Dakota Real Estate Investment Trust OFFERING CIRCULAR UNDER REGULATION A 300,000 Class A Voting Shares 150,000 Class B Non-Voting Shares 150,000 Class I Voting Shares Issuable at $14.73 per Share Under the Distribution Reinvestment Plan

The Dakota Real Estate Investment Trust (the “Trust”) is a business trust organized under the laws of North Dakota. Our principal place of business is 3003 32nd Avenue South, Suite 250, Fargo, North Dakota 58103, our telephone number is (701) 239-6879 and our website is www.dakotareit.com. The Trust’s assets consist of a controlling interest in DAKOTA UPREIT LIMITED PARTNERSHIP (the “UPREIT”), a North Dakota limited partnership. The UPREIT invests in and operates real estate. The Trust is the General Partner of the UPREIT.

Pursuant to an Offering Statement (the “Offering Statement”) qualified with the Securities and Exchange Commission (the “SEC”) on the date hereof we are offering (the “Offering”) our Class A Voting Shares (the “Class A Shares”), our Class B Non-Voting Shares (the “Class B Shares”), and our Class I Voting Shares (the “Class I Shares” and collectively with the Class A Shares and Class B Shares, the “Shares”) to existing Shareholders of the Trust who or which elect to participate in our Distribution Reinvestment Plan (the “DRIP”) to apply distributions payable to them for the acquisition of Shares at the rate one share for each $14.73 of distribution payable to the participant. This Offering Circular is provided to participants in the DRIP for use in considering continuation of their participation in and to other shareholders considering becoming participants in the DRIP.

You should not acquire Shares if you cannot afford a complete loss of your investment. Investing in the Shares involves material risks (See “RISK FACTORS” beginning on page 3).

The Offering will terminate at the earlier of issuance of all of the Shares or July 31, 2021.

THE UNITED STATE’S SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF THIS OFFERING CIRCULAR OR OTHER SELLING LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SEC; HOWEVER, THE SEC HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED HEREUNDER ARE EXEMPT FROM REGISTRATION.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES COMMISION OF ANY STATE NOR HAS THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Offering Circular is ____ __, 2020

TABLE OF CONTENTS

WHO MAY PARTICIPATE IN THE OFFERING

This Offering Circular does not constitute an offer to issue or a solicitation of an offer to acquire any securities offered hereby in any jurisdiction where, or to any person to whom, it is unlawful to make such an offer.

Required Residence / Domicile to Invest This Offering is available to existing shareholders of the Trust who are residents of or entities domiciled in a state in which we have qualified the issuance of shares under the DRIP by registration or pursuant to an exemption from registration in accordance with laws of such state related to the offer and issuance of shares. Individuals are residents of the state in which they maintain their principal residence. A corporation, partnership, trust or other entity is domiciled in the state where the principal office of the entity is located.

Participation in the DRIP To participate in the Offering, investors must be a participant in the DRIP and have their shareholder registration with the Trust reflect that the participant meets the residency / domicile requirements addressed above.

The Shares are offered subject to withdrawal or cancellation of the Offering at any time without prior notice. The Trust reserves the right to terminate the Offering of any of the Class A, Class B Shares or the Class I Shares and continue the Offering of the other class or classes of Shares.

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

Please carefully read the information in this Offering Circular and any supplements thereto. You should rely only upon the information in this Offering Circular as we have not authorized anyone to provide any different information regarding us or this Offering.

Offering Statement This Offering Circular is part of an offering statement we have filed with the SEC and may amend from time to time (the “Offering Statement”). We contemplate this being a “continuous offering” and thus we anticipate that we may prepare and distribute supplements or amendments and restatements to add or change information contained in the Offering Circular contained in our Offering Statement. Our Offering Statement includes exhibits that provide detailed information or documents discussed in this Offering Circular. You may access such information through the electronic data gathering, analysis and retrieval system found at https://www.sec.gov/edgar.

Cautionary Note Regarding Forward Looking Statements This Offering Circular contains forward-looking statements. All Statements other than statements of historical fact contained in this Offering Circular, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward looking-statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Forward-looking statements are subject to risks and uncertainties, certain of which are beyond our control. Actual results could differ materially as a result of the factors described in “Risk Factors” in this Offering Circular.

OFFERING Summary

The following summary is qualified in its entirety by the detailed information appearing elsewhere in this Offering Circular.

SHARES BEING OFFERED

The Trust is offering to shareholders who or which have elected to participate in the Trust’s Distribution Reinvestment Plant (the “DRIP”) to receive up to Shares in lieu of receipt of payment of distributions on the class of Shares with respect to which they elect to participate. The Shares will be issued at a rate of one Share for each $14.73 of distribution taken in Shares rather than in a cash payment.

Under its Amended and Restated Declaration of Trust (the “Declaration of Trust”), the Trust is authorized to issue one or more classes of Shares. The Declaration of Trust recognizes both Class A and Class B Shares (the primary distinction between Class A and Class B Shares is that Class B Shares do not have the voting rights which the Class A Shares have); however, the Board of Trustees is authorized to create additional classes of Shares and in May 2020, the Board of Trustees established the Class I Shares having voting rights and the same equal rights to participate in distributions as do the other two classes of Shares. As of March 31, 2020, there were approximately 6,812,077 Class A Shares, approximately 2,059,308 Class B Shares and no Class I Shares outstanding.

terms of the distribution reinvestment plan

The Trust has adopted the DRIP to permit shareholders who or which elect to participate in the plan the opportunity to invest their cash distributions otherwise payable to the shareholder in the purchase of Shares of the same class with respect to which the distribution is payable. Participation is made by completion of an election to participate. For individuals initially subscribing to purchase Shares, the subscription to be tendered includes an election provision. For existing shareholders, the election is made in a Shareholder Change Form reflecting the election to participate. Participants in the DRIP may discontinue their participation by completing and submitting to the Trust of a Shareholder Change Form reflecting the election to discontinue participating.

Issuance of Shares under the DRIP is subject to the Trust having in effect qualification for the issuance under both applicable federal and state laws regulating the offer and issuance of securities with respect to the Shares. If there is not such a qualification in effect when a distribution is payable, the Trust may elect to either: (i) issue payment of the distribution in cash; or (ii) hold the distribution pending qualification of the issuance under applicable law.

The rate of issuance of Shares in lieu of a cash payment of a distribution is currently 95% of the per share offering price for the Shares then being offered by the Trust (exclusive of any commissions or other fees a subscriber may be required to pay) rounded up to the next full cent. As the Trust has established $15.50 as its current offering price for its Shares, the issuance rate currently in effect under the DRIP is $14.73 per share.

The TRUST

The Trust began business operations in 1997. The Trust is an unincorporated, but registered business trust under North Dakota law. The Trust has a term of existence consistent with North Dakota law. The Trust is the sole general partner of the UPREIT and makes all of the investment decisions of the UPREIT. The Trust will invest in properties that the Board of Trustees considers suitable investments. Properties can and may include commercial properties and multi-family residential properties, such as apartment buildings. The Trust has had no business activities other than the ownership of real estate and interests in entities owning real estate.

