement, and an assignment
of rents
    
    
    2,726,613
    
    
    
    2,746,5407.18% mortgage note payable, due in monthly installments of
$16,258, including interest, until January 2013, secured by a
mortgage on property, security agreement, and an assignment
of rents
    
    
    1,902,963
    
    
    
    1,917,4076.30% mortgage note payable, due in monthly installments of
$4,224, including interest, until October 2017, remainder
due at that time, secured by a mortgage on property and
business assets
    
    
    653,245
    
    
    
    655,6056.30% mortgage note payable, due in monthly installments of
$2,032, including interest, until October 2017, remainder
due at that time, secured by a mortgage on property and
business assets
    
    
    314,180
    
    
    
    315,315
   18




---



##### Table of Contents



Notes to Consolidated Financial Statements
 2011
    
    
    20106.10% mortgage note payable, due in monthly installments of
$13,862, including interest, until December 2017, remainder
due at that time, secured by a mortgage on property and
business assets
    
    
    2,191,406
    
    
    
    2,199,4926.10% mortgage note payable, due in monthly installments of
$12,680, including interest, until December 2017, remainder
due at that time, secured by a mortgage on property and
business assets
    
    
    2,004,598
    
    
    
    2,011,9946.59% mortgage note payable, due in monthly installments of
$6,700, including interest, until December 2012, remainder
due at that time, secured by a mortgage on property
    
    
    920,037
    
    
    
    924,7536.23% mortgage note payable, due in monthly installments of
$13,642, including interest, until January 2013, remainder
due at that time, secured by mortgage on property
    
    
    1,932,212
    
    
    
    1,942,9266.73% mortgage note payable, due in monthly installments of
$17,314, including interest, until December 2013, remainder
due at that time, secured by mortgage on property, security
agreement, and an assignment of rents
    
    
    2,149,220
    
    
    
    2,164,8285.03% mortgage note payable, due in monthly installments of
$19,122, including interest, until September 2019, remainder
due at that time, secured by mortgage on property, security
agreement, and an assignment of rents
    
    
    3,233,815
    
    
    
    3,250,3787.06% - 7.65% mortgage notes payable, due in various monthly
installments of principal and interest, until March 2016,
remainder due at that time, secured by mortgage on property
and assignment of rents
    
    
    13,288,229
    
    
    
    13,519,5645.72% mortgage note payable, due in monthly installments of
$17,683, including interest, until January 2013, remainder
due at that time, secured by mortgage on property, deed to secure
debt or deed of trust
    
    
    2,642,459
    
    
    
    2,657,5765.50% mortgage note payable, due in monthly installments of
$3,735, including interest, until June 2013, remainder due at
that time, secured by mortgage on property
    
    
    574,250
    
    
    
    577,634
   19




---



##### Table of Contents



Notes to Consolidated Financial Statements
 2011
    
    
    20105.98% mortgage note payable, due in monthly installments of
$11,965, including interest, until September 2017, remainder
due at that time, secured by mortgage on property, deed to
secure debt or deed of trust
    
    
    1,939,399
    
    
    
    1,946,2275.93% mortgage note payable, due in monthly installments of
$15,174, including interest, until September 2017, remainder
due at that time, secured by mortgage on property, deed to
secure debt or deed of trust
    
    
    2,471,950
    
    
    
    2,480,7316.15% mortgage note payable, due in monthly installments of
$6,862, including interest, until July 2016, remainder due at
that time, secured by mortgage on property
    
    
    954,251
    
    
    
    960,1046.15% mortgage note payable, due in monthly installments of
$35,057, including interest, until June 2015, remainder due at
that time, secured by mortgage on property and an assignment
of rents
    
    
    5,506,393
    
    
    
    5,526,6846.00% mortgage note payable, due in monthly installments of
$13,084, including interest, until May 2015, remainder due at
that time, secured by mortgage on property and an assignment
of rents
    
    
    2,082,612
    
    
    
    2,092,2596.83% mortgage note payable, due in monthly installments of
$2,800, including interest, until June 2018, remainder due at
that time, secured by mortgage on property and an assignment
of rents
    
