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                                                                EXHIBIT 10.5

                  INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
                     INDEPENDENT DIRECTOR STOCK OPTION PLAN

                                    ARTICLE I

                                     GENERAL

1.1  PURPOSE:
     Inland Western Retail Real Estate Trust, Inc., a Maryland corporation (the
"Company"), hereby adopts this Independent Director Stock Option Plan (the
"Plan"). The purpose of the Plan is to foster and promote the long-term
financial success of the Company by attracting and retaining outstanding
nonemployee directors by enabling them to participate in the Company's growth
through the granting of Options (as defined in Article II) which entitle them to
purchase shares of the Company's common stock, par value $0.01 per share
("Shares").

1.2  PARTICIPATION:
     Only directors of the Company who at the time an Option is granted are
"Non-Employee Directors" as such term is defined in Rule 16b3 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 16b3"), or any similar
rule which may subsequently be in effect (the "Independent Directors") shall
receive an Option under the Plan.

1.3  SHARES SUBJECT TO THE PLAN:
     Shares to be issued upon exercise of Options granted under the Plan may be
in whole or in part from authorized but unissued Shares or treasury Shares of
the Company. A maximum of 75,000 Shares (the "Plan Maximum") may be issued for
all purposes under the Plan (subject to adjustment pursuant to Section 3.2), and
the Company shall reserve 75,000 authorized but unissued Shares as of the date
this Plan is established for issuance upon exercise of Options granted under the
Plan. Any Shares reserved for issuance under Options which for any reason are
canceled or terminated without having been exercised shall not be counted in
determining whether the Plan Maximum has been reached. Options for fractional
shares shall not be granted.

1.4  GENDER AND NUMBER:
     Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender, the singular
shall include the plural, and the plural shall include the singular.

                                   ARTICLE II

                               STOCK OPTION AWARDS

2.1  AWARD OF STOCK OPTIONS:

     (a)  Effective on the later of (i) the date on which an Independent
Director becomes a member of the Board of Directors of the Company or (ii) the
date this Plan is adopted by the Company, or (iii) the date on which at least
200,000 Shares are issued and outstanding (subject to adjustment pursuant to
Section 3.2), each Independent Director who satisfies the conditions set forth
in Section 1.2 will automatically be awarded a stock option (an "Initial
Option") under the Plan to purchase 3,000 Shares (subject to adjustment pursuant
to Section 3.2). Effective on

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the date of each Annual Meeting of Stockholders of the Company (an "Annual
Meeting"), commencing with the Company's Annual Meeting in 2004, each
Independent Director then in office who satisfies the conditions set forth in
Section 1.2 will automatically be awarded a stock option (a "Subsequent Option"
or the "Subsequent Options", collectively with the "Initial Options" referred to
herein as an "Option" or "Options") to purchase 500 Shares (subject to
adjustment pursuant to Section 3.2). The Options are not intended to qualify as
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").

     (b)  Notwithstanding any other provision of this Plan, no Options shall be
issued pursuant to Section 2.1(a) to the extent that the issuance of such
Options would (i) enable the Independent Directors as a group to hold more than
10% of the outstanding Shares if such Options were exercised; (ii) result in the
Company being "closely held" within the meaning of Code Section 856(h); (iii)
cause the Company to own, directly or constructively, 10% or more of the
ownership interests in a tenant of the property of the Company (or of the
property of one or more partnerships in which the Company is a partner), within
the meaning of Code Section 856(d)(2)(B); or (iv) cause, in the opinion of
counsel to the Company, the Company to fail to qualify (or create, in the
opinion of counsel to the Company, a material risk that the Company would no
longer qualify) as a real estate investment trust within the meaning of Code
Section 856. To the extent that the issuance of Options pursuant to Section
2.1(a) would violate any of these limitations, the number of Shares that may be
purchased under the Options to be issued to each of the Independent Directors
shall be reduced pro rata. To the extent that the number of Shares which may be
purchased under Options issued to an Independent Director is reduced in any year
as a result of the application of these limitations, Options to purchase such
Shares shall be issued to the Independent Director in any subsequent year in
which issuance of such Options, after taking into account the Options to be
issued to the Independent Directors in such subsequent year under Section
2.1(a), would not violate the limitations imposed by this Section 2.1(b). To the
extent that the issuance of an Option is delayed until a subsequent year under
this Section 2.1, the Option shall be treated for all purposes under this Plan
as having been issued in such subsequent year.