The Trust is registered as required by the laws of North Dakota and is structured to comply with the requirements under Internal Revenue Code Section 856 which requires that 75% of the assets of a real estate investment trust must consist of real estate assets and that 75% of its gross income must be derived from real estate. The Trust believes it qualifies as a real estate investment trust but has not received confirmation of its qualification from the Internal Revenue Service. (See “FEDERAL INCOME TAX CONSIDERATIONS”).

ADVISOR

The advisor of the Trust is Dakota REIT Management, LLC (the “Advisor”), which was formed for such purpose in April 2008. The Advisor manages the affairs of the Trust, subject to the review and overall control of the Board of Trustees, who may remove the Advisor without cause.

THE UPREIT

The Trust’s assets consist almost entirely of our general partnership interest in Dakota UPREIT Limited Partnership (the “UPREIT”), a North Dakota limited partnership. The UPREIT utilizes its assets to invest either directly in real estate properties or in ownership interests in entities that hold real estate properties. The Trust is the general partner of the UPREIT. As of December 31, 2019 our interest in the UPREIT represented an approximately 56% ownership interest with the remaining approximately 44% in interests being held by approximately 160 holders of limited partnership interests.

INVESTMENT OBJECTIVES

The Trust’s investment objectives are (i) to preserve, protect and return shareholder capital, (ii) provide cash distributions on a quarterly basis at the discretion of the Board of Trustees, a portion of which (due to depreciation) may not constitute current taxable income, and (iii) provide growth of capital investment through potential appreciation in the value of the Trust’s properties. There is no assurance that such objectives will be attained.

THE PROPERTIES

As of December 31, 2019, the UPREIT held residential apartment projects comprising a total of 3,527 apartment units, 122 residential rental townhome units and 2,314,487 square feet of commercial rental property. In 2019, the UPREIT acquired two commercial properties, Hampshire Technology located in Bloomington, MN with 91,730 SF and Brooklyn Park Warehouse located in Brooklyn Park, MN with 144,441 SF and five apartment complexes under one purchase agreement consisting of 414 units in Bismarck, ND. In 2019, the UPREIT sold one property, a 38,713 SF retail complex located in Sioux Falls, SD. It is anticipated that UPREIT will continue to seek to acquire properties or interests in properties involving both residential and commercial real estate (See “DESCRIPTION OF PROPERTIES”).

SUMMARY OF RISK FACTORS

Investing in this Offering through participation in the DRIP involves significant risks. A more detailed listing of risk factors you should consider prior to investing in the Shares is set out in the section entitled “RISK FACTORS.”

RISK FACTORS

The acquisition of Shares in the Offering pursuant to an election to participate in the DRIP involves various risks. Existing and prospective participants in the DRIP should carefully consider the following risks, among others, before making a decision to accept Shares in lieu of cash payment of distributions. An investment in the Trust is speculative and involves a high degree of risk, and should be considered only by persons who can afford the loss of their entire investment.

RISKS RELATED TO INVESTING IN THE TRUST AND PARTICIPATING IN THIS OFFERING

The UPREIT Has Not Identified Properties to Acquire in the Future

The future real estate investments and properties to be acquired by the UPREIT are yet to be determined. Because future acquisitions have not been identified, the participants in the DRIP will have no information to assist in making the investment decision based on the identification or location of, or as to the operating histories of, or other relevant economic and financial data pertaining to, the properties to be purchased by the UPREIT, and must rely entirely on the investment judgment of the Advisor and the Board of Trustees.

The Shares Are an Illiquid Investment

There is currently no trading market for the Shares and we do not anticipate such a market will develop and we have no intention to seek to list the Shares upon any stock exchange. Without the benefit of an established public trading market, the Shares are likely to remain illiquid and not readily accepted as loan collateral. Consequently, the purchase of Shares should be considered only as a long-term investment. Furthermore, even if a market for the sale of Shares were to develop, no assurance can be given as to the price at which Shares would be sold in such market.

The Trust has no plans to liquidate. The Amended and Restated Declaration of Trust allows for a majority vote of Class A shareholders to require liquidation, but absent such a vote, the Trust is to continue until twenty-one years after the death of the last survivor of the original Board of Trustees (however, the Trust will seek approval by Shareholders to remove from the Amended and Restated Declaration of Trust such required termination tied to the lives of the original Trustees as is now permitted under North Dakota law). Accordingly, an investor in the Shares pursuant to the DRIP, should not anticipate liquidity from the liquidation of the Trust.

Shareholders Must Rely on Management to Act on Their Behalf

The Advisor and the Trustees are accountable to the Trust as fiduciaries and must exercise good faith and integrity in handling Trust affairs. The Trustees have the authority to approve or disapprove all investments recommended to the UPREIT by the Advisor. The Trustees will have ultimate control over the management of the Trust and the conduct of Trust affairs, including management of the business of the UPREIT and the acquisition and disposition of the UPREIT’s assets. Shareholders have no right or power to take part in the direct management of the Trust or the UPREIT and the success of the Trust and UPREIT will depend, to a large extent, on the services and performance of the Advisor. Holders of Shares with voting rights (Class A Shares and Class I Shares) will also have the right to vote regarding amendments to Declaration of Trust, most changes to the Bylaws, election of Trustees, liquidation, roll-up transactions, sale of the Trust, and the term of the Trust. Holders of Shares with voting rights also have the right to demand a special meeting of shareholders.

Subject to some conditions and limitations, the Declaration of Trust limits the liability of, and provides for the Trust to indemnify, the Trustees, the Advisor and their affiliates, and to provide insurance coverage and pay for all premiums thereon to protect the Board of Trustees while acting for and on behalf of the Trust (See “BOARD OF TRUSTEES, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES – Organizational Structure”).

None of the Officers appointed by the Trust or members of the Board of Trustees devote their full time and attention to the operation of the Trust. Each has their own businesses and investments, and in some instances, employment which places demands upon their available time.

RISKS RELATED TO OUR INVESTMENTS

Borrowing Risks

The UPREIT makes extensive use of borrowed funds in connection with its investments, generally seeking to maintain a level of financing equal to 75% of the appraised value of our properties. As of December 31, 2019 the mortgage notes payable were approximately $387,325,000. Use of borrowed funds permits the UPREIT to acquire additional properties than what might otherwise have been acquired only with available cash; however, should the value of the acquired property decrease, we may owe more on the borrowing than we can realize from the operation or sale of the property.