    
    390,783
    
    
    
    392,4906.83% mortgage note payable, due in monthly installments of
$12,500, including interest, until June 2018, remainder due at
that time, secured by mortgage on property and an assignment
of rents
    
    
    1,699,415
    
    
    
    1,707,794Variable rate mortgage note payable (5.95% at March 31, 2011 and
December 31, 2010), adjusted every three years, due in monthly
installments of $7,700, including interest, until April 2018,
remainder due at that time, secured by mortgage on property
and an assignment of rents
    
    
    1,132,954
    
    
    
    1,139,1356.83% mortgage note payable, due in monthly installments of
$5,100, including interest, until June 2018, remainder due at
that time, secured by mortgage on property and an assignment
of rents
    
    
    702,999
    
    
    
    706,2556.83% mortgage note payable, due in monthly installments of
$2,500, including interest, until June 2018, remainder due at
that time, secured by mortgage on property and an assignment
of rents
    
    
    343,743
    
    
    
    345,354
  20
    Table of Contents   Notes to Consolidated Financial Statements
 2011
    
    
    20105.60% mortgage note payable, due in monthly installments of
$12,658, including interest, until December 2012, remainder
due at that time, secured by mortgage on property and an
assignment of rents
    
    
    1,921,480
    
    
    
    1,932,4466.25% mortgage note payable, due in monthly installments of
$25,200, including interest, until August 2015, remainder due
at that time, secured by mortgage on property and an assignment
of rents
    
    
    3,619,335
    
    
    
    3,638,1705.96% mortgage note payable, due in monthly installments of
$6,727, including interest, until October 2015, remainder due at
that time, secured by mortgage on property
    
    
    993,585
    
    
    
    998,9085.96% mortgage note payable, due in monthly installments of
$11,488, including interest, until October 2015, remainder
due at
that time, secured by mortgage on property
    
    
    1,696,727
    
    
    
    1,705,8186.96% mortgage note payable, due in monthly installments of
$16,897, including interest, until June 2013, remainder due at
that time, secured by mortgage on property, deed to secure
debt or deed of trust
    
    
    2,033,264
    
    
    
    2,048,4007.80% mortgage note payable, due in monthly installments of
$12,914, including interest, until September 2014, remainder
due
at that time, secured by mortgage on property, deed to secure
debt or deed of trust
    
    
    1,515,317
    
    
    
    1,524,394Variable rate mortgage note payable (4.00% at March 31, 2011
and December 31, 2010), adjusted every three years, due in
monthly installments of $31,300, including interest, until
December 2013, remainder due at that time, secured by
mortgage on property and an assignment of rents
    
    
    5,572,206
    
    
    
    5,610,1165.50% mortgage note payable, due in monthly installments of
$16,024, including interest, until December 2013, remainder
due at that time, secured by mortgage on property and an
assignment of rents
    
    
    2,474,185
    
    
    
    2,488,1005.60% mortgage note payable, due in monthly installments of
$14,905, including interest, until December 2013, remainder
due at that time, secured by mortgage on property and an
assignment of rents
    
    
    2,279,616
    
    
    
    2,291,9406.96% mortgage note payable, due in monthly installments of
$24,848, including interest, until June 2013, remainder due
at that time, secured by mortgage on property and an
assignment of rents
    
    
    2,990,097
    
    
    
    3,012,356
   21




---



##### Table of Contents



Notes to Consolidated Financial Statements
 2011
    
    
    20106.96% mortgage note payable, due in monthly installments of
$22,198, including interest, until July 2013, remainder due
at that time, secured by mortgage on property and an
assignment of rents
    
    
    2,677,820
    
    
    
    2,697,5895.64% construction note payable, due in monthly installments of
$116,225, including interest, until June 2015, remainder due
at that time, secured by mortgage on property and an
assignment
of the executed lease
    
    
    15,582,402
    
    
    
    15,670,6225.96% mortgage note payable, due in monthly installments of
$5,955, including interest, until January 2016, remainder due
at that time, secured by mortgage on property and an
assignment
of rents
    
