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<SEC-DOCUMENT>0000950134-04-017572.txt : 20041115
<SEC-HEADER>0000950134-04-017572.hdr.sgml : 20041115
<ACCEPTANCE-DATETIME>20041115134117
ACCESSION NUMBER:		0000950134-04-017572
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041115
DATE AS OF CHANGE:		20041115

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INCOME OPPORTUNITY REALTY INVESTORS INC /TX/
		CENTRAL INDEX KEY:			0000949961
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		IRS NUMBER:				752615944
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14784
		FILM NUMBER:		041143641

	BUSINESS ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		4685224200

	MAIL ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d20164e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">





<P align="center" style="font-size: 14pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="30%" align="center">

<P align="center" style="font-size: 18pt"><B>FORM 10-Q</B>


<P align="center" style="font-size: 12pt"><FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B>


<P align="center" style="font-size: 10pt"><B>FOR THE QUARTER ENDED SEPTEMBER 30, 2004</B>


<P align="center" style="font-size: 10pt"><B>or</B>


<P align="center" style="font-size: 12pt"><FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B>


<P align="center" style="font-size: 10pt"><B>FOR THE TRANSITION PERIOD FROM &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TO </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;


<P align="center" style="font-size: 10pt"><B>Commission File Number 1-14784</B>


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="30%" align="center">

<P align="center" style="font-size: 20pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B>

<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in Its Charter)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Nevada</B><BR>
(State or Other Jurisdiction of<BR>
Incorporation or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>75-2615944</B><BR>
(I.R.S. Employer<BR>
Identification No.)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><B>1800 Valley View Lane, Suite&nbsp;300, Dallas, Texas</B><BR>
(Address of Principal Executive Office)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>75234</B><BR>
(Zip Code)</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>(214)&nbsp;750-5800</B><BR>
(Registrant&#146;s Telephone Number, Including Area Code)


<P align="center" style="font-size: 10pt"><HR size="1" noshade width="30%" align="center">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule&nbsp;12b-2 of the Act).&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the Registrant (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
Registrant was required to file such reports), and (2)&nbsp;has been subject to such
filing requirements for the past 90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>.


<P align="center" style="font-size: 10pt"><B>APPLICABLE ONLY TO CORPORATE ISSUERS:</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate the number of shares outstanding of each of the issuer&#146;s classes
of Common Stock, as of the latest practicable date.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Common Stock, $.01 par value<BR>
(Class)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>1,438,945<BR>
(Outstanding at October&nbsp;31, 2004)</B></TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P>
<HR size="1" noshade color="#000000" style="margin-top: -2px">
<HR size="4" noshade color="#000000" style="margin-top: -10px">






<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">







<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PART I. FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">ITEM 1. FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">CONSOLIDATED BALANCE SHEETS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">CONSOLIDATED STATEMENTS OF OPERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">CONSOLIDATED STATEMENT OF STOCKHOLDERS&#146; EQUITY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">CONSOLIDATED STATEMENTS OF CASH FLOWS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">ITEM 4. CONTROLS AND PROCEDURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">PART II. OTHER INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">ITEM 1. LEGAL PROCEEDINGS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">ITEM 6. EXHIBITS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">SIGNATURE PAGE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q</A></TD></TR>
<TR><TD colspan="9"><A HREF="d20164exv31w1.htm">Certification Pursuant to Rules 13a-14 and 15d-14</A></TD></TR>
<TR><TD colspan="9"><A HREF="d20164exv32w1.htm">Certification Pursuant to 18 U.S.C. Section 1350</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>






<!-- link1 "PART I. FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center" style="font-size: 10pt">PART I. FINANCIAL INFORMATION


<!-- link2 "ITEM 1. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>ITEM 1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>FINANCIAL STATEMENTS</B></TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">The accompanying Consolidated Financial Statements have not been audited by
independent certified public accountants, but in the opinion of the management
of Income Opportunity Realty Investors, Inc. (&#147;IORI&#148;), all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
IORI&#146;s consolidated financial position, consolidated results of operations and
consolidated cash flows at the dates and for the periods indicated, have been
included.


<!-- link1 "CONSOLIDATED BALANCE SHEETS" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center" style="font-size: 10pt">INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
CONSOLIDATED BALANCE SHEETS

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>except per share)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-10px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate held for investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">56,367</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less-accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,152</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,002</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,365</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes and interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,531</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment in real estate partnerships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets (including $261 in 2004 and $930 in 2003 due from affiliates)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">96,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">101,144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:20px; text-indent:-10px"><B>Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes and interest payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">60,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other liabilities (including $2,340 in 2004 and $473 in 2003 due to affiliates)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,230</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">62,055</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common Stock, $.01 par value; authorized, 10,000,000 shares; issued and
outstanding 1,438,945 shares in 2004 and 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,774</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(200</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,416</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,699</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,089</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">96,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">101,144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these Consolidated Financial Statements.


<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "CONSOLIDATED STATEMENTS OF OPERATIONS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center" style="font-size: 10pt">INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the Three Months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the Nine Months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Ended September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Ended September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(dollars in thousands, except per share)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property revenue:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Rents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Property operations (including $103 in 2004
and $278 in 2003 to affiliates and
related parties)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">626</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Recovery of accounts receivable written off</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,569</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Equity in income (loss)&nbsp;of equity partnerships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,462</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Advisory fee to affiliate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Impairment of real estate held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income fee to affiliate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">General and administrative (including $58 in
2004 and $294 in 2003 to affiliates and
related parties)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">692</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,147</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)&nbsp;from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(409</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(224</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Discontinued operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">(Loss)/Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,674</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,674</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(977</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,343</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings (loss)&nbsp;per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.28</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.16</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.68</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.93</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average common shares used in computing
earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438,945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these Consolidated Financial Statements.


<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "CONSOLIDATED STATEMENT OF STOCKHOLDERS&#146; EQUITY" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center" style="font-size: 10pt">INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
CONSOLIDATED STATEMENT OF STOCKHOLDERS&#146; EQUITY


<P align="center" style="font-size: 10pt">For the Nine Months Ended September&nbsp;30, 2004

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Common Stock</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Treasury Stock</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3"><B>Total<BR>Stockholders&#146;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capital</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deficit</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Equity</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">62,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(23,699</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,089</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase of Treasury Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(200</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(200</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, September&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">62,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(200</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(20,416</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these Consolidated Financial Statements.