Certain of the borrowing used to finance acquisition of properties is under longer term fixed rate arrangements, but substantial portions of our borrowing involves “balloon payments” where the loan amount is not fully amortized prior to the maturity date or periodic readjustment of the interest rates. If general borrowing conditions result in a rise in interest rate or if lenders perceive lending to us has grown in risk, we may face increased interest rates or other adverse changes to the terms under which we may borrow funds that may impair our operating results. In connection with your consideration of these risks you may wish to know that we have the following loans maturing this year and in the next two calendar years:

Risk That Tenants Will Not Renew Their Leases

Tenants of our residential real estate typically lease their apartment or townhome for an initial term of from six to twelve months with month-to-month terms thereafter. There can be no assurance that our residential tenants will renew their leases with us at the end of the term of their lease. Opportunities for purchase of residential properties by those residing in our apartments and townhome properties and tenants relocating outside of the area due to reduced employment opportunities may affect the choice by our tenants to continue their occupancy. As well, tenants may view newer properties or those with different amenities or lower rents as attractive. In addition to loss of revenues while a residential unit is vacant, a vacancy typically results in additional operating expenses associated with preparing the unit for rental and in the marketing of the unit.

Our commercial properties are typically leased for terms from one to twenty years with options to renew the term. Of the approximately 319 leases currently in effect for the approximately 2,010,417 square feet of commercial real estate, five of the leases (for an aggregate of approximately 7,016 square feet) are under month to month terms and 133 of the leases (for approximately 455,993 square feet) are scheduled to end by the end of December 2021. The table below identifies the leases, as of December 31, 2019 scheduled to expire the years indicated:

In general, commercial real estate requires additional costs to secure a new tenant or the renewal of a tenant’s lease when compared with residential real estate due to the granting of concessions to the tenant for undertaking the lease of the property. Such concessions include abatement of rent for periods of time and contributions to costs of the tenant making improvements or relocating its operations.

As well, certain commercial property may be for specialized uses that are not compatible with the needs of potential replacement tenants. This may cause a delay in locating a subsequent tenant or require substantial contributions to a tenant’s cost of modification of the property to meet their needs.

Our Investment in Real Estate will be Subject to General Risks Associated with Real Estate Investments

The real estate properties and interests in entities holding real estate properties invested in by the UPREIT will be subject to risks typically associated with real estate, including:

The Trust’s Assets are not Diversified and have Limited Liquidity

Through the UPREIT, the Trust invests in real estate. All real estate investments are subject to some degree of risk. Such investments will be subject to risks such as adverse changes in general and local economic conditions or local conditions such as excessive building resulting in an oversupply of existing space or a decrease in employment reducing the demand for space. Such investments will also be subject to other factors affecting real estate values, including (i) possible federal, state or local regulations and controls affecting lending, rents, price of goods, fuel and energy consumption and prices, water, and environmental restrictions affecting new construction, (ii) increasing labor and material costs, (iii) the attractiveness of the property to tenants in the neighborhood, and (iv) state and federal income tax liability. Economic conditions, which the Trust cannot predict or control, may have a negative impact on the value of the UPREIT’s assets.

We currently own properties in the states of Iowa, Nebraska, Minnesota, North Dakota and South Dakota (See “DESCRIPTION OF PROPERTIES”). As of December 31, 2019, most of our holdings were located in North Dakota (24 residential properties with 2,533 units and 19 commercial properties with 1,002,824 square feet of space of the total holdings of 35 residential properties with 3,649 units and 2,314,487 square feet of commercial space). Accordingly, you should view our investment in real property as concentrated within a limited geographic area.

Our real estate investments have primarily been in residential rental properties; however, we have increased our holdings of commercial real estate. Of the 2,314,487 square feet of commercial real estate held on December 31, 2019, approximately 45% was retail (including approximately 257,000 square feet being small shopping centers with a grocery store anchor tenant, approximately 183,000 square feet being small shopping centers with a “big box” retailer as anchor tenant and approximately 51,000 square feet being single tenant retail space); approximately 32% being office space (including approximately 161,500 square feet being single tenant office space); approximately 21% being “flex space” where the tenant may allocate the space among warehouse, production and office uses (approximately 117,500 square feet being single tenant flex space); and approximately 2% being self-storage space.

The Trust will have very little opportunity to vary its portfolio promptly in response to changing economic, financial and investment conditions.

Significant Increases in Property Taxes Could Adversely Affect the Trust

With respect to some of our commercial real estate, we pass through to the tenant the obligation to pay property taxes assessed upon the property subject to their lease; however, most of our leases (most notably our residential leases) do not provide for such shifting of the risk of increased property taxes to the tenants. Accordingly, significant increases in property taxes payable with respect to our properties could have a material adverse effect on our operating results. Further, as a significant increase in taxes payable with respect to our properties would reduce the operating profitability, the values we may obtain from a sale of properties subject to the increased tax burden would be reduced.

Regulations and Public and Private Use Restrictions on Our Properties May Affect our Operations

Local governmental agencies may impose controls or restrictions on rental charges or otherwise adopt regulations which could have a material adverse effect upon our operations. In addition, costs of compliance with regulations such as those pertaining to environmental matters or accessibility to those with physical disabilities (such as the American with Disabilities Act) may also adversely affect our operations.

In addition to regulations, zoning and other use restrictions of local governmental agencies as well as covenants that may be established by private parties that apply to our properties. These public and private restrictions may include the types of uses that may be made with the property as well as impose operating conditions, such as numbers of required parking spaces that must be maintained based on the size of the property and the appearance (“architectural controls”) of the property.

Such taxes, regulations and controls may impair the operating profitability of our properties and thus the values we obtain from a sale of such properties would be reduced.

Real Estate Investments of the UPREIT Face Competition From Other Real Estate Properties

The results of operation of the Trust will depend upon the availability of suitable real estate investment opportunities for the UPREIT, and on the yields available from time to time on real estate and other investments, which, in turn, depends to a large extent on the type of investment involved, the condition of capital markets, the nature and geographic location of the property, and competition and other factors, none of which can be predicted with certainty. Even though the Advisor and its Affiliates have years of experience of acquiring properties suitable for investment, the UPREIT will be competing for acceptable investments with private investors and other real estate investment programs. Many of these competitors have greater experience and resources than the UPREIT.

Ownership of Real Estate Carries Risk of Uninsured Losses and Environmental Liabilities

The Trust intends to maintain what it believes to be adequate property damage, flood, fire loss and liability insurance. However, there are certain types of losses (generally of a catastrophic nature), which may be uninsurable or which may be economically unfeasible to insure. Such excluded risks may include war, earthquake, hurricane, terrorism, certain environmental hazards and floods. Should such events occur, (i) the UPREIT and the Trust might suffer a loss of capital invested, (ii) tenants of spaces may suffer losses and may be unable to pay rent for the spaces, and (iii) UPREIT and the Trust may suffer loss of profits which might be anticipated from one or more properties.

Federal law (and the laws of some states in which the UPREIT holds or may acquire properties) imposes liability on a landowner for the presence on the premises of hazardous substances or wastes (as defined by present and future federal and state laws and regulations). This liability is without regard to fault or knowledge of the presence of such substances and may be imposed jointly and severally upon all succeeding landowners. If such hazardous substances are discovered on a property owned by UPREIT, UPREIT could incur liability for the removal of the substances and the cleanup of the property. There can be no assurance that UPREIT would have effective remedies against prior owners of the property. In addition, UPREIT may be liable to tenants and may find it difficult or impossible to sell the property either prior to or following any such cleanup.