2.2  STOCK OPTION CERTIFICATES:
     The award of an Option shall be evidenced by a certificate executed by an
officer of the Company.

2.3  OPTION PRICE:
     The purchase price of a Share (the "Option Price") under each Initial
Option granted shall be the Fair Market Value (as defined in Section 3.5) of a
Share on the date of the grant, which, for purposes of the Plan, until the
earlier of (i) the termination of the Company's initial public offering of
Shares (the "IPO") which is anticipated to commence in March 2003, or (ii) the
same month and day as such commencement date of the IPO but in the year 2003
(the "Initial Offering Period"), shall be $9.05. The Option Price under each
Subsequent Option granted on the date of any Annual Meeting shall be the Fair
Market Value of a Share on the last business day preceding the date of the
Annual Meeting, provided, however, that during the Initial Offering Period the
Option Price shall be $9.05 per Share.

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2.4  EXERCISE AND TERM OF OPTIONS:
     (a)  Options may be exercised by the delivery of written notice of exercise
and payment of the aggregate Option Price for the Shares to be purchased to the
Secretary of the Company. The Option Price may be paid in cash (including check,
bank draft or money order) or, unless in the opinion of counsel to the Company
doing so may result in a possible violation of law, by delivery of Shares
already owned by the Independent Director, valued at Fair Market Value on the
date of the exercise. As soon as practicable after receipt of each notice and
full payment, the Company shall deliver to the Independent Director a
certificate or certificates representing the purchased Shares. An Independent
Director shall have none of the rights of a shareholder until a certificate or
certificates for Shares underlying the Option(s) exercised are issued and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such certificate or certificates are issued.

     (b)  Each certificate for Shares issued upon exercise of an Option, unless
at the time of exercise such Shares are registered with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
shall bear the following legend:

          NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THESE
          SHARES SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION UNDER
          THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
          OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
          REGISTRATION IS NOT REQUIRED.

Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of such counsel as shall be reasonably approved by the Company, the
securities represented thereby no longer need be subject to such restrictions.

     Each certificate for Shares issued upon exercise of an Option shall also
bear any legends required by the Company's Articles of Incorporation and the
transferability of the certificate and the Shares represented thereby shall be
subject to the restrictions contained in the Company's Articles of
Incorporation.

     (c)  An Independent Director's Initial Option shall (subject to Section
3.1) become exercisable as follows: (i) 1,000 shares on the date of grant, (ii)
an additional 1,000 shares on the first anniversary of the date of grant, and
(iii) an additional 1,000 shares on the second anniversary of the date of grant
and shall continue to be exercisable until the first to occur of (i) the tenth
anniversary of the date of grant, (ii) the removal for cause of the Independent
Director as an Independent Director, or (iii) three months following the date
the Independent Director ceases to be an Independent Director for any other
reason except death or disability. Each of an Independent Director's Subsequent
Options shall (subject to Section 3.1) become fully exercisable on the second
anniversary of the date on which the Subsequent Option(s) was granted and shall
continue to be exercisable until the first to occur of (i) the tenth anniversary
of the date of grant, (ii) the removal for cause of the Independent Director as
an Independent Director, or (iii) three months following the date the
Independent Director ceases to be an

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Independent Director for any other reason except death or disability.
Notwithstanding the foregoing, Options granted under this Plan shall continue to
be exercisable in the case of death or disability for a period of one year after
death or the disabling event, provided that the death or disabling event occurs
while the person is an Independent Director and prior to his or her removal for
cause, resignation or ceasing to be an Independent Director for any other reason
and the Option is otherwise exercisable on the date of the death or disabling
event; PROVIDED, HOWEVER, if the Option is exercised within the first six months
after it becomes exercisable, any Shares issued pursuant to such exercise may
not be sold until the six month anniversary of the date of the grant of the
Option. An Independent Director is removed "for cause" for gross negligence or
willful misconduct in the execution of his duties; or for conviction of, or
entry of a plea of guilty or nolo contendere to, any felony or any act of fraud,
embezzlement, misappropriation, or a crime involving moral turpitude.