<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="center" style="font-size: 10pt">INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the Nine Months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Ended September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash Flows from Operating Activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income/(loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,343</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Reconciliation of net income (loss)&nbsp;to net cash used by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Adjustments to reconcile net income (loss)&nbsp;to net cash used in operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Loss on impairment of fixed asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,689</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">(Gain) loss on equity partnerships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Increase in interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(391</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(85</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">(Increase) decrease in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,712</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,222</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Decrease in interest payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(108</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Increase (decrease)&nbsp;in other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(178</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,238</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash Flows from Investing Activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Real estate improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(400</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Proceeds from sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Receipts from (Payments to) advisor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(254</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(654</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash Flows from Financing Activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Payments on notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(931</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(828</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Proceeds on notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Advances from affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred financing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Purchase of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(200</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(741</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">349</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Supplemental Disclosures of Cash Flow Information:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash paid for interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,461</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Schedule of noncash investing and financing:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Note receivable from sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these Consolidated Financial Statements.


<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link1 "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="006"></A></DIV>

<P align="center" style="font-size: 10pt">INCOME OPPORTUNITY INVESTORS, INC.<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<P align="left" style="font-size: 10pt">NOTE 1. BASIS OF PRESENTATION

<P align="left" style="font-size: 10pt">The accompanying Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article&nbsp;10 of Regulation
S-X. Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements. Operating results for the nine month period ended September&nbsp;30,
2004, are not necessarily indicative of the results that may be expected for
the year ending December&nbsp;31, 2004. For further information, refer to the
Consolidated Financial Statements and notes thereto included in
IORI&#146;s Annual Report on Form 10&#8209;K for the year ended December&nbsp;31, 2003 (the &#147;2003 Form
10-K&#148;). Dollar amounts in tables are in thousands, except per share amounts.


<P align="left" style="font-size: 10pt">Certain balances for 2003 have been reclassified to conform to the 2004
presentation.



<P align="left" style="font-size: 10pt">NOTE 2. REAL ESTATE

<P align="left" style="font-size: 10pt">In 2004, IORI sold the following property:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sales</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Cash</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Debt</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gain</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Property</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Location</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Units/Sq.Ft.</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Received</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Discharged</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>on Sale</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD colspan="25"><DIV style="margin-left:0px; text-indent:0px"><B><I>First
Quarter</I></B></DIV></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:0px"><B>Apartment Building</B><BR>
Treehouse</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">San Antonio, TX</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">106 Units</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD colspan="25"><DIV style="margin-left:0px; text-indent:0px"><B><I>Second
Quarter</I></B></DIV></TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:0px; text-indent:0px"><B>Apartment Building</B><BR>
Treehouse<sup>(1)</sup></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">Irving, TX</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">160 Units</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(498</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap><SUP>(2)</SUP></TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:0px"><B>Commercial Building</B><BR>
Akard Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">Dallas, TX</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">42,258 Sq.Ft.</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD colspan="25"><DIV style="margin-left:0px; text-indent:0px"><B><I>Third
Quarter</I></B></DIV></TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:0px"><B>Land</B><BR>
Frankel Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">Midland, TX</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">1 Acre</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD colspan="25"><DIV style="margin-left:0px; text-indent:0px"><B><I>Fourth
Quarter</I></B></DIV></TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:0px"><B>Commercial Building</B><BR>
Chuck Yeager</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">Chantilly, VA</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">60,060 Sq.Ft.</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,967</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>





<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Property sold to TCI, a related party who assumed debt of $5.0&nbsp;million
and transferred a $3.0&nbsp;million secured note receivable to
IORI. IORI paid $498,000 to TCI for the net difference at closing.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Excludes a $56,000 deferred gain from a related party sale.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">In 2003, IORI sold the following property:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sales</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Cash</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Debt</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gain</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Property</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Location</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Units/Sq.Ft.</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Received</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Discharged</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>on Sale</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:0px"><B><I>Third Quarter</I></B><BR>
<B>Office Building</B><BR>
5600 Mowry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">Newark, CA</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">56,120 Sq.Ft.</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">6
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">NOTE 3. NOTES AND INTEREST RECEIVABLE


<P align="left" style="font-size: 10pt">There were no new notes funded in 2004.


<P align="left" style="font-size: 10pt"><I>Junior Mortgage Loans. </I>Junior mortgage loans are loans secured by mortgages
that are subordinate to one or more prior liens either on the fee or a
leasehold interest in real estate. Recourse on the loans ordinarily includes
the real estate which secures the loan, other collateral and personal
guarantees of the borrower.


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,222,500
given by Unified Housing of Parkside Crossing, LLC to Regis Realty I, LLC
(&#147;RRI&#148;) and the accrued interest receivable of $112,878 were assigned from RRI
to IORI as a paydown of certain intercompany receivables.


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,053,616
given by Unified Housing of Temple, LLC to RRI and the accrued interest
receivable of $98,338 were assigned from RRI to IORI as a paydown of certain
intercompany receivables.


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $835,658
given by Unified Housing of Terrell, LLC to RRI and the accrued interest
receivable of $80,223 were assigned from RRI to IORI as a paydown of certain
intercompany receivables.


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,770,000
given by Housing for Seniors of Humble, LLC to RRI and the accrued interest
receivable of $174,640 were assigned from RRI to IORI as a paydown of certain
intercompany receivables.


<P align="left" style="font-size: 10pt">On May&nbsp;24, 2004, a Secured Promissory Note in the amount of $2,990,000 given by
Unified Housing of McKinney, LLC (&#147;UHM&#148;) to Transcontinental Eldorado, Inc. was
assigned from Transcontinental Realty Investors, Inc. (&#147;TCI&#148;) to IORI as a
partial payment for TCI&#146;s repurchase of 100% of the outstanding common shares
of Transcontinental Treehouse Corporation (&#147;Treehouse-IR&#148;) from IORI.


<P align="left" style="font-size: 10pt">On December&nbsp;30, 2003, a Secured Promissory Note in the amount of $6,363,360
given by Housing for Seniors of Humble (&#147;Humble&#148;), LLC to NLP Lakeshore Villas,
LLC (&#147;NLP&#148;) was assigned from American Realty Investors, Inc. (&#147;ARI&#148;) to IORI
as a paydown of certain intercompany receivables.


<P align="left" style="font-size: 10pt">On December&nbsp;30, 2003, a Secured Promissory Note in the amount of $2,000,000
given by Humble to NLP was assigned from ARI to IORI as additional paydown of
certain intercompany receivables.


<P align="left" style="font-size: 10pt">On October&nbsp;14, 2003, IORI sold and conveyed the office building known as One
Hickory Centre and 202 acres of unimproved real property known as the Travelers
Land in Dallas County, Texas to Encino Executive Plaza, Ltd. The sale price for
One Hickory Centre was $12,200,000 and Encino Executive Plaza, Ltd. executed a
wrap-around promissory note in the amount of $11,973,025 payable to the order
of IORI secured by a Deed of Trust encumbering One Hickory Centre. The note
bore interest at 5.5% per annum. As with the prior transaction, the difference
between the purchase price and the promissory note represented adjustments for
various prorations. The sale price for the Travelers Land was $25,000,000. At
closing, Encino Executive Plaza, Ltd. executed an all inclusive wrap-around
promissory note payable to the order of IORI in the principal amount of
$22,801,987 secured by a Deed of Trust covering the Travelers Land sold and
delivered cash to IORI in the amount of $1,946,715, the remaining difference of
which was as a result of prorations and various expenses paid by IORI in
connection with the closing of the transaction. The note bore interest at 5.5%
per annum. Subsequently, IORI made a loan to Encino Executive Plaza, Ltd. in
the amount of $1,567,232 payable upon demand or if no demand is made prior
thereto on June&nbsp;30, 2006 with a market rate of interest. Encino Executive
Plaza, Ltd. executed and delivered a promissory note payable to the order of
IORI in the stated principal amount of $1,567,232. The note bore interest at
5.5% per annum.