    
    882,900
    
    
    
    887,4165.50% mortgage note payable, due in monthly installments of
$7,492, including interest, until July 2014, remainder due
at that time, secured by mortgage on property and an
assignment
of rents
    
    
    1,180,266
    
    
    
    1,186,6775.40% mortgage note payable, due in monthly installments of
$34,815, including interest, until April 2015, remainder due
at that time, secured by mortgage on property and an
assignment
of rents
    
    
    5,859,397
    
    
    
    5,884,4985.75% mortgage note payable, due in monthly installments of
$8,551, including interest, until May 2019, remainder due
at that time, secured by mortgage on property and an
assignment
of rents
    
    
    1,310,534
    
    
    
    1,317,3305.75% mortgage note payable, due in monthly installments of
$12,742, including interest, until March 2014, remainder due
at that time, secured by mortgage on property and corporate
guaranty
    
    
    1,701,164
    
    
    
    1,714,7985.75% mortgage note payable, due in monthly installments of
$7,545, including interest, until May 2019, remainder due
at that time, secured by mortgage on property and an
assignment
of rents
    
    
    1,156,323
    
    
    
    1,162,3195.68% mortgage note payable, due in monthly installments of
$63,989, including interest, until October 2015, remainder due
at that time, secured by mortgage on property, security
agreement, and assignment or rents and leases
    
    
    10,080,110
    
    
    
    10,128,4515.69% mortgage note payable, due in monthly installments of
$20,960, including interest, until April 2025 remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    2,433,067
    
    
    
    2,461,070
  22
    Table of Contents   Notes to Consolidated Financial Statements
 2011
    
    
    20106.85% mortgage note payable, due in monthly installments of
$49,216, including interest, until March 2034 remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    6,829,915
    
    
    
    6,860,2546.85% mortgage note payable, due in monthly installments of
$38,325, including interest, until August 2033, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    5,261,796
    
    
    
    5,286,3825.40% mortgage note payable, due in monthly installments of
$19,682, including interest, until March 2015, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    3,423,180
    
    
    
    3,435,8856.07% mortgage note payable, due in monthly installments of
$21,542, including interest, until October 2024, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    2,405,787
    
    
    
    2,433,6144.25% mortgage note payable, due in monthly installments of
$38,325, including interest, until August 2011, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    6,549,223
    
    
    
    6,549,2234.95% mortgage note payable, due in monthly installments of
$5,989, including interest, until August 2015, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    1,009,905
    
    
    
    1,015,3275.55% mortgage note payable, due in monthly installments of
$4,159, including interest, until December 2017, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    670,751
    
    
    
    675,3404.00% mortgage note payable, due in monthly installments of
$12,932, including interest, until December 2013, remainder
due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    2,442,914
    
    
    
    2,450,0005.25% mortgage note payable, due in monthly installments of
$7,569, including interest, until January 2016, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    1,110,733
    
    
    
    1,114,500
   23




---



##### Table of Contents



Notes to Consolidated Financial Statements
 2011
    
    
    20104.25% mortgage note payable, due in monthly installments of
$20,900 including interest, until December 2013,
remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    3,658,200
    
    
    
    3,690,9615.00% mortgage note payable, due in monthly installments of$7,580 including interest, until March 2016, remainder due
at that time, secured by mortgage on property, security
agreement and assignment of rents and leases
    
    
    1,287,000
    
    
    
    $
    195,735,494
    
    
    $
    192,171,524
  NOTE 8  FAIR VALUE MEASUREMENT
    24




---



##### Table of Contents



Notes to Consolidated Financial Statements
  
    
    Level 1  Quoted prices for identical instruments in active markets;
 
    
    Level 2  Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived
valuations whose significant inputs are observable;
 
    
    Level 3  Instruments whose significant inputs are unobservable.
  Quoted
    
    
    Significant
    
    
    SignificantTotal
    
    
    Prices:
    
    
    Other Inputs:
    
    
    NonobservableLiability
    
    03/31/11
    
    
    Level 1
    
    
    Level 2
    
    
    Inputs: Level 3Fair value of
interest rate
swap
    
    $
    174,431
    
    
    $
    
    
    