     (d)  Notwithstanding any other terms or provisions herein to the contrary,
no Option may be exercised if, in the opinion of the Company's counsel, such
exercise would jeopardize the Company's status as a real estate investment trust
under the Code.

                                   ARTICLE III

                            MISCELLANEOUS PROVISIONS

3.1  NONTRANSFERABILITY; BENEFICIARIES:
     No Option awarded under the Plan shall be transferable by the Independent
Director otherwise than by will or, if the Independent Director dies intestate,
by the laws of descent and distribution. All Options exercised during the
Independent Director's lifetime shall be exercised only by the Independent
Director or his legal representative. Any transfer contrary to this Section 3.1
will nullify the Option. Notwithstanding any other provisions of this Plan,
Options granted under this Plan shall continue to be exercisable in the case of
death or disability for a period of one year after death or the disabling event,
provided that the death or disabling event occurs while the person is an
Independent Director and prior to his or her removal for cause, resignation or
ceasing to be an Independent Director for any other reason and the Option is
exercisable on the date of the Independent Director's death or disabling event;
provided, however, if the Option is exercised within the first six months after
it becomes exercisable, any Shares issued on such exercise may not be sold until
the six month anniversary of the date of the grant of the Option. Each
Independent Director may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) who may exercise
such Options. Each designation will revoke all prior designations by such
Independent Director, must be in writing and will be effective only when filed
with the Secretary of the Company during his lifetime.

3.2  ADJUSTMENT UPON CERTAIN CHANGES:
     (a)  If the outstanding Shares are (i) increased, decreased, or (ii)
changed into, or exchanged for, a different number or kind of shares or
securities of the Company, through a reorganization or merger in which the
Company is the surviving entity, or through a combination, recapitalization,
reclassification, stock split, stock dividend, stock consolidation or otherwise,
an appropriate adjustment shall be made in the number and kind of Shares that
may be issued pursuant to an Option and in the minimum number of Shares that
must be issued and

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outstanding prior to the issuance of the Initial Options pursuant to Section
2.1(a)(iii). A corresponding adjustment to the consideration payable with
respect to all Options granted prior to any such change shall also be made. Any
such adjustment, however, shall be made without change in the total payment, if
any, applicable to the portion of the Option not exercised but with a
corresponding adjustment in the Option Price for each Share.

     (b)  Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon sale of all or substantially all of the Company's property, the Plan
shall terminate, and any outstanding Options shall terminate and be forfeited.
However, holders of Options may exercise any Options that are otherwise
exercisable immediately prior to the dissolution, liquidation, consolidation or
merger. Notwithstanding the foregoing, the Board of Directors may provide in
writing in connection with, or in contemplation of, any such transaction for any
or all of the following alternatives (separately or in combinations): (i) for
the assumption by the successor corporation of the Options theretofore granted
or the substitution by such corporation for such Options of awards covering the
stock of the successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; (ii) for
the continuance of the Plan by such successor corporation in which event the
Plan and the Options shall continue in the manner and under the terms so
provided; or (iii) for the payment in cash or Shares in lieu of and in complete
satisfaction of such Options.

3.3  AMENDMENT, SUSPENSION AND TERMINATION OF PLAN:
     The Board of Directors may suspend or terminate the Plan or any portion
thereof at any time and may amend it from time to time in such respects as the
Board of Directors may deem advisable in order that any Options thereunder shall
conform to or otherwise reflect any change in applicable laws or regulations, or
to permit the Company or the Independent Directors to enjoy the benefits of any
change in applicable laws or regulations, or in any other respect the Board of
Directors may deem to be in the best interests of the Company; provided,
however, that no such amendment shall, without stockholder approval to the
extent required by law, or any agreement or the rules of any stock exchange upon
which the Shares may be listed or of any national market system on which Shares
may be traded: (a) except as provided in Section 3.2, materially increase the
number of Shares which may be issued under the Plan; (b) materially modify the
requirements as to eligibility for participation in the Plan; (c) materially
increase the benefits accruing to Independent Directors under the Plan; or (d)
extend the termination date of the Plan. No such amendment, suspension or
termination shall: (x) impair the rights of Independent Directors under any
outstanding Option without the consent of the Independent Directors affected
thereby; or (y) make any change that would disqualify the Plan, or any other
plan of the Company intended to be so qualified, from the exemption provided by
Rule 16b3.