<P align="left" style="font-size: 10pt">NOTE 4. OTHER ASSETS; OTHER LIABILITIES


<P align="left" style="font-size: 10pt"><I>Related Party. </I>On September&nbsp;19, 2002, IORI&#146;s Board of Directors authorized the
Chief Financial Officer of the Company to advance funds either to or from the
Company, through the advisor without interest, in an amount up to $5.0&nbsp;million
on the condition that such advances shall be repaid in cash or transfers of
assets within 90&nbsp;days. From time-to-time, IORI and its affiliates and related
parties have made unsecured advances to each other to fund their respective
operations, which generally have not had specific repayment terms and have been
reflected in IORI&#146;s financial statements as other assets. At September&nbsp;30,
2004, IORI held a receivable of

<P align="center" style="font-size: 10pt">7
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">$261,000 from TCI, and at December&nbsp;31 2003 held receivables of $302,000,
$367,000, and $261,000 from its advisor Syntek West, Inc. (&#147;SWI&#148;), ARI, and
TCI, respectively at December&nbsp;31, 2003. IORI had payables of $1.7&nbsp;million to
SWI and $602,000 to RRI at September&nbsp;30, 2004, and a payable of $473,000 to RRI
at December&nbsp;31, 2003. See also NOTE 7. &#147;RELATED PARTY TRANSACTIONS&#148;.


<P align="left" style="font-size: 10pt">NOTE 5. NOTES AND INTEREST PAYABLE


<P align="left" style="font-size: 10pt">In April&nbsp;2002, IORI sold all of its residential properties to partnerships
controlled by Metra Capital, LLC (&#147;Metra&#148;). These properties include: the 60
unit Brighton Court, the 92 unit Del Mar, the 68 unit Enclave, the 280 unit
Meridian, the 57 unit Signature, the 114 unit Sinclair, located in Midland,
Texas and the 106 unit Treehouse, located in San Antonio, Texas. Innovo Realty,
Inc., a subsidiary of Innovo Group, Inc. (&#147;Innovo&#148;) is a limited partner in the
partnerships that purchased the properties. Joseph Mizrachi, a former director
of ARI, a related party, controls approximately 11.67% of the outstanding
common stock of Innovo. The sale constituted 23% of the total assets of IORI
as of December&nbsp;31, 2001. The sales price for the properties totaled $26.2
million. IORI received $5.4&nbsp;million in cash after the payoff of $16.1&nbsp;million
in debt and various closing costs. Management has determined to account for
this sale as a refinancing transaction, in accordance with SFAS No.&nbsp;66,
&#147;Accounting for Sales of Real Estate.&#148; IORI will continue to report the assets
and the new debt incurred by the Metra partnerships on the IORI financial
statements. The new debt on the properties totals $21.4&nbsp;million, bears
interest at 7.57% per annum, requires monthly interest only payments of
$135,000 and matures in May&nbsp;2012. IORI also received $5.2&nbsp;million of 8%
non-recourse, non-convertible Series&nbsp;A Preferred Stock (&#147;Preferred Shares&#148;) of
Innovo. The transaction is currently the subject of litigation. See ITEM 1.
&#147;LEGAL PROCEEDINGS&#148;, under PART II. &#147;OTHER INFORMATION&#148; for further information
on this matter.


<P align="left" style="font-size: 10pt">The dividend on the Preferred Shares will be funded entirely and solely through
member distributions from cash flows generated by the operation and subsequent
sale of the sold properties. In the event the cash flows for the properties
are insufficient to cover the 8% annual dividend, Innovo will have no
obligation to cover any shortfall.


<P align="left" style="font-size: 10pt">The Preferred Shares have a mandatory redemption feature and are redeemable
from the cash proceeds received by Innovo from the operation and sale of the
properties. All member distributions that are in excess of current and accrued
8% dividends must be used by Innovo to redeem the Preferred Shares. Since
redemption of these shares is subject to the above future events, management
has elected to record no basis in the Preferred Shares.


<P align="left" style="font-size: 10pt">As mentioned in Note 2, the Treehouse apartment property (San Antonio) was sold
for $5.4&nbsp;million, the Treehouse apartment property (Irving) was sold for $8.0
million to TCI, a related party, and the Akard Plaza was sold for $3.9&nbsp;million.
All the existing mortgage payable amounts were discharged at the closing.


<P align="left" style="font-size: 10pt">In 2004, IORI refinanced the following property:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Cash</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Debt</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Debt</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Received/</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Interest</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maturity</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Property</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Location</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sq.Ft./Acrs</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Incurred</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Discharged</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Paid)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:0px"><B><I>First Quarter</I></B><BR>
<B>Office Building</B><BR>
Yeager Building</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">Chantilly, VA</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">60,060 Sq.Ft.</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.50</TD>
    <TD nowrap>%<SUP>(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/06</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>





<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Variable rate.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">8
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">NOTE 6. RELATED PARTY TRANSACTIONS


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,222,500
given by Unified Housing of Parkside Crossing, LLC to Regis Realty I, LLC
(&#147;RRI&#148;) and the accrued interest receivable of $112,878 were assigned from RRI
to IORI as a paydown of certain intercompany receivables.


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,053,616
given by Unified Housing of Temple, LLC to RRI and the accrued interest
receivable of $98,338 were assigned from RRI to IORI as a paydown of certain
intercompany receivables.


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $835,658
given by Unified Housing of Terrell, LLC to RRI and the accrued interest
receivable of $80,223 were assigned from RRI to IORI as a paydown of certain
intercompany receivables.


<P align="left" style="font-size: 10pt">On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,770,000
given by Housing for Seniors of Humble, LLC to RRI and the accrued interest
receivable of $174,640 were assigned from RRI to IORI as a paydown of certain
intercompany receivables.