    $
    174,431
    
    
    $
    
 Quoted
    
    
    Significant
    
    
    SignificantTotal
    
    
    Prices:
    
    
    Other Inputs:
    
    
    NonobservableLiability
    
    12/31/10
    
    
    Level 1
    
    
    Level 2
    
    
    Inputs: Level 3Fair value of
interest rate
swap
    
    $
    194,499
    
    
    $
    
    
    
    $
    194,499
    
    
    $
    
 NOTE 9  NONCONTROLLING INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIPS
      25




---



##### Table of Contents



Notes to Consolidated Financial Statements
 NOTE 10  BENEFICIAL INTEREST
   NOTE 11  RELATED PARTY TRANSACTIONS
 Property Management Fee
   Director Fees
  Advisory Management Fees
  Acquisition Fees
    26




---



##### Table of Contents



Notes to Consolidated Financial Statements
 Commissions
    Rental Income
       27




---



##### Table of Contents



Notes to Consolidated Financial Statements
 NOTE 12  RENTALS UNDER OPERATING LEASES / RENTAL INCOME
   NOTE 13  PROPERTY MANAGEMENT FEES
     28




---



##### Table of Contents



Notes to Consolidated Financial Statements
 NOTE 14  COMMITMENTS AND CONTINGENCIES
 Environmental Matters
  Risk of Uninsured Property Losses
  Tenant in Common Ownership
    NOTE 15  BUSINESS COMBINATIONS AND DIVESTITURES
    29




---



##### Table of Contents



Notes to Consolidated Financial Statements
 2011 Purchases
  Property and
    
    
    In Place
    
    
    Favorable
    
    
    Unfavorable
    
    
    Mortgages
    
    
    ConsiderationEquipment
    
    
    Leases
    
    
    Lease Terms
    
    
    Lease Terms
    
    
    Assumed
    
    
    GivenApplebees Apple
Valley, MN
    
    $
    1,795,299
    
    
    $
    322,866
    
    
    $
    404,635
    
    
    $
    
    
    
    $
    
    
    
    $
    2,522,800Sierra Ridge
    
    
    6,458,761
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,264,480
    
    
    
    2,194,281$
    8,254,060
    
    
    $
    322,866
    
    
    $
    404,635
    
    
    $
    
    
    
    $
    4,264,480
    
    
    $
    4,717,081
 2011 Divestitures
  Three Months EndedMarch 31, 2011Revenue
    
    $
    66,136Expenses from rental operations
    
    
    (44,858
    )Administration of REIT
    
    
    (850
    )Income from discontinued operations
    
    $
    20,428
 2010 Purchases
       30




---



##### Table of Contents



Notes to Consolidated Financial Statements
  Property and
    
    
    In Place
    
    
    Favorable
    
    
    Unfavorable
    
    
    Mortgages
    
    
    ConsiderationEquipment
    
    
    Leases
    
    
    Lease Terms
    
    
    Lease Terms
    
    
    Assumed
    
    
    GivenWestside Apartments,
Hawley, MN
    
    $
    425,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    425,000Applebees, Bloomington, MN
    
    
    1,426,868
    
    
    
    322,368
    
    
    
    400,764
    
    
    
    
    
    
    
    
    
    
    
    2,150,000Applebees, Coon Rapids, MN
    
    
    1,617,328
    
    
    
    326,155
    
    
    
    482,517
    
    
    
    
    
    
    
    
    
    
    
    2,426,000Applebees, Savage, MN
    
    
    1,165,240
    
    
    
    253,324
    
    
    
    150,436
    
    
    
    
    
    
    
    
    
    
    
    1,569,000$
    4,634,436
    
    
    $
    901,847
    
    
    $
    1,033,717
    
    
    $
    
    
    
    $
    
    
    