3.4  TAX WITHHOLDING:
     (a)  The Company shall have the power to withhold, or require an
Independent Director to remit to the Company, an amount sufficient to satisfy
any withholding or other tax due from the Company with respect to any amount
payable and/or Shares issuable under the Plan, and the Company may defer such
payment or issuance unless indemnified to its satisfaction.

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     (b)  Subject to the consent of the Board of Directors of the Company, due
to the exercise of an Option, an Independent Director may make an irrevocable
election (an "Election") to: (a) have Shares otherwise issuable hereunder
withheld; or (b) tender back to the Company Shares received; or (c) deliver back
to the Company previously acquired Shares having a Fair Market Value sufficient
to satisfy all or part of the Independent Director's estimated tax obligations
associated with the transaction. Such Election must be made by an Independent
Director prior to the date on which the relevant tax obligation arises. The
Board of Directors of the Company may disapprove of any Election, may suspend or
terminate the right to make Elections, or may provide with respect to any Option
under this Plan that the right to make Elections shall not apply to such Option.

3.5  DEFINITION OF FAIR MARKET VALUE:
     "Fair Market Value" on any date shall mean the average of the Closing Price
(as defined below) per Share for the five consecutive Trading Days (as defined
below) ending on such date. The "Closing Price" on any date shall mean the last
sale price, regular way (as defined below), or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
The Nasdaq Stock Market, Inc. ("Nasdaq") or, if Nasdaq is no longer in use, the
principal automated quotation system that may then be in use or, if the Shares
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Shares selected by the Board or, if there is no professional market maker making
a market in the Shares, the average of the last ten (10) sales pursuant to the
IPO if the IPO has not concluded, or, if the IPO has concluded, the average of
the last ten (10) purchases by the Company pursuant to its Share Repurchase
Program (the "SRP"), and if there are fewer than ten (10) of such purchases
under the SRP, then the average of such lesser number of purchases, or, if the
SRP is not then in existence, the price at which the Company is then offering
Shares to the public if the Company is then engaged in a public offering of
Shares, or if the Company is not then offering Shares to the public, the price
per share at which a Stockholder may purchase Shares pursuant to the Company's
Distribution Reinvestment Program (the "DRP") if such DRP is then in existence,
or if the DRP is not then in existence, the fair market value of a Share as
determined by the Company, in its sole discretion. "Trading Day" shall mean a
day on which the principal national securities exchange or national automated
quotation system on which the Shares are listed or admitted to trading is open
for the transaction of business or, if the Shares are not listed or admitted to
trading on any national securities exchange or national automated quotation
system, shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in the State of Illinois are authorized or obligated by law
or executive order to close. The term "regular way" means a trade that is
effected in a recognized securities market for clearance and settlement pursuant
to the rules and procedures of the National Securities Clearing Corporation, as
opposed to a trade effected "ex-clearing" for same-day or next-day settlement.

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3.6  PLAN NOT EXCLUSIVE:
     The adoption of the Plan shall not preclude the adoption by appropriate
means of any other stock option or other incentive plan for Independent
Directors or other Directors of the Company.

3.7  LISTING, REGISTRATION AND LEGAL COMPLIANCE:
     Each Option shall be subject to the requirement that if at any time counsel
to the Company shall determine that the listing, registration or qualification
thereof or of any Shares or other property subject thereto upon any securities
exchange or under any foreign, federal or state securities or other law or
regulation, or the consent or approval of any governmental body or the taking of
any other action to comply with or otherwise, with respect to any such law or
regulation, is necessary or desirable as a condition to or in connection with
the award of such Option or the issue, delivery or purchase of Shares or other
property thereunder, no such Option may be exercised or paid in Shares or other
property unless such listing, registration, qualification, consent, approval or
other action shall have been effected or obtained free of any conditions not
acceptable to the Company, and the holder of the award will supply the Company
with such certificates, representations and information as the Company shall
request and shall otherwise cooperate with the Company in effecting or obtaining
such listing, registration, qualification, consent, approval or other action.
The Company may at any time impose any limitations upon the exercise, delivery
or payment of any Option which, in the opinion of the Board of Directors of the
Company, are necessary or desirable in order to cause the Plan or any other plan
of the Company to comply with Rule 16b3. If the Company, as part of an offering
of securities or otherwise, finds it desirable because of foreign, federal or
state legal or regulatory requirements to reduce the period during which Options
may be exercised, the Board of Directors of the Company may, without the
holders' consent, so reduce such period on not less than 15 days written notice
to the holders thereof.