<P align="left" style="font-size: 10pt">On December&nbsp;18, 2003, IORI purchased 100% of the outstanding common shares of
Treehouse-IR, a wholly-owned subsidiary of TCI, a related party, for $7.5
million for a reduction of intercompany debt in the amount of $2.4&nbsp;million
subject to a mortgage lien in the amount of $5.1&nbsp;million. TCI repurchased 100%
of the outstanding common shares of Treehouse-IR from IORI for $7.5&nbsp;million
through assumption of debt of $5.0&nbsp;million plus a transfer of a secured
promissory note for $3.0&nbsp;million on May&nbsp;24, 2004. This assignment of a
promissory note from TCI to IORI was given by Unified Housing of McKinney, LLC
(&#147;UHM&#148;) to Transcontinental Eldorado, Inc. Treehouse-IR owns the 153,072
sq.ft. Treehouse Apartments Building in Irving, Texas. See Note 2. &#147;REAL
ESTATE&#148;.


<P align="left" style="font-size: 10pt">On December&nbsp;30, 2003, Secured Promissory Notes in the amount of $6.3&nbsp;million
and $2.0&nbsp;million given by Humble to NLP were assigned from ARI to IORI. These
assignments were payments on certain intercompany receivables due to IORI.


<P align="left" style="font-size: 10pt">On December&nbsp;18, 2003, IORI purchased 100% of the outstanding common shares of
Transcontinental Brewery Corporation (&#147;Brewery&#148;), a wholly-owned subsidiary of
TCI, a related party, for $4.0&nbsp;million for a reduction of intercompany debt in
the same amount. Brewery owns 19.96 acres of land and the 133,000 sq. ft.
Eagle Crest Warehouse Building in Farmers Branch, Texas.


<P align="left" style="font-size: 10pt">On December&nbsp;18, 2003, IORI purchased 100% of the outstanding common shares of
Transcontinental Parkway Corporation (&#147;Parkway&#148;), a wholly-owned subsidiary of
TCI, for $4.0&nbsp;million for reduction of intercompany debt in the amount of $2.4
million subject to mortgage lien in the amount of $1.6&nbsp;million. Parkway owns
the 28,374 sq. ft. Parkway Shopping Center in Dallas, Texas.


<P align="left" style="font-size: 10pt">On October&nbsp;14, 2003, IORI sold and conveyed the office building known as One
Hickory Centre and 202 acres of unimproved real property known as the Travelers
Land in Dallas County, Texas to Encino Executive Plaza, Ltd. The sale price for
One Hickory Centre was $12,200,000 and Encino Executive Plaza, Ltd. executed a
wrap-around promissory note in the amount of $11,973,025 payable to the order
of IORI secured by a Deed of Trust encumbering One Hickory Centre. The note
bore interest at 5.5% per annum. As with the prior transaction, the difference
between the purchase price and the promissory note represented adjustments for
various prorations. The sale price for the Travelers Land was $25,000,000. At
closing, Encino Executive Plaza, Ltd. executed an all inclusive wraparound
promissory note payable to the order of IORI in the principal amount of
$22,801,987 secured by a Deed of Trust covering the Travelers Land sold and
delivered cash to IORI in the amount of $1,946,715, the remaining difference of
which was as a result of prorations and various expenses paid by IORI in
connection with the closing of the transaction. The note bore interest at 5.5%
per annum. Subsequently, IORI made a loan to Encino Executive Plaza, Ltd. in
the amount of $1,567,232 payable upon demand or if no demand is made prior
thereto on June&nbsp;30, 2006 with a market rate of interest. Encino Executive
Plaza, Ltd. executed and delivered a promissory note payable to the order of
IORI in the stated principal amount of $1,567,232. The note bore interest at
5.5% per annum.



<P align="center" style="font-size: 10pt">9
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">See also NOTE 4. &#147;OTHER ASSETS; OTHER LIABILITIES&#148; relating to advances of
funds to and from related parties through the advisor. The following table
reconciles the beginning and ending balances of Accounts Receivable/(Payables)
from/to Affiliates as of September&nbsp;30, 2004.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>SWI</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>RRI</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ARI</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>TCI</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(473</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash transfers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash repayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,644</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(367</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other repayments </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,466</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, September&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,738</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(602</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><I>Returns on Metra Properties. </I>As described more fully in Note 5, IORI sold all
of its residential properties during 2002 to partnerships controlled by Metra.
The partnership agreement for each of these partnerships states that the Metra
Partners, as defined, receive cash flow distributions at least quarterly in an
amount sufficient to provide them with a fifteen percent cumulative compounded
annual rate of return on their invested capital, as well as a cumulative annual
amount of 0.50% of the average outstanding balance of the mortgage indebtedness
secured by any of these residential properties. These distributions to the
Metra Partners have priority over distributions to any of the other partners.



<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">NOTE 7. OPERATING SEGMENTS


<P align="left" style="font-size: 10pt">Significant differences among the accounting policies of the operating segments
as compared to the Consolidated Financial Statements principally involve the
calculation and allocation of general and administrative expenses. Management
evaluates the performance of the operating segments and allocates resources to
each of them based on their operating income and cash flow. Items of income
that are not reflected in the segments are interest, income or (loss)&nbsp;of equity
in partnerships, and recovery of loss provision on receivable from related
party totaling $997,000 and $2.2&nbsp;million for the three and nine months ended
September&nbsp;30, 2004, and a negative income of $1,000 and $2.2&nbsp;million for the
three and nine months ended September&nbsp;30, 2003. Expenses that are not
reflected in the segments are general and administrative expenses, advisory
fees, impairment of real estate held for sale, and net income fees totaling
$276,000 and $1.4&nbsp;million for the three and nine months ended September&nbsp;30,
2004, and $522,000 and $1.9&nbsp;million for the three and nine months ended
September&nbsp;30, 2003. Excluded from operating segment assets are assets of $59.5
million at September&nbsp;30, 2004 and $50.8&nbsp;million at September&nbsp;30, 2003, which
are not identifiable with an operating segment. There are no intersegment
revenues and expenses and all business is conducted in the United States.


<P align="left" style="font-size: 10pt">Presented below is the operating income and assets of each operating segment.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Commercial</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Three Months Ended September 30, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Land</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Properties</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Apartments</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,662</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">687</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">856</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,802</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Nine Months Ended September 30, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,091</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,705</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,386</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,802</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Commercial</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Three Months Ended September 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Land</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Properties</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Apartments</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">923</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">661</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,531</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Nine Months Ended September 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,462</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,531</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>


<P align="left" style="font-size: 10pt">NOTE 8. ADVISORY FEES, PROPERTY MANAGEMENT, ETC.