    $
    6,570,000
 2010 Divestitures
  Three Months EndedMarch 31, 2010Revenue
    
    $
    8,184Expenses from rental operations
    
    
    (7,716
    )Gain on disposal of property and equipment
    
    
    189,374Income from discontinued operations
    
    $
    189,842
 NOTE 16  OTHER COMPREHENSIVE INCOME
  2011
    
    
    2010Net income
    
    $
    1,321,496
    
    
    $
    1,238,279Other comprehensive income (loss)Increase (decrease) in fair value of
interest rate swap
    
    
    20,068
    
    
    
    10,860Total other comprehensive income (loss)
    
    
    20,068
    
    
    
    10,860Comprehensive income
    
    
    1,341,564
    
    
    
    1,249,139Comprehensive income attributable
to the noncontrolling interest
    
    
    986,919
    
    
    
    961,343Comprehensive income attributable to
INREIT Real Estate Investment Trust
    
    $
    354,645
    
    
    $
    287,796
   31




---



##### Table of Contents



Notes to Consolidated Financial Statements
 NOTE 17  SUBSEQUENT EVENTS
     Property and equipment, net
    
    $
    1,084,010Restricted deposits and funded reserves
    
    
    24,928Assets held for sale
    
    $
    1,108,938Real estate taxes payable
    
    $
    6,302Security deposits payable
    
    
    24,928Liabilities on assets held for sale
    
    $
    31,230
  32




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
 forward-looking statements believe, expect, anticipate, may, plan, should,
 Plan of Operation
   Operating Partnership
    33




---



##### Table of Contents



Our Board of Trustees and Executive Officers
  Our Advisor
  Investment Objectives
  
    
    to acquire quality real estate properties or interests in real
estate properties that can provide stable cash flow for
distribution to our stockholders, preservation of capital and
realization of long-term capital appreciation upon the sale of
such properties;
    
    to offer an investment option in which the value of the common
shares is correlated to commercial real estate as an asset class
rather than traditional asset classes such as stocks and bonds;
and
    
    provide a hedge against inflation through use of month-to-month
rentals or short-term and long-term lease arrangements with
tenants of our rental properties.
   34




---



##### Table of Contents



Investment Strategy
  
    
    commercial real estate
properties or portfolios of real estate
properties in various sectors, including multi-family residential,
senior housing, retail, office, medical and other commercial
properties, including restaurants, primarily located in North
Dakota and other states located in the United States; and
    
    ownership interests in real estate properties in various sectors,
including multi-family residential, senior housing, retail,
office, medical and other commercial properties located in these
markets.
   Liquidity and Capital Resources
  Short-term Liquidity and Capital Resources
   Long-term Liquidity and Capital Resources
   35




---



##### Table of Contents



Cash Flow Analysis
 Cash Flows From Operating Activities
    Cash Flows From Investing Activities
     36




---



##### Table of Contents



Cash Flows From Financing Activities
    Results of Operations
 Three Months Ended March 31, 2011 Compared to Three months Ended March 31, 2010
  Three Months EndedMarch 31,2011
    
    
    2010Total property revenues
    
    $
    11,952,383
    
    
    $
    10,685,435Total property expenses
    
    
    (10,137,160
    )
    
    
    (9,317,754
    )Total other expenses
    
    
    (578,701
    )
    
    
    (414,053
    )Total other income
    
    
    64,546
    
    
    
    94,809Income from discontinued operations
    
    
    20,428
    
    
    
    189,842Net income
    
    
    1,321,496
    
    
    
    1,238,279Net income attributable to noncontrolling interest
    
    
    (972,111
    )
    
    
    (952,962
    )Net income attributable to INREIT Real Estate Investment Trust
    
    $
    349,385
    
    
    $
    285,317Distributions paidDistributions paid per share (1)
    
    $
    .20125
    
    
    $
    0.19250
 (1)
    
    Does not take into consideration the amounts paid by the operating partnership to limited
partners. Property revenues.
  37




---



##### Table of Contents



Property expenses.
 Three months EndedMarch 31,2011
    
    
    2010Real estate taxes
    
    $
    1,398,655
    
    
    $
    1,220,165Property management fees
    
    
    920,628
    
    
    
    801,261Repairs and maintenance
    
    
    1,273,167
    
    
    