We Rely Upon Services of Property Management Companies

We engage the Advisor and various independent property management companies to manage our real estate properties (See “DESCRIPTION OF BUSINESS – ADVISOR AND PROPERTY MANAGERS”). In 2018 and in 2019, we paid $2,083,440 and $2,269,609 in property management fees (including $261,296 and $263,607 to the Advisor). We also paid to the Advisor advisory management fees of $1,689,300 in 2018 and $1,800,383 in 2019 for administrative services (See “COMPENSATION PAID TO ADVISOR AND OTHER PROPERTY MANAGERS”).

While the Advisor does not act as a property manager for any other property owners, the rest of the property management companies we use do manage properties for other parties which properties may compete for tenants with our properties. While we seek to monitor the effectiveness of our property managers, there can be no assurance that owners of competing properties may receive better services than do we. While we have rights to terminate the agreements, we are also subject to termination of the property management agreements by the managers upon very limited notice.

Increases in Expenses May Reduce Cash Flow and Thus Funds Available for the Making of Distribution Payments and for Additional Acquisitions of Investments

Our net income from operations was approximately $5.2 million in 2018 and approximately $5.9 million in 2019. Such income represents income from the rental of our residential and commercial properties less the expenses from our operations and the costs of administration of the Trust. We declared distributions to our shareholders of $5,994,225 in 2018 and $6,652,801 in 2019 and the UPREIT declared distributions to its limited partners of $5,076,086 in 2018 and $5,337,791 in 2019. The actual amounts paid out with respect to the distributions declared was substantially less as a result of the election by shareholders and limited partners to reinvest their distribution to acquire shares or limited partnership units. Shareholders received shares in lieu of approximately 63% and 61% of distributions due them and limited partners received limited partnership units in lieu of approximately 25% and 23% of distributions due them in 2018 and 2019, respectively.

If our operating expenses or the cost of the administration of the Trust increase without corresponding increases in our income from rental of our properties, our operating net income would decrease and our ability to continue to make distributions the Shareholders of the Trust and limited partners of the UPREIT and our ability to use cash flows from operation to invest in additional properties could be impaired. In addition, reduction in our distributions may reduce the levels of participation by shareholders of the Trust and by limited partners in the UPREIT in the reinvestment plans each maintains (in 2019, $4,084,543 was reinvested in the acquisition of shares of the Trust and approximately $1,213,593 was reinvested in the acquisition of limited partnership units of the UPREIT). Under the terms of the Trust’s and the UPREIT’s Distribution Reinvestment Plans, participants may revoke their election and choose to receive cash payment of their distributions or distributions. Reductions in our operating income may affect a shareholder’s determination to participate in the plan.

Delays in Connection With Construction of Improvements to Our Properties

It has been our practice to acquire properties that have been in operation rather than undertaking to build and develop properties. As such, we have had limited exposure to risks associated with uncertainties in the development of real estate properties, such as unanticipated delays in the completion of construction of the improvements due to issues with suppliers of the materials or services used in the construction of the property.

We have, however, invested in properties under development through the making of loans to or acquisition of non-controlling equity interests in a property developer constructing a property. In addition, from time to time, we engage in the renovation or improvement of our properties (See the discussion of improvements and maintenance expenditures in “MANAGEMENT’S DISCUSSION AND ANYALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” – “Capital Expenditures”).

Delays in completion of improvements to our properties may arise for a variety of reasons over which we will have no control. Such delays may result in additional costs being incurred as well as in loss of income due to the delay in completion of the improvements.

RISKS RELATED TO ADVISOR AND CONFLICTS OF INTEREST

We are Dependent on the Advisor, the Principals of which have other Business Interests

The Advisor is responsible for the day to day management of the operation of the Trust and of the UPREIT. As such, we are dependent upon the services of the Advisor. George Gaukler, Jim Knutson and Matthew Pedersen, who are each members of the Trust’s Board of Trustees and officers of the Trust or the Advisor, but do not devote their full time to the business of the Advisor (See the biographical information for Mr. Gaukler, Mr. Knutson and Mr. Pedersen under “BOARD OF TRUSTEES, EXECUTIVE OFFICERS AND SIGNFICANT EMPLOYEES” for information related to those other interests

We estimate that Mr. Gaukler, Mr. Knutson and Mr. Pedersen, collectively, devote an average of 30 hours per week in performing their functions as the principal managers of the Advisor. Such time does not include the time they devote to their duties as officers of the Trust, members of the Trust’s Board of Trustees or Mr. Gaukler as a principal of property management firms (Valley Rental Service, Inc. and Horizon Real Estate Group, LLC) or any other service provider to the Trust they may have an interest in (see “INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS”).

While many of the employees of the Advisor have been with the Advisor for extended periods of time, there can be no assurance that they will continue their employment or that the Advisor would be successful in retaining services of successors should existing staff no longer continue their employment. Neither the Trust nor the Advisor maintains “key person” life insurance policies on any members of the staff of the Advisor. Accordingly, in the event of the death of a key staff member of the Advisor, we and the Advisor would not receive proceeds of a life insurance policy to assist in covering costs which might be incurred in connection with securing a replacement for the loss of a deceased key staff member.

Conflicts of Interest in General

Various conflicts of interest exist – and will arise in the future – as a result of the transactions between the Trust and: (i) the Advisor; (ii) members of the Board of Trustees; or (iii) affiliates of a Trustee (See “INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS”). These conflicts present the risk to holders of Shares that the transactions between the Trust and such parties have not been negotiated at arm’s-length. As a consequence, agreements between related parties do not carry the indicia of fairness that a transaction negotiated between unrelated parties would have, and bear closer scrutiny by investors.

No Assurances that Transactions between the Trust and Affiliated Parties will be as Favorable to the Trust as those not with Affiliated Parties

The UPREIT has engaged in transactions with members of the Board of Trustees or their affiliates (See “COMPENSATION PAID TO ADVISOR AND OTHER PROPERTY MANAGERS – Affiliates of the Trust Participating in Service Providers” and “Interests of Management and Others in Certain Transactions” for information regarding such transactions). The transactions have included: (i) provision of property management services to the Trust; (ii) provision of real estate brokerage services to the Trust; (iii) the acquisition of real estate from such affiliates (iv) the making of loans to finance real estate developments by the affiliates; and (v) the acquisition of equity interests in entities owned or controlled by such affiliates.

While in each instance, the member of the Board of Trustees who is engaging directly or (through an affiliate) indirectly with the UPREIT is required to disclose their interest in the transaction to the Board of Trustees and, under the Declaration of Trust, by a majority vote of the Independent Trustees, it must be determined that:

there can be no assurance that past and future transactions are not as favorable to the Trust as might have been or be obtained in a transaction with a completely independent party rather than with an affiliate of one of our Trustees.