<P align="left" style="font-size: 10pt">Revenue, fees and cost reimbursements to its advisors and affiliates for the
nine months ended:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the Nine Months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Ended September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Advisory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">498</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Property and construction management and leasing commission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost reimbursements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">NOTE 9. DISCONTINUED OPERATIONS


<P align="left" style="font-size: 10pt">Effective January&nbsp;1, 2002, IORI adopted Financial Accounting Standards No.&nbsp;144,
&#147;Accounting for the Impairment or Disposal of Long-Lived Assets&#148; (&#147;SFAS 144&#148;),
which established a single accounting model for the impairment or disposal of
long-lived assets including discontinued operations. This statement requires
that the operations related to properties that have been sold, or properties
that are intended to be sold, be presented as discontinued operations in the
statement of operations for all periods presented, and the properties intended
to be sold are to be designated as &#147;held for sale&#148; on the balance sheet. In
the event of a future asset sale, IORI is required to reclassify portions of
previously reported operations to discontinued operations within the Statements
of Operations. For the three months and nine months ended September&nbsp;30, 2004,
income from discontinued operations relates to three properties that IORI sold
during 2004. The following table summarizes revenue and expense information
for the properties sold.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the Three Months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the Nine Months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Ended September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Ended September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Rental</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,792</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Property Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,038</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">754</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,843</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net (loss)&nbsp;from discontinued
operations before gains on sale of
operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,674</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain on sale of operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income/(loss) from discontinued
operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,674</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Discontinued operations have not been segregated in the consolidated statement
of cash flows. Therefore, amounts for certain captions will not agree with
respective consolidated statements of operations.


<P align="left" style="font-size: 10pt">NOTE 10. COMMITMENTS AND CONTINGENCIES


<P align="left" style="font-size: 10pt"><I>Liquidity. </I>Management anticipates that IORI will generate excess cash from
operations in 2004 due to increased rental rates and occupancy at its
properties, however, such excess may not be sufficient to discharge all of
IORI&#146;s debt obligations as they mature. Management intends to selectively sell
income producing real estate, refinance real estate and incur additional
borrowings against real estate to meet its cash requirements.


<P align="left" style="font-size: 10pt"><I>Litigation. </I>IORI is involved in various lawsuits arising in the ordinary
course of business. Management is of the opinion that the outcome of these
lawsuits should have no material impact on the Company&#146;s financial condition,
results of operations or liquidity. IORI is also involved in two significant
items of litigation&#151;See ITEM 1. &#147;LEGAL PROCEEDINGS&#148;, under PART II. &#147;OTHER
INFORMATION&#148;.


<P align="left" style="font-size: 10pt">NOTE 11. SUBSEQUENT EVENTS


<P align="left" style="font-size: 10pt">On November&nbsp;5, 2004, IORI purchased 36,400 shares of IORI as a block from one
stockholder at $16.25 per share for the total cost of $591,500.



<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- link1 "ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">ITEM 2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">Introduction


<P align="left" style="font-size: 10pt">IORI invests in equity interests in real estate through acquisitions, leases
and partnerships and also invests in mortgage loans. IORI is the successor to
a California business trust organized on December&nbsp;14, 1984, which commenced
operations on April&nbsp;10, 1985.


<P align="left" style="font-size: 10pt">Critical Accounting Policies


<P align="left" style="font-size: 10pt">Critical accounting policies are those that are both important to the
presentation of IORI&#146;s financial condition and results of operations and
require management&#146;s most difficult, complex or subjective judgments. IORI&#146;s
critical accounting policies relate to the evaluation of impairment of
long-lived assets and the evaluation of the collectibility of accounts and
notes receivable.


<P align="left" style="font-size: 10pt">If events or changes in circumstances indicate that the carrying value of a
rental property to be held and used or land held for development may be
impaired, management performs a recoverability analysis based on estimated
undiscounted cash flows to be generated from the property in the future. If
the analysis indicates that the carrying value is not recoverable from future
cash flows, the property is written down to estimated fair value and an
impairment loss is recognized. If management decides to sell rental properties
or land held for development, management evaluates the recoverability of the
carrying amounts of the assets. If the evaluation indicates that the carrying
value is not recoverable from estimated net sales proceeds, the property is
written down to estimated fair value less costs to sell and an impairment loss
is recognized within income from continuing operations. IORI&#146;s estimates of
cash flow and fair values of the properties are based on current market
conditions and consider matters such as rental rates and occupancies for
comparable properties, recent sales data for comparable properties and, where
applicable, contracts or the results of negotiations with purchasers or
prospective purchasers. IORI&#146;s estimates are subject to revision as market
conditions and IORI&#146;s assessments of them change.


<P align="left" style="font-size: 10pt">IORI&#146;s allowance for doubtful accounts receivable and notes receivable is
established based on analysis of the risk of loss on specific accounts. The
analysis places particular emphasis on past due accounts. Management considers
such information as the nature and age of the receivable, the payment history
of the tenant or other debtor, the financial condition of the tenant or other
debtor and IORI&#146;s assessment of its ability to meet its lease or interest
obligations. IORI&#146;s estimate of the required allowance, which is reviewed on a
quarterly basis, is subject to revision as these factors change and is
sensitive to the effects of economic and market conditions. Typically, IORI&#146;s
notes receivable are collateralized by income producing real estate. IORI had
notes receivable of $54.3&nbsp;million and $45.5&nbsp;million at September&nbsp;30, 2004 and
December&nbsp;31, 2003, respectively.


<P align="left" style="font-size: 10pt">Liquidity and Capital Resources


<P align="left" style="font-size: 10pt">Cash and cash equivalents at September&nbsp;30, 2004 were $93,000, compared with
$58,000 at December&nbsp;31, 2003. IORI&#146;s principal sources of cash have been and
will continue to be property operations, proceeds from property sales,
financings and refinancings and partnership distributions. Management
anticipates that IORI will generate excess cash from operations in 2004 due to
increased rental receipts at its properties, however, such excess will not be
sufficient to discharge all of IORI&#146;s debt obligations as they mature.
Management intends to selectively sell income producing real estate, refinance
real estate and incur additional borrowings against real estate to meet its
cash requirements.


<P align="left" style="font-size: 10pt">The Company reported net income of $3.3&nbsp;million for the nine months ended
September&nbsp;30, 2004, which included the following non-cash charges: depreciation
of $779,000, gain on sale of real estate of $3.7&nbsp;million, loss on equity
partnership of $9,000, increase in interest receivable of $391,000, increase in
other assets of $8.7&nbsp;million, decrease in interest payable of $108,000, and
increase in other liabilities of $2.6&nbsp;million. Net cash used in operating
activities amounted to $6.2&nbsp;million for the nine months ended September&nbsp;30,
2004. During the nine months ended September&nbsp;30, 2004, the increase in other
assets was primarily due to increase in accounts receivable from affiliates and
the increase in other liabilities was primarily due to increase in accounts
payable in general. Net cash provided by investing activities of $5.5&nbsp;million
was comprised of proceeds from sale of real estate of $3.5&nbsp;million net of
payments to SWI of $2.0&nbsp;million. Net cash provided by financing activities of
$728,000 was comprised of payments on notes payable of $931,000, proceeds on
notes payable of $1.2&nbsp;million, advances from affiliates of $497,000, deferred
financing cost of $169,000, and payment for treasury stock of $200.