    1,082,481Utilities
    
    
    981,417
    
    
    
    895,076Total property expenses
    
    $
    4,573,867
    
    
    $
    3,998,983
 Real estate taxes.
 Property management fees.
 Repairs and Maintenance.
 Utilities.
  38




---



##### Table of Contents



Other expenses.
 Three Months EndedMarch 31,2011
    
    
    2010General and administrative
    
    $
    578,701
    
    
    $
    414,053Depreciation and amortization
    
    
    2,431,970
    
    
    
    2,212,977Interest expense
    
    
    2,954,478
    
    
    
    2,927,798Interest income
    
    
    (64,546
    )
    
    
    (55,909
    )Total other expenses
    
    $
    5,900,603
    
    
    $
    5,498,919
 General and administrative.
 Depreciation and amortization.
 Interest expenses, net.
 Property Acquisitions and Dispositions
   Funds From Operations
    39




---



##### Table of Contents



Reconciliation of Net Income Attributable to INREIT Real Estate Investment Trust to Funds from Operations
 2011
    
    
    2010Per
    
    
    
    
    
    
    Weighted Avg
    
    
    PerWeighted Avg
    
    
    Share and
    
    
    
    
    
    
    Shares and
    
    
    Share andThree Months Ended March 31,
    
    Amount
    
    
    Shares and Units(1)
    
    
    Unit(2)
    
    
    Amount
    
    
    Units(1)
    
    
    Unit(2)Net Income attributable to
INREIT Real Estate
Investment Trust
    
    $
    349,385
    
    
    
    3,740,568
    
    
    $
    0.09
    
    
    $
    285,317
    
    
    
    2,942,334
    
    
    $
    0.10Add back:Noncontrolling Interest  OPU
    
    
    972,111
    
    
    
    10,505,145
    
    
    
    
    
    
    
    952,962
    
    
    
    9,903,014Depreciation & Amortization
    
    
    2,437,646
    
    
    
    
    
    
    
    
    
    
    
    2,214,340Subtract:Gains on Asset Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (189,842
    )Funds from Operations (FFO)
    
    $
    3,759,142
    
    
    
    14,245,713
    
    
    $
    0.26
    
    
    $
    3,262,777
    
    
    
    12,845,348
    
    
    $
    0.25
 (1)
    
    UREIT Units of the Operating Partnership are exchangeable for shares of beneficial interest on a one-for-one basis.(2)
    
    Net Income is calculated on a per share basis. FFO is calculated on a per share and unit basis.  40




---



##### Table of Contents



Critical Accounting Estimates
    Off-Balance Sheet Arrangements
  
 Item 4.
    
    Controls and Procedures.
 Disclosure Controls and Procedures
  Changes In Internal Controls Over Financial Reporting
   41




---



##### Table of Contents



PART II
 OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
 Sale of Securities
      Repurchases of Securities
  Total Number of Shares

    
    
    Average Price PaidPeriod
    
    Repurchased
    
    
    per ShareJanuary 1-31, 2011
    
    
    13,190.533
    
    
    
    $
    12.60February 1-28, 2011
    
    
    6,814.756
    
    
    
    $
    12.60March 1-31, 2011
    
    
    13,055.140
    
    
    
    $
    12.60
 
 Item 3.
    
    Defaults Upon Senior Securities.
   42




---



##### Table of Contents



Item 4.
    
    Removed and Reserved.
  
 Item 5.
    
    Other Information.
  
 Item 6.
    
    Exhibits.
 ExhibitNumber
    
    Title of Document31.1
    
    
    Certification of the Chief Executive Officer and Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the of the Sarbanes-Oxley Act of 2002.99.1
    
    
    INREIT Investor Update 1st Quarter 2011.
 
  43




---



##### Table of Contents



SIGNATURES
   INREIT REAL ESTATE INVESTMENT TRUSTBy:
    /s/ Kenneth P. ReganKenneth P. ReganChief Executive Officer
(Principal Executive Officer)By:
    /s/ Peter J. WingerPeter J. WingerChief Financial Officer
(Principal Financial and Accounting Officer)  44