Affiliates Managing Our Properties. Of the ten property managers we currently engage to manage our properties, five are affiliated with members of our Board of Trustees. George Gaukler, Jim Knutson and Matthew Pedersen are owners of the Advisor. Mr. Gaukler is an owner of Valley Rental Services, Inc. and Horizon Real Estate Group, LLC and Mr. Knutson was an owner of Valley Rental Services, Inc. until September 30, 2018 and of Horizon Real Estate Group, LLC until December 31, 2018. Kevin Christianson is the owner of Property Resources Group, Inc. Craig Lloyd is an owner of Lloyd Property Management Company. In 2019 and in 2018 we paid $2,269,609 and $2,083,440, respectively in management fees. Of those fees, the above named management companies affiliated with Trustees were:

Affiliates Compensated for Commercial Leasing. In 2019 and in 2018 we paid commissions of $981,085 and $839,036, respectively, to real estate brokers in connection with their having participated in the long term leasing of space in our commercial properties. Three of such brokers are affiliates of current members of our Board of Trustees. They were Horizon Real Estate Group, LLC (an affiliate of George Gaukler and, until December 31, 2018, an affiliate of Jim Knutson) Property Resources Group (an affiliate of Kevin Christianson) and Lloyd Companies, Inc. (an affiliate of Craig Lloyd). The fees paid to such brokers for services in leasing of space in our commercial properties in 2019 and 2018 were:

Properties Acquired from Affiliates. Of the 80 properties we currently own, 30 (or approximately 38%) were acquired from a member of our Board of Trustees or from an entity owned - at least in part - by a member of our Board of Trustees (See tables listing our properties and the column indicating acquisition from a Trustee under “DESCRIPTION OF PROPERTIES” for information related to which of our properties were so acquired). In 2015, we acquired seven properties for approximately $105.5 million (two involving approximately $53.9 million from Trustees or their affiliates). In 2016, we acquired seven properties for approximately $76.2 million (one involving approximately $6.9 million from an affiliate of a Trustee). In 2017, we acquired three properties for approximately $48.1 million (two involving approximately $28.9 million from Trustees or their affiliates). In 2018, we acquired one property for approximately $9.1 million (which did not involve a Trustee or their affiliates). In 2019, we made three acquisitions, one involving five separate residential properties for approximately $41.4 million (which did not involve a Trustee or their affiliates). For additional information regarding the acquisitions from affiliates, see “Acquisitions from Affiliates” in “Interests of Management and Others in Certain Transactions.”

Loans to Affiliates. Since January 1, 2014, we have had outstanding three loans to affiliates of members of our Board of Trustees in connection with real estate development. We contemplate that we may continue to make such loans. In January 2013, we loaned $750,000 to Dakota Roseland Apartments I, LLLP, an affiliate of George Gaukler and Jim Knutson which was converted into equity in connection with the acquisition by the UPREIT of interests in such limited partnership in January 2014. In April 2014, we loaned $2.5 million to another affiliate of George Gaukler and Jim Knutson, Dakota Roseland Apartments IX-XII, LLLP which was also converted into membership interests in January 2017. In November 2016, we loaned $1.5 million to an affiliate of Kevin Christianson to assist in the financing of the Azool Retail Center which we acquired in January 2017.

Investment in Affiliates. We currently own interests in five limited liability companies or limited partnerships (See table in the “General Overview” section of “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” for identification of the entities and our ownership interests in them), each of which has or had George Gaukler as one of its owners. Each operates apartment buildings located in Williston, North Dakota. We have invested an aggregate of $6.275 million in such entities. We also were an owner of One Oak II Limited Liability Limited Partnership and thereby had an indirect interest in another limited liability limited partnership which was developing the One Oak Place senior living facility in Fargo, North Dakota, but in August 2015, the UPREIT acquired ownership of the property for a purchase price of $45.7 million and we effectively converted our $2.5 million investment in the property into a full ownership position.

RISKS RELATED TO ECONOMIC CONDITIONS

Economic Conditions Resulting from COVID-19 Pandemic

We anticipate that the disruptions in employment, reduction in certain retail sales and other challenges resulting from the COVID-19 pandemic will have an adverse impact on our tenants and their ability to pay the rent due under their leases. We are unable to predict the severity of the negative consequences on our operations or actions we take, including the granting of rent concessions to our tenants to assist them in continuing their leases with us.

Economic Conditions May Limit the Ability of the UPREIT to Purchase Properties or of Tenants to Pay Rent

Periods of tight credit and high interest rates may adversely affect the ability of the UPREIT to acquire or sell properties. The inability of the UPREIT to acquire new properties or to sell certain of its existing properties further constrains the Trust’s diversification and growth. During times of economic recession the ability of tenants to rent spaces from the UPREIT and timely pay rent when due may be adversely affected. This would limit the income available to the UPREIT for distribution to the Trust and, consequently, limit the Trust’s ability to make distributions to our shareholders.

There may be future shortages or increased costs of fuel, natural gas, water, or electric power, or allocations thereof by suppliers or governmental regulatory bodies in the areas where property purchased by the UPREIT is located. In the event that any such shortages, price increases or allocations occur, the financial condition of tenants of the UPREIT may be adversely affected. The Trust is unable to predict the extent, if any, to which such shortages, increased prices or allocations would influence the ability of tenants to make rent payments and the Trust to make cash distributions to shareholders.

Risk of Downturn in Real Estate Market

While we are exposed to risks of adverse development in the economy in general, the real estate market we participate may have its own adverse economic developments. Due to numerous conditions over which we will have no control, the market values of properties we own may decrease. Such decreases will adversely affect our abilities to refinance mortgage indebtedness on such properties (See footnotes to the “DESCRIPTION OF PROPERTIES” for information regarding mortgage indebtedness against our properties) which could provide significant issues for properties we have financed on terms involving “balloon payments” of the unpaid principal balance at a maturity date which occurs prior to complete payment of the debt based upon the payment schedule.

If such downturns in the real estate markets occur, we may find that we are unable to sell properties we determine to sell or, if we are able to sell a property, we may receive an amount which is less than we have invested in acquiring and operating the property. We may even find that the debt we owe at the time of sale, exceeds the amount we can obtain from a purchaser.

Risks of Disruptions in the Financial Markets

The success of our business is significantly related to general economic conditions, but in particular, we are dependent upon the condition of the banking and financial markets. Rising interest rates and the decreasing availability of funding for real estate investments could have a materially adverse effect on our operations and on our abilities to acquire additional properties, refinance mortgage indebtedness and sell properties we hold.

Tenant Bankruptcies

Economic conditions affecting tenants leasing our properties may result in filing of bankruptcy by tenants. In particular, this may have a more significant adverse impact on our operations and financial condition with respect to our commercial real estate where the properties have fewer tenants than are associated with our residential rental real estate. In addition, we may incur legal fees and other costs in seeking to protect our interests in the event of a filing of bankruptcy by a tenant.