<P align="left" style="font-size: 10pt">Management reviews the carrying values of IORI&#146;s properties at least annually
and whenever events or a change in circumstances indicate that impairment may
exist. Impairment is considered to exist if, in the case of a property, the
future cash flow from the property (undiscounted and without interest) is less
than the carrying amount of the property. If impairment is found to exist, a
provision for loss is recorded by a charge against earnings. The property
review generally includes selective property inspections, discussions with the
manager of the property, visits to selected properties in the area and a
review of the following: (1)&nbsp;the property&#146;s

<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">current rents compared to market rents, (2)&nbsp;the property&#146;s expenses, (3)&nbsp;the
property&#146;s maintenance requirements and (4)&nbsp;the property&#146;s cash flows.


<P align="left" style="font-size: 10pt">Results of Operations


<P align="left" style="font-size: 10pt">IORI had net income of $310,000 for the three months ended September&nbsp;30 2004,
and net income of $3.3&nbsp;million for the nine months ended September&nbsp;30, 2004, as
compared to net loss of $977,000 and net loss of $1.3&nbsp;million for the
corresponding periods in 2003. The net income in 2004 included gains on sale
of real estate totaling $3.7&nbsp;million. Fluctuations in components of revenue
and expense between the 2004 and 2003 periods are discussed below.


<P align="left" style="font-size: 10pt">Rents in the three and nine months ended September&nbsp;30, 2004 were $1.7&nbsp;million
and $5.1&nbsp;million versus $1.6&nbsp;million and $4.8&nbsp;million in the corresponding
periods in 2003. Rental income for the remaining quarter of 2004 may be
expected to decrease if IORI selectively sells properties.


<P align="left" style="font-size: 10pt">Property operations expense in the three and nine months ended September&nbsp;30,
2004 were $975,000 and $2.7&nbsp;million versus $923,000 and $2.5&nbsp;million in the
corresponding periods in 2003. Property operations expense may be expected to
decrease in the remaining quarters of 2004 if IORI selectively sells
properties.


<P align="left" style="font-size: 10pt">Interest income in the three and nine months ended September&nbsp;30, 2004 was $1.0
million and $2.2&nbsp;million versus $12,000 and $626,000 in the corresponding
periods in 2003. The nine months increase in 2004 from 2003 was due to interest
income earned from the wraparound promissory notes with Encino Executive Plaza
and the promissory notes with Housing for Seniors of Humble, LLC.


<P align="left" style="font-size: 10pt">Interest expense in the three and nine months ended September&nbsp;30, 2004 was
$856,000 and $2.7&nbsp;million versus $398,000 and $1.5&nbsp;million in the corresponding
periods in 2003. The increases in 2004 from 2003 were primarily due to
additional interest payments made after the sales transactions with Encino
Executive Plaza, Ltd. in October&nbsp;2003. Most of the additional interest expense
incurred by this transaction was offset by the additional interest income
earned from the wraparound note as explained in Note 3. Interest expense in
2004 is expected to remain constant.


<P align="left" style="font-size: 10pt">Depreciation expense in the three and nine months ended September&nbsp;30, 2004 was
$250,000 and $779,000 versus $149,000 and $807,000 in the corresponding periods
in 2003. The year-to-date decrease in 2004 from 2003 were primarily due to the
sale of properties throughout the year and fully depreciated tenant
improvements.


<P align="left" style="font-size: 10pt">Advisory fee to affiliate in the three and nine months ended September&nbsp;30, 2004
was $177,000 and $573,000 versus $164,000 and $498,000 in the corresponding
periods in 2003. The increases in 2004 from 2003 were due to changes in gross
assets, the basis of the fee. See NOTE 9. &#147;ADVISORY FEES.&#148;


<P align="left" style="font-size: 10pt">Net income fee to affiliate was $250,000 for the nine months ended September
30, 2004. The net income fee is based on 7.5% of IORI&#146;s net income.


<P align="left" style="font-size: 10pt">General and administrative expense in the three and nine months ended September
30, 2004 was $95,000 and $540,000 versus $323,000 and $692,000 in the
corresponding periods in 2003. The decreases in 2004 from 2003 were primarily
due to the decrease in legal expenses and advisory cost reimbursement.


<P align="left" style="font-size: 10pt">Related Party Transactions


<P align="left" style="font-size: 10pt">Historically, IORI, ARI, RRI, and TCI have each engaged in and may continue to
engage in business transactions, including real estate partnerships with
related parties. Management believes that all of the related party
transactions represented the best investments available at the time and were at
least as advantageous to IORI, ARI, RRI, and TCI as could have been obtained
from unrelated third parties.



<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">Taxes


<P align="left" style="font-size: 10pt">For the tax years prior to 2003, IORI elected and qualified to be treated as a
Real Estate Investment Trust (&#147;REIT&#148;), as defined in Sections&nbsp;856 and 860 of
the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), and as such was not
taxed for federal income tax purposes on that portion of its taxable income
which is distributed to stockholders. Due to the completion of a tender offer
by ARI, an affiliate, and the resulting concentration of ownership, IORI no
longer met the requirements for tax treatment as a REIT under the Code as of
January&nbsp;1, 2003, and is prohibited from re-qualifying for REIT status for at
least five years.


<P align="left" style="font-size: 10pt">Financial statement income varies from taxable income principally due to the
accounting for income and losses of investees, gains and losses from asset
sales, depreciation on owned properties, amortization of discounts on notes
receivable and payable and the difference in the allowance for estimated
losses. IORI had a loss for federal income tax purposes after the use of net
operating loss carryforwards in the third quarter of 2004 and a loss for
federal income tax purposes in the third quarter of 2003; therefore, it
recorded no provision for income taxes.


<P align="left" style="font-size: 10pt">At September&nbsp;30, 2004, IORI had a net deferred tax asset of $3.5&nbsp;million due to
tax deductions available to it in future years. However, as management cannot
determine that it is more likely than not that IORI will realize the benefit of
the deferred tax asset, a 100% valuation allowance has been established.


<P align="left" style="font-size: 10pt">Inflation


<P align="left" style="font-size: 10pt">The effects of inflation on IORI&#146;s operations are not quantifiable. Revenues
from apartment operations tend to fluctuate proportionately with inflationary
increases and decreases in housing costs. Fluctuations in the rate of
inflation also affect the sales value of properties and the ultimate gain to be
realized from property sales. To the extent that inflation affects interest
rates, earnings from short-term investments and the cost of new financings, as
well as the cost of variable interest rate debt, will be affected.


<P align="left" style="font-size: 10pt">Environmental Matters


<P align="left" style="font-size: 10pt">Under various federal, state and local environmental laws, ordinances and
regulations, IORI may be potentially liable for removal or remediation costs,
as well as certain other potential costs, relating to hazardous or toxic
substances (including governmental fines and injuries to persons and property)
where property-level managers have arranged for the removal, disposal or
treatment of hazardous or toxic substances. In addition, certain environmental
laws impose liability for release of asbestos-containing materials into the air
and third parties may seek recovery for personal injury associated with such
materials.