3.8  RIGHTS OF INDEPENDENT DIRECTORS:
     Nothing in the Plan shall confer upon any Independent Director any right to
serve as an Independent Director for any period of time or to continue serving
at his present or any other rate of compensation.

3.9  NO OBLIGATION TO EXERCISE OPTION:
     The granting of an Option shall impose no obligation upon the Independent
Director to exercise such Option.

3.10 REQUIREMENTS OF LAW; GOVERNING LAW:
     The granting of Options under this Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required. The Plan, and all
agreements hereunder, shall be construed in accordance with and governed by the
laws of the State of Illinois. The provisions of this Plan shall be interpreted
so as to comply with the conditions or requirements of Rule 16b3, unless a
contrary interpretation of any such provision is otherwise required by
applicable law.

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              FORM OF INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
                     INDEPENDENT DIRECTOR STOCK OPTION PLAN
                                OPTION AGREEMENT
                                  AGREEMENT NO.

     THIS OPTION AGREEMENT (the "Agreement" or the "Option") made and entered
into as of the ______ day of ________________, 2003 (the "Grant Date"), by and
between INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation
(the "Company"), and _________________________________ (the "Optionee") under
and pursuant to the Inland ______________ Trust, Inc. Independent Director Stock
Option Plan (the "Plan").

     Except where the context otherwise requires, all capitalized terms which
are not defined in this Agreement shall have the meaning set forth in the Plan.

     The parties agree as follows:

     1.     GRANT OF OPTION.

            In consideration of the services rendered and to be rendered to the
Company by the Optionee as an Independent Director of the Company and upon the
determination made by the Board of Directors of the Company (the "Board") that
the Optionee is eligible to receive an Option under the Plan, the Company hereby
grants to the Optionee an Option (the "Option") to purchase a total of up to
______________ (____________) shares of the Common Stock, par value $0.01 per
share, of the Company (each share of such Common Stock, a "Share" and
collectively, the "Shares"). The purchase price of a Share (the "Option Price")
purchased upon exercise of the Option granted by this Agreement shall be $9.05
per Share, upon and subject to the terms and conditions set forth in this
Agreement. Shares which may be purchased upon the exercise of the Option are
hereafter referred to as "Option Shares."

     2.     ACKNOWLEDGMENT BY OPTIONEE. The Optionee hereby acknowledges:

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                   (i)     that he or she has had an opportunity to review a
            copy of the Plan, a copy of all available reports on Forms 8-K, 10-Q
            and 10-K, if any, and the registration statement on Form S-11, filed
            by the Company with the Securities and Exchange Commission, and the
            Company's prospectus dated _______________, 2003 used in connection
            with its initial public offering of Shares (which prospectus
            contains a summary of the Plan under the caption "Management -
            Independent Director Stock Option Plan"), as well all supplements to
            that prospectus; and

                   (ii)    that any questions pertaining to the Plan, to the
            Option and to the Option Shares have been answered by the Company to
            his or her satisfaction; and

                   (iii)   that he or she understands that the Plan is
            incorporated in this Agreement by reference and is made a part of
            this Agreement as if fully set forth in this Agreement; and

                   (iv)    that the Plan shall control in the event that there
            is any conflict between the Plan and this Agreement, and also with
            respect to any matter not addressed in this Agreement.