RISKS RELATED TO OUR STRUCTURE AND THE OFFERING

There is No Assurance That Shareholders Will Receive Cash Distributions or Property Appreciation

While we have had a history of paying quarterly distributions, there is no assurance as to whether cash distributions can continue to be available for distribution to shareholders (See “SECURITIES BEING OFFERED – Distribution” for distribution declared and paid since 2009). There is no assurance that the Trust will operate at a profit or that any properties acquired by the UPREIT will appreciate in value or can ever be sold at a profit. The value and marketability of the UPREIT’s properties will depend upon many factors beyond the control of the Trust or the UPREIT, and there is no assurance that there will be a ready market for the properties owned by the UPREIT since investments in real property are generally non-liquid. Operating expenses of the Trust, including certain compensation to the Advisor will be incurred and must be paid irrespective of the Trust’s profitability.

Even if the Trust operates on a profitable basis, our ability to pay cash distributions may be impaired. In each of 2019 and 2018 we declared aggregate distributions to shareholders of the Trust and to limited partners of the UPREIT of $11,990,592 and $11,070,311 (after reinvestment of declared distributions to acquire shares or limited partnership units, the net distributions/distributions paid were $6,692,456 and $6,029,270) compared to net cash from operating activities of $19,212,639 and $17,716,904, respectively. Shareholders of the Trust and limited partners of the UPREIT participating in reinvestment of their distributions or distributions may terminate such participation with minimal notice and such termination by a substantial number of the participants could require us to use cash rather than our shares or the Trust’s limited partnership units to satisfy the rights to distributions or distributions, as applicable.

Further, if we were not successful in refinancing our mortgage indebtedness when the loans mature, we would need to use net operating cash flow to satisfy the “balloon payments” due at the maturities of our loans. For information regarding the amounts coming due under our mortgage indebtedness see the footnotes to the table of our “DESCRIPTION OF PROPERTIES.” In connection with your consideration of these risks you may wish to know that we have the following loans maturing this year and in the next two calendar years:

Investments in the Trust are Subject to Dilution by Future Sales of Securities by Both the Trust and the UPREIT

Under the terms of the UPREIT Limited Partnership Agreement, the UPREIT is authorized to issue limited partnership interests in the UPREIT in exchange for real estate or interests in real estate. Such exchanges have occurred and are expected to continue to occur during and after the Offering. We intend for the UPREIT to continue to seek contributions of property in exchange for Partnership Interests in the UPREIT. Additionally, the Trust will, continue to seek investors in to acquire Shares in exchange for cash investment in the Trust. These additional investments will dilute the percentage ownership interests of current investors of the Trust, including those that reinvest their distributions to acquire additional shares.

No Assurance that we will Continue our Share Repurchase Plan

To provide shareholders with an opportunity for liquidity with respect to our Shares, we have from time to time maintained arrangements permitting shareholders who have held their Shares for at least one year the right to request the repurchase by the Trust of all or a portion of their Shares (See - “SECURITIES BEING OFFERD – Share Repurchase Plan” for information related to such arrangements).

The Board of Trustees reserves the absolute right to terminate, suspend or amend the Share Repurchase Program at any time without shareholder approval, but subject to advance notification to the shareholders, if the Trustees believe such action is in the best interest of the Trust or if they determine the funds otherwise available to fund our Share repurchase are needed for other purposes. In response to potential reduction in operating revenue as a result of the COVID-19 pandemic, the Board of Trustees determined in April 2020 to indefinitely suspended the repurchase of shares.

RISKS RELATED TO OUR STATUS AS A REAL ESTATE INVESTMENT TRUST

The Trust May Limit Ownership of Shares in Order to Remain Qualified as a REIT

In order for the Trust to qualify as a REIT, no more than 50% of the outstanding Shares may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of the Trust’s taxable year. To ensure that the Trust will not fail to qualify as a REIT under this test, the Declaration of Trust authorizes the Trustees to take such actions as may be required to preserve its qualification as a REIT, and limits any person to direct or indirect ownership of no more than a limited percentage of the outstanding Shares of the Trust. While these restrictions are designed to prevent any five individuals from owning more than 50% of the Shares, they would also make virtually impossible a change of control of the Trust. The restrictions and provisions may also (i) deter individuals and entities from making tender offers for Shares, which offers may be attractive to shareholders, or (ii) limit the opportunity for shareholders to receive a premium for their Shares in the event an investor is making purchases of Shares in order to acquire a block of Shares.

Compliance with REIT Qualification Requirements may Impair our Operations

The Declaration of Trust directs the Board of Trustees to maintain our qualification under applicable law as a REIT. It is possible that the requirements may limit the investments which may be pursued by the Trust or even require a liquidation of investments the Board of Trustees views as being attractive.

If the Trust Fails to Qualify as a Real Estate Investment Trust, the Trust and Investors May Suffer Adverse Tax Consequences. The Trust and Investors May Also Suffer Adverse Tax Consequences from Other Unanticipated Events

Although management believes that the Trust has been organized and operated to qualify as a REIT under the Code, no assurance can be given that the Trust has in fact operated or will be able to continue to operate in a manner to qualify or remain so qualified. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and the determination of various factual matters and circumstances not entirely within the Trust’s control (See – “Requirements for Qualification – General,” “Income Tests,” “Asset Tests” and “Annual Distribution Requirements” under “FEDERAL INCOME TAX CONSIDERATIONS”). For example, in order to qualify as a REIT: the Trust must be owned by at least 100 or more persons; at least 95% of the Trust’s taxable gross income in any year must be derived from qualifying sources; the Trust must make distributions to shareholders aggregating annually at least 90% of its REIT taxable income (excluding net capital gains); and at least 75% of our assets must be “real estate assets,” cash or U.S. government securities. To the extent we fail these requirements, unless certain relief provisions apply, we may have a loss of our status. Such a loss could have a material adverse effect on the Trust and its ability to make distributions to you and to pay amounts due on its debt. Additionally, to the extent UPREIT was determined to be taxable as a corporation, the Trust would not qualify as a REIT, which could have a material adverse effect on the Trust and its ability to make distributions to you and to pay amounts due on its debt. Finally, no assurance can be given that new legislation, new regulations, administrative interpretations or court decisions will not change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification.

If the Trust fails to qualify as a REIT, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at corporate rates, which would likely have a material adverse effect on the Trust and its ability to make distributions to shareholders and to pay amounts due on its debt. In addition, unless entitled to relief under certain statutory provisions, the Trust would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would reduce funds available for investment or distributions to shareholders because of the additional tax liability to the Trust for the year or years involved. In addition, the Trust would no longer be required to make distributions to shareholders. To the extent that distributions to shareholders would have been made in anticipation of qualifying as a REIT, the Trust might be required to borrow funds or to liquidate certain investments to pay the applicable tax.