<P align="left" style="font-size: 10pt">Management is not aware of any environmental liability relating to the above
matters that would have a material adverse effect on IORI&#146;s business, assets or
results of operations.


<!-- link1 "ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">ITEM 3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">At September&nbsp;30, 2004, IORI&#146;s exposure to a change in interest rates on its
debt is as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Effect of 1%</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Increase In</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Interest Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Base Rates</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Wholly-owned debt:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Variable rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.38</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total
decrease in IORI&#146;s annual Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "ITEM 4. CONTROLS AND PROCEDURES" -->
<DIV align="left"><A NAME="009"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">ITEM 4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CONTROLS AND PROCEDURES</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of the end of the period covered by this report, IORI carried out an
evaluation, under the supervision and with the participation of IORI&#146;s
management, including IORI&#146;s Acting Principal Executive Officer and
principal accounting officer, of the effectiveness of the design and
operation of IORI&#146;s disclosure controls and procedures pursuant to
Exchange Act Rule&nbsp;13a-14. Based upon the evaluation, IORI&#146;s Acting
Principal Executive Officer and principal accounting officer concluded
that IORI&#146;s disclosure controls and procedures are effective in timely
alerting him to material information relating to IORI (including its
consolidated subsidiaries) required to be included in IORI&#146;s periodic SEC
filings.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>There have been no significant changes in IORI&#146;s internal controls or in
other factors that could significantly affect IORI&#146;s internal controls
subsequent to the date IORI carried out this evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt"><B>WARNING CONCERNING FORWARD LOOKING STATEMENTS</B>

<P align="left" style="font-size: 10pt">This quarterly report on Form 10-Q and IORI&#146;s 2003 Form 10-K, referred to
herein, contain forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and federal securities laws. These
statements concern the intent, belief or expectations of IORI&#146;s officers with
respect to IORI&#146;s ability to lease its properties, tenant&#146;s ability to pay
rents, purchase of additional properties, ability to pay interest and debt
principal and make distributions, policies and plans regarding investments and
financings, and other matters. Also, words such as &#147;believe&#148;, &#147;expect&#148;,
&#147;anticipate&#148;, &#147;intend&#148;, &#147;plan&#148;, &#147;estimate&#148;, or similar expressions identify
forward looking statements. Actual results may differ materially from those
contained in or implied by the forward looking statements as a result of
various factors. Such factors include, without limitation, the impact of
changes in the economy and the capital markets on IORI and its tenants,
competition within the real estate industry or those industries in which its
tenants operate, and changes in federal, state and local legislation. For
example: Some of IORI&#146;s tenants may not renew expiring leases and IORI may be
unable to locate new tenants to maintain the historical occupancy rates of the
properties; rents which IORI can achieve at its properties may decline; tenants
may experience losses and become unable to pay rents; and IORI may be unable to
identify or to negotiate acceptable purchase prices for new properties. These
results could occur due to many different circumstances, some of which, such as
changes in IORI&#146;s tenants&#146; financial conditions or needs for leased space, or
changes in the capital markets or the economy, generally, are beyond IORI&#146;s
control. Forward looking statements are only expressions of IORI&#146;s present
expectations and intentions. Forward looking statements are not guaranteed to
occur, and they may not occur. You should not place undue reliance upon forward
looking statements.



<P align="center" style="font-size: 10pt">17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- link1 "PART II. OTHER INFORMATION" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="center" style="font-size: 10pt">PART II. OTHER INFORMATION

<!-- link1 "ITEM 1. LEGAL PROCEEDINGS" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">ITEM 1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>LEGAL PROCEEDINGS</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">On August&nbsp;10, 2004, American Realty Investors, Inc. (&#147;ARI&#148;), Transcontinental
Realty Investors, Inc. (&#147;TCI&#148;) and Income Opportunity Realty Investors, Inc.
(&#147;IOT&#148;) instituted an action in Texas State District Court as Cause No.
2004-60231-393 styled <I>American Realty Investors, Inc., Transcontinental Realty
Investors, Inc. and Income Opportunity Realty Investors, Inc., Plaintiffs v.
Innovo Realty, Inc. and Innovo Group, Inc., Involuntary Plaintiffs v. Innovo
Realty, Inc., Metra Capital LLC, Innovo Group, Inc., Joseph Mizrachi, Simon
Mizrachi, Hubert Guez, Third Millennium Partners LLC, Third Millennium
Partners, Inc., Third Millennium Group, LLC and Sunridge Management Group,
Inc., Defendants</I>. Plaintiffs&#146; complaint alleges that Joseph Mizrachi, a former
director of ARI and others, offered a plan to the Plaintiffs to create one or
more joint venture arrangements with one or more of the Plaintiffs to pursue
alternative forms of financing or refinancing portions of Plaintiffs&#146; real
estate portfolios, which entailed the creation of 22 separate limited
partnerships to acquire 28 separate apartment complexes in three states (Texas,
Florida and Louisiana), the general partners of which are affiliates of, or
controlled by, Joseph Mizrachi. Plaintiffs&#146; complaint alleges that the overall
transaction required the establishment of a sinking fund by the Defendants and
the 22 limited partnerships as a trust for the benefit of certain preferred
shareholders of Innovo Group, Inc. and the payment of certain proceeds to the
Plaintiffs. Plaintiffs assert that payments have not been made pursuant to the
agreement of the parties. Plaintiffs allege that Defendants&#146; conduct
constituted a common business enterprise, alleges breach of contract and
derivative claims on behalf of Innovo Group, Inc. against Joseph Mizrachi and
others and requests declaratory relief involving the Plaintiffs&#146; rights in the
partnerships, an accounting of proceeds, and the creation of a constructive
trust. Plaintiffs&#146; complaint also alleges that Joseph Mizrachi engaged in
fraud, negligent misrepresentation and/or breach of fiduciary duty and seeks
unspecified damages, attorneys&#146; fees, a constructive trust be established, and
other relief.