     3.     TIME OF EXERCISE.

            (a)    Subject to the provisions of this Section 3 and the
restrictions imposed in the Plan, the Option may be exercised in accordance with
the provisions of Section 4 below, in whole or in part, as follows: (i) ______
Option Shares on or after the date of grant; (ii) an additional ____________
Option Shares on or after the first anniversary of the date of grant; and (iii)
an additional _________ Option Shares on or after the second anniversary of the
date of grant. Notwithstanding the foregoing, except as otherwise provided in
paragraph (b) below of this Section 3, an Option may not be exercised after the
earliest to occur of the following dates: (i) the date that is ten (10) years
from the date of grant, (ii) the date upon which the Optionee is removed for
cause as an Independent Director, or (iii) three (3) months following the date
the Optionee ceases to be an Independent Director for any reason other than
death or disability.

            (b)    Subject to the provisions of this Section 3 and the
restrictions imposed in the Plan, in the event that the Optionee dies or becomes
disabled while an Independent Director of the Company, any Option as to which
the Optionee's rights have become vested but which has

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not yet been exercised may be exercised and the Option Shares may be purchased
for a period of one (1) year after death or the disabling event, provided that
the death or disabling event occurs while the Optionee is an Independent
Director and prior to his or her removal for cause, resignation or ceasing to be
an Independent Director for any other reason and provided that the Option is
otherwise exercisable on the date of death or of the disabling event; provided
however, that if the Option is exercised within the first six (6) months after
it becomes exercisable, any Shares issued pursuant to such exercise may not be
sold until the six-month anniversary of the date of the grant of the Option.

            4.     MANNER OF EXERCISE. All Options exercised during the
Optionee's lifetime shall be exercised only by the Optionee or the Optionee's
legal representative. A legal representative shall be required to provide
written evidence reasonably satisfactory to the Company of his or her authority
to act on behalf of the Optionee. Each Optionee may name, from time to time, any
beneficiary or beneficiaries (who may be named contingently or successively) who
may exercise the Optionee's Options following the Optionee's death (the
"Optionee's beneficiaries"). Each designation will revoke all prior designations
by the Optionee, must be in writing to be valid and will be effective only when
filed with the Secretary of the Company during the Optionee's lifetime. The
Optionee may also revoke a designation without designating a new beneficiary. To
be valid such a revocation must be in writing and will be effective only when
filed with the Secretary of the Company during the Optionee's lifetime. The
Option may be exercised only by the delivery of a written notice of exercise in
person or sent by registered or certified mail, return receipt requested,
postage prepaid, to the Company at its principal executive offices at 2901
Butterfield Road, Oak Brook, Illinois 60521, Attn: Secretary. In the event that
the Company moves its principal executive offices it shall notify the Optionee
in writing of the new address

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and Options will thereafter be exercisable only by the delivery of written
notice of exercise in person or sent by registered or certified mail, return
receipt requested, postage prepaid, to the Company at its new principal
executive offices. Each such notice of exercise shall state the number of Option
Shares with respect to which the Option is being exercised and either shall be
signed by the Optionee or, in the event that the Option is being exercised by
the legal representative of the Optionee or by the Optionee's beneficiaries,
shall be signed by such legal representative or beneficiaries, and shall be
accompanied by a copy of the Optionee's death certificate (if the Optionee is
deceased) and/or such other proof, satisfactory to counsel for the Company, of
the right of such person to exercise the Option. Notices sent by registered or
certified mail shall be effective only when received by the Company. Each such
notice shall be accompanied by (a) the original executed copy of this Agreement,
(b) the full aggregate purchase price of the Option Shares being purchased, and
(c) such other documents or instruments as the Company may require to comply
with the then current federal and state income tax and securities laws. In the
event that this Option is exercised for less than all of the Option Shares
covered by this Agreement, and subject to the terms and conditions of the Plan,
the Company shall deliver an executed copy of a new Option Agreement to the
Optionee within sixty (60) days of such exercise for the number of Option Shares
covered by this Agreement which are not then exercised. The exercise price for
the Option Shares may be paid (i) in cash, by check, bank draft or money order;
or (ii) unless, in the opinion of counsel to the Company doing so may result in
a possible violation of law, by the delivery of Shares then owned by the
Optionee valued at Fair Market Value on the date of exercise. No Option Shares
shall be issued in connection with an exercise of the Option until payment for
such Shares has been made.