For a further discussion of income tax issues, see “FEDERAL INCOME TAX CONSIDERATIONS.”

PLAN OF DISTRIBUTION

This Offering is being made to existing shareholders of the Trust who are residents of or entities domiciled in a state in which we have qualified the issuance of Shares under the DRIP in accordance with laws of such state related to the offer and issuance of securities. Individuals are residents of the state in which they maintain their principal residence. A corporation, partnership, trust or other entity is domiciled in the state where the principal office of the entity is located. With respect to shareholders residing in or domiciled in certain states, the number of shares which may be issued may be limited such that the Trust may need to decline to accept requests for reinvestment of distributions that would involve our exceeding such limitations.

Duration of Offering This Offering will end on the earlier of: (i) July 31, 2021; (ii) when all Shares and been issued; or (iii) when we may elect to terminate the Offering one or more of the classes of Shares. We may, however, elect to obtain authorization from the SEC and applicable state securities administrators to extend the term of the Offering or otherwise amend its terms.

No Broker/Dealers are Engaged to Solicit Participation in the Plan The Trust is directly, without the engagement of broker/dealers, offering the Shares in this Offering under the Trust’s DRIP (See “SECURITIES BEING OFFERED – Distribution Reinvestment Plan”).

State of Residence or Domicile for Plan Participation by a Shareholder This Offering is available only to shareholders of the Trust who are residents of or entities domiciled in a state in which we have qualified the issuance of share under the DRIP in accordance with laws of such state related to the offer and issuance of shares. Individuals are residents of the state in which they maintain their principal residence. A corporation, partnership, trust or other entity is domiciled in the state where the principal office of the entity is located.

Participation in the DRIP To participate in the Offering, investors must be a participant in the DRIP and have their shareholder registration with the Trust reflect that the participant meets the residency / domicile requirements addressed above.

USE OF PROCEEDS

The Trust will receive no cash proceeds from the issuance of Shares to participants in the DRIP. Such issuance, however, will permit the Trust to retain funds within the UPREIT which would otherwise be applied to payment of cash distributions. Such retained funds can be used by the UPREIT to acquire additional properties, repay indebtedness and for expenditure in operations of the business of the Trust and the UPREIT.

As of the date of this Offering Circular, we have not identified any specific property or properties we will seek to acquire with any additional cash retained as a result of issuance of Shares in lieu of payment of distributions in cash to participants in the DRIP. Acquisitions and investments by the UPREIT will be determined by the Board of Trustees of the Trust and we anticipate that we will continue to use our capital and proceeds from borrowings to invest in real estate (See “DESCRIPTION OF BUSINESS – Investment Policies and Objectives of the Trust”).

DESCRIPTION OF BUSINESS

THE TRUST

The Trust is an unincorporated business trust registered under the laws of North Dakota with the office of the North Dakota Secretary of State and is set up to meet the requirements under Internal Revenue Code Section 856 as a real estate investment trust (a “REIT”). Internal Revenue Code Section 856 requires that 75% of the assets of a REIT, either directly or indirectly, must consist of real estate assets and that 75% of its gross income must be derived from real estate. As a REIT, the Trust is generally not subject to U.S. federal corporate income tax on its net taxable income that is distributed to the shareholders of the Trust.

The Trust began operations in 1997 and in 2000 the Trust formed the UPREIT to acquire income-producing real estate properties and investments in entities holding income-producing real estate. Through the UPREIT, for which the Trust is the General Partner, the Trust seeks to invest in income-producing real estate that will provide cash flow and capital appreciation opportunities. The Trust intends to invest in the upper Midwest region and, as of the date of this Offering Circular, the properties we hold in are primarily located in North Dakota, we also have properties in Iowa, Minnesota, Nebraska, and South Dakota. Of those properties, (based on the amounts we invested in them) approximately 49.8% are commercial and 50.2% are residential (See “DESCRIPTION OF PROPERTIES”).

The principal governing document for the Trust is its Declaration of Trust, which was amended and restated, as of June 13, 2017. The Declaration of Trust provides that unless earlier terminated by a majority vote of the shareholders with voting rights, it will continue until the expiration of 21 years after the death of the last survivor of the original eight members of the Board of Trustees (six of whom are living as of the date of this Offering Circular). We intend to seek approval of the Shareholders to remove the required termination following the death of the original members of the Board of Trustees as is now permitted under North Dakota law.

THE UPREIT

The UPREIT is a limited partnership established under the laws of North Dakota with two classes of ownership interests, general partnership interests and limited partnership interests. The Trust is the only holder of general partnership interests. As of December 31, 2019 there were approximately 160 holders of limited partnership interests in the UPREIT holding an aggregate of 6,995,115 Partnership Units. In our consolidated financial statements, our general partnership interests are referred to as “Beneficial Interests” while the limited partnership interests are referred to as “Noncontrolling Interests.”

Most of the real estate properties we have invested in are held directly by the UPREIT. The UPREIT, however, also is the sole owner/member of ten entities that own real property. This has been done to satisfy a requirement of mortgage lenders who finance the acquisition or holding of the properties. In addition, the UPREIT holds minority interests in real estate holding entities and has made loans to developers of real estate projects the UPREIT intends to invest in.

The UPREIT acquires real properties through both purchase and in exchange for issuance of limited partnership interests to owners of the real estate being acquired through such an exchange. Engaging in an exchange of the property for limited partnership interests, rather than selling the property to the UPREIT for cash, the owner may defer the recognition of the taxable gain on the property if the value of the property exceeds the tax basis the owner has in the property.

ADVISOR AND PROPERTY MANAGERS

Neither the Trust nor the UPREIT has employees. The Trust has an advisory contract with Dakota REIT Management, LLC (the “Advisor”) under which the Advisor carries out the daily operations of the Trust including its responsibilities as the general partner of the UPREIT (for information regarding the qualifications of the Advisor, see “SIGNIFICANT EMPLOYEES OF THE ADVISOR”). The Advisor is paid fees under the advisory contract (See “COMPENSATION PAID TO ADVISOR AND OTHER PROPERTY MANAGERS”).

The Advisor has never controlled or provided services to any other real estate investment trust, a real estate investment limited partnership or other investment program which provides flow-through tax consequences to investors. Thus, the Advisor has never participated in the offering of investments by such an entity which disclosed when the investment entity might be liquidated and thus there can be no disclosure as to whether such liquidation was completed as disclosed.

The UPREIT engages services of the property management companies in connection with the management of the properties owned by the UPREIT or its wholly owned subsidiaries, five of which are affiliates or members of our Board of Trustees (See “Property Management Agreements” for more information).

INVESTMENT POLICIES AND OBJECTIVES OF THE TRUST

Currently, all of the real estate investments of the Trust are made through the UPREIT. As general partner of the UPREIT, the Trust determines whether any properties are to be acquired or disposed of with such investment decisions being made through action of the Trust’s Board of Trustees. Currently, the Board of Trustees of the Trust intends to invest in properties located in the upper Midwest region. The Board of Trustees intends to look for the communities within this area for acquisitions that appear to involve a stable market for particular investments. The Board of Trustees also expects to primarily focus on multi-family apartments with the balance being commercial property (primarily office, retail and warehouse space).