<P align="left" style="font-size: 10pt">On October&nbsp;5, 2004, Sunset Management LLC (&#147;Sunset&#148;) filed a complaint as a
purported stockholder&#146;s derivative action on behalf of Transcontinental Realty
Investors, Inc. (&#147;TCI&#148;) in the United States District Court for the Northern
District of Texas, Dallas Division, against American Realty Investors, Inc.
(&#147;ARI&#148;) and several others, including IOT, as Case No.&nbsp;04CV20162-B, styled
<I>Sunset Management LLC, Derivatively on behalf of Transcontinental Realty
Investors, Inc. v. American Realty Investors, Inc., et al. </I>Sunset&#146;s complaint
alleges (i)&nbsp;Sunset is the owner of 10 shares of Common Stock of TCI and is the
pledgee and beneficial owner of other shares of Common Stock of TCI, (ii)
Sunset is a single-member limited liability company, (iii)&nbsp;that all of the
Defendants have in their various capacities breached fiduciary duties to TCI,
and (iv)&nbsp;unjust enrichment of the various Defendants. Sunset&#146;s complaint seeks
an injunction prohibiting TCI from entering into any related-party transactions
that are not fair to TCI and approved by disinterested directors and/or
stockholders with full knowledge of the common interests of the directors
and/or officers, unspecified damages, attorneys&#146; fees and costs. All
Defendants (including IOT) believe the action is not properly brought as a
derivative action on behalf of TCI as Sunset&#146;s interests are adverse to the
interests of TCI. The current action brought by Sunset contains many of the
same allegations raised by Sunset in four other cases involving TCI which, as
rulings have occurred, have resulted in a denial of Sunset&#146;s requested relief.
The Defendants (including IOT) intend to vigorously defend the action and have
filed a Motion to Dismiss Sunset&#146;s complaint pursuant to Rules&nbsp;12 and 23.1 of
the Federal Rules of Civil Procedure on the basis that Sunset&#146;s allegations are
insufficient to evade the stringent demand requirement under the futility
exception for stockholder derivative actions, and Sunset cannot fairly and
adequately represent the interests of the other stockholders. Sunset&#146;s
complaint makes no specific allegations against IOT, but advises that as of
March&nbsp;19, 2003, TCI owned approximately 24% of IOT.



<P align="center" style="font-size: 10pt">18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- link1 "ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES" -->
<DIV align="left"><A NAME="012"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">ITEM 2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CHANGES IN SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES</TD>
</TR>

</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum Number of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Purchased as</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares that May</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price Paid</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Part of Publicly</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yet be Purchased</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Period</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Purchased</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>per Share</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Announced Program</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Under the Program<sup>(a)</sup></B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">July 1-31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">August 1-31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">September 1-30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(a)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">On September&nbsp;23, 2000, the IORI Board of Directors approved a share
repurchase program for up to 500,000 shares of our common stock. This
repurchase program has no termination date.</TD>
</TR>

</TABLE>


<!-- link1 "ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">ITEM 4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">The Annual Meeting of Stockholders was held on September&nbsp;16, 2004, at which
meeting stockholders were to consider and vote upon the election of directors
and the ratification of the selection of independent public accountants for the
Company for the fiscal year ending December&nbsp;31, 2004. At the Annual Meeting,
the stockholders elected the following individuals as directors:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Voting</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name of Director</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>For</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Withheld</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">David E. Allard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,284,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Robert A. Jakuszewski</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,284,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ken L. Joines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,283,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Peter L. Larsen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,284,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,732</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ted P. Stokely</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,283,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,366</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>


<P align="left" style="font-size: 10pt">There were no abstentions or broker votes on the election of directors. With
respect to the ratification of the appointment of Swalm &#038; Associates, P.C. as
independent auditors of the Company for the fiscal year ending December&nbsp;31,
2004, and any interim period, at least 1,286,670 votes were received in favor
of such proposal, 1,006 votes were received against such proposal, and 3,158
votes abstained.



<P align="center" style="font-size: 10pt">19
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- link1 "ITEM 6. EXHIBITS" -->
<DIV align="left"><A NAME="014"></A></DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">ITEM 6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>EXHIBITS</TD>
</TR>

</TABLE>
<P align="left" style="font-size: 10pt">The following exhibits are filed herewith or incorporated by reference or
indicated:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Description</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14 Under the Securities
Exchange Act of 1934, filed herewith.</DIV></TD>
</TR>

<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, filed herewith.</DIV></TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">20
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "SIGNATURE PAGE" -->
<DIV align="left"><A NAME="015"></A></DIV>

<P align="center" style="font-size: 10pt">SIGNATURE PAGE

<P align="left" style="font-size: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="4">INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
&nbsp;</TD>
</TR><TR>
    <TD>Date: November 15, 2004&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Robert N. Crouch II
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Robert N. Crouch II&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Executive Vice President, Chief Financial
Officer, and Acting Principal Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">21
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<!-- link1 "EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q" -->
<DIV align="left"><A NAME="016"></A></DIV>

<P align="center" style="font-size: 10pt">INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
EXHIBITS TO<BR>
QUARTERLY REPORT ON FORM 10-Q<BR>
For the Quarter ended September&nbsp;30, 2004

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Page</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Description</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Number</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14 Under the Securities Exchange Act of 1934.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification Pursuant to 18 U.S.C. Section&nbsp;1350.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">22
</DIV>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>d20164exv31w1.htm
<DESCRIPTION>CERTIFICATION PURSUANT TO RULES 13A-14 AND 15D-14
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="right" style="font-size: 10pt">EXHIBIT 31.1



<P align="center" style="font-size: 10pt">CERTIFICATION

<P align="left" style="font-size: 10pt">I, Robert N. Crouch II, Executive Vice President, Chief Financial Officer, and
Acting Principal Executive Officer, of Income Opportunity Realty Investors,
Inc. (&#147;IORI&#148;), certify that:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this quarterly report on Form 10-Q of IORI;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I am responsible for establishing and maintaining internal controls and
procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13(a)-15(f) and 15d-15(f) for IORI and have:</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under our
supervision, to insure that material information relating to IORI and
its consolidated subsidiaries is made known to me by others within
those entities, particularly for the periods presented in this
quarterly report;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal controls over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of IORI&#146;s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in the report any change in IORI&#146;s internal control
over financial reporting that occurred during IORI&#146;s most recent
fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably
likely to materially affect IORI&#146;s internal control over financial
reporting; and</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to IORI&#146;s auditors and the audit committee of
IORI&#146;s Board of Directors (or persons performing the equivalent
functions):</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect IORI&#146;s ability to
record, process, summarize and report financial information; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or
other employees who have a significant role in IORI&#146;s internal
controls.</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>Date: November 15, 2004&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Robert N. Crouch II
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Robert N. Crouch II&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Executive Vice President, Chief Financial
Officer, and Acting Principal Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>3
<FILENAME>d20164exv32w1.htm
<DESCRIPTION>CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
<TEXT>
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<HEAD>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<P align="right" style="font-size: 10pt">EXHIBIT 32.1



<P align="center" style="font-size: 10pt">Certification Pursuant to 18 U.S.C. Section&nbsp;1350,<BR>
as Adopted Pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002

<P align="left" style="font-size: 10pt">In connection with the Quarterly Report of Income Opportunity Realty Investors,
Inc. (the &#147;Company&#148;), on Form 10-Q for the period ended September&nbsp;30, 2004, as
filed with Securities Exchange Commission on the date hereof (the &#147;Report&#148;), I,
Robert N. Crouch II, Executive Vice President, Chief Financial Officer, and
Acting Principal Executive Officer, of the Company, certify, pursuant to 18
U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley
Act of 2002, that:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>Date: November 15, 2004&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Robert N. Crouch II
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Robert N. Crouch II&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Executive Vice President, Chief Financial
Officer, and Acting Principal Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
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