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     5.     DELIVERY OF CERTIFICATES. The Company shall not be required to issue
or deliver any certificate for the Option Shares upon the exercise of the Option
prior to compliance by the Company with any requirements of the then current
federal and state securities laws and of any stock exchange or other market
system on which the Shares may at that time be listed or traded. The Optionee
(or the legal representative of the Optionee or the Optionee's beneficiaries)
shall have no interest in the Option Shares unless and until certificates for
such Option Shares are issued to him or her.

     6.     EFFECT OF CERTAIN CHANGES. In the event that the number of
outstanding Shares shall be changed by reason of split-ups or combinations of
shares or recapitalizations or by reason of stock dividends, the number of
Option Shares which are granted, the number of Option Shares which can be
purchased on a particular date and the Option Price per Option Share shall be
appropriately adjusted, as determined by the Company, to give proper effect to
such changes.

     7.     OPTIONS ARE NON-TRANSFERABLE. The Option may not be assigned,
transferred, pledged or hypothecated in any way whether by operation of law or
otherwise (except by will, or if the Independent Director dies intestate, by the
laws of descent and distribution). The Option may be exercised only by the
Optionee (or in the event of the Optionee's incompetency by the Optionee's legal
representative) during the Optionee's lifetime and, after the Optionee's death,
may be exercised only by the Optionee's legal representative or by the
Optionee's beneficiaries.

     8.     NO GUARANTEE OF DIRECTORSHIP. Nothing in this Agreement shall be
deemed or construed to confer upon any Independent Director any right to serve
as an Independent Director for any period of time or to continue serving at his
or her present or any other rate of compensation.

                                        5
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     9.     LIMITATION ON LIABILITY.

     In the event that the Optionee shall have designated a beneficiary or
beneficiaries in accordance with Section 4 and has not revoked such designation
in accordance with Section 4, the Company shall be absolved of all further
liability to the Optionee, the Optionee's estate, the Optionee's spouse and the
Optionee's heirs, successors and assigns to the extent that it issues Shares as
directed by the beneficiary or beneficiaries so designated upon the exercise of
an Option following the death of the Optionee that satisfies the requirements of
Section 4 of this Agreement.

     10.    TAX WITHHOLDING.

     Subject to Section 3.4 of the Plan, the Company shall have the power to
withhold, or require an Optionee to remit to the Company, an amount sufficient
to satisfy any withholding or other tax due from the Company with respect to any
amount payable and/or the Option Shares issuable under the Plan, and the Company
may defer such payment or issuance unless indemnified to its satisfaction.

     11.    MISCELLANEOUS.

            (a)    The Option may not be exercised with respect to a fraction of
any Option Share.

            (b)    This Agreement contains all of the undertakings and
understandings between the Company and the Optionee regarding the subject matter
of the Option. No oral or unwritten undertaking or understandings exist with
regard to this Option and if claimed or believed by any person to exist shall be
disregarded and shall not be relied upon for any purpose. No modification or
amendment of any of the terms of the Option shall be valid if not made in

                                        6
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writing and no such writing shall be binding on the Company if not signed by its
Chairman, President or one of its Vice Presidents and attested by its Secretary
or an Assistant Secretary.

            (c)    Anything to the contrary notwithstanding, the provisions of
the Plan shall be incorporated in this Agreement and made a part hereof by this
reference and shall govern and control to the extent of any inconsistency
between the Plan and this Agreement and also with respect to any matter that is
not addressed in this Agreement.

            (d)    This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, except to the extent
preempted by federal law.

            (e)    This Agreement shall be binding upon the successors and
assigns of the Optionee and the Company.

            (f)    If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provisions to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.

                                        7
<Page>

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized corporate officers, and the Optionee has duly executed this
Agreement, all as of the date and year first above written.

                                         INLAND WESTERN RETAIL REAL ESTATE
                                         TRUST, INC.

                                         By:
                                            ------------------------------------
                                            Robert D. Parks, Chairman


ATTEST:

_________________________, Secretary

                                         Optionee:

                                         Signature:
                                                   -----------------------------

                                         Name:
                                              ----------------------------------