In 2018, we made one acquisition at a cost of $9,150,000. The property acquired was an office/warehouse facility.

In 2019, we have made three acquisitions and one disposition of a property. Two of the acquisitions were office warehouse facilities (one in January for $5,500,000 and the other in March for $11,850,000). In November, 2019, we acquired five separate multi-family residential properties in a single transaction for $24,000,000. In October we sold a 39,120 square foot retail property located in Sioux Falls, South Dakota for $4,100,000.

For listings of the properties currently held either directly by the UPREIT or through an entity wholly owned by the UPREIT, see “DESCRIPTION OF PROPERTIES.”

The UPREIT does not currently intend to invest in mortgages loans originated by others, although we have made loans to finance the development of real estate properties we contemplate acquiring. The Declaration of Trust sets forth restrictions on investment in mortgage loans, including limitations on deferral of payment of accrued interest and the making of loans that result in indebtedness against the property exceeding 85% of its appraised value absent substantial justification (such as credit enhancements in the form of a guaranty by a financially strong third party).

The UPREIT has made investments in limited partnerships, limited liability companies and other limited liability entities that own and operate real estate which is of a type the UPREIT would hold.

The investment objectives of the Trust are to provide to its shareholders (i) preservation, protection and eventual return of the shareholder’s investment, (ii) annual cash distributions of cash from operations, a portion of which (due to depreciation) may be a return of capital for tax purposes rather than taxable income, and (iii) realization of long-term appreciation in value of the properties acquired by the Trust. There is no assurance that such objectives will be attained.

When considering properties to be included in the portfolio of the UPREIT, the Board of Trustees of the Trust uses the following criteria for selection:

In making its investment decisions, the Board of Trustees is subject to terms of the Declaration of Trust (See “BOARD OF TRUSTEES, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES – Organizational Structure”) which restricts the Trust from:

The Declaration of Trust also requires the Board of Trustees to approve acquisition at prices the Board of Trustees determines to be the fair market value of the property. Due to requirements of mortgage lenders and to comply with an accounting standard discussed in “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Results of Operations,” independent appraisals of property are obtained. The Declaration of Trust requires the purchase from an affiliate of the Trust to be not greater than the appraised value determined by an independent appraiser. Further, a majority of the independent trustees may require use of the appraised value when the purchase is from any other seller (See “BOARD OF TRUSTEES, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES – Members of the Trust’s Board of Trustees and Executive Officers”).

SUMMARY description OF the UPREIT limited PARTNERSHIP AGREEMENT

The Limited Partnership Agreement (the “Partnership Agreement”) is the governing document for the UPREIT. The Trust is the sole general partner of the UPREIT and as of December 31, 2019, the UPREIT had 160 limited partners of the UPREIT. The following is a summary of the material terms of the Partnership Agreement. Any descriptions are qualified in their entirety by reference to the Partnership Agreement. A copy of the Partnership Agreement currently in effect has been filed as an exhibit to the Offering Statement the Trust has filed with the SEC of which this Offering Circular is a part.

MANAGEMENT

As the sole general partner of the UPREIT, the Trust has the full, complete and exclusive discretion to manage and control the business of the UPREIT, and the limited partners have no authority in their capacity as limited partners to transact business for, or participate in the management of the UPREIT. The authority of the Trust as general partner includes the admission of limited partners and the determination of the interests in the UPREIT to be issued in connection with such admission and to issue additional interests to existing partners in exchange for contributions of capital.

CAPITAL CONTRIBUTIONS

The Trust and each limited partner of the UPREIT is required to make a capital contribution in connection with their becoming a partner of the UPREIT. For purposes of determining the relative interests in the UPREIT, such interests are denominated by the Partnership Agreement as “Partnership Units.” While the Partnership Agreement permits the issuance of Partnership Units to be in series or classes with such designations and preferences as the general partner shall determine, all Partnership Interests have been of a single class with respect to the allocation of income or loss and the participation in distributions.

In connection with forming the UPREIT in October 2000, the Trust contributed substantially all of its assets to the UPREIT subject to various debts and obligations and George Gaukler, as the initial limited partner, made a nominal cash contribution to the UPREIT. Other than such initial contribution of assets by the Trust to the UPREIT, the Partnership Agreement requires the Trust to contribute to the UPREIT the proceeds from issuance of the Trust’s shares and to receive one Partnership Unit for each share so issued by the Trust.

Except for the obligation of the Trust to contribute proceeds from its issuance of shares, the partners have no right or obligation to make any additional capital contributions. The Trust may make loans to the UPREIT to have the UPREIT borrow funds from others, including from limited partners.

Many of the properties held by the UPREIT were contributed to the UREIT in exchange for Partnership Units. For most who are contributing property, the transaction is considered a tax deferred exchange. The Declaration of Trust requires the purchase price to be approved by the Board of Trustees as not being more than the fair market value of the property and if the seller is an affiliate of the Trust, for the fair market value to be based on an independent appraisal. The contributor is required to hold the Partnership Units received in exchange for their property for at least one year.

PROFIT AND LOSS ALLOCATIONS AND DISTRIBUTIONS

The net profit or loss of the UPREIT for each year is generally allocated among the partners in accordance with their respective interests. This general allocation is subject to compliance with specific exceptions related to matters recognized under federal income tax regulations related to minimum gain chargeback with respect to nonrecourse debt and to allocation of loss to the general partner when such allocation to a limited partner would create a capital account deficit. There is also provision in the Partnership Agreement for allocation of net profit or loss allocation if a limited partner affects a permitted transfer of their partnership interest during the year.

The Partnership Agreement contemplates that the UPREIT will make regular operating cash distributions on at least a quarterly basis in an amount the general partner deems appropriate. The general partner is, however, required to use its best efforts to effect distributions of sufficient amounts to permit the Trust to pay distributions to its shareholders as is required to maintain the status of the Trust as a REIT. The distributions made are in accordance with the respective percentage interests (i.e. the Partnership Units held) as of the record date the general partner may establish for purposes of determining to whom a distribution is payable.

Upon liquidation of the UPREIT, remaining assets are to be distributed to all partners with positive Capital Accounts in accordance with their respective positive Capital Account balances.

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

Limited partners are not to be liable for any debts or obligations of the UPREIT. A limited partner is only obligated to make payments of its capital contribution in accordance with any capital contribution agreement made with the UPREIT, if any, as and when due thereunder.

After owning Partnership Units for one year and subject to certain limitations in the Partnership Agreement, each limited partner has a right (the “Exchange Right”) to request the UPREIT to redeem all or a portion of the Partnership Units held by such limited partner in exchange for payment per unit of the then current offering price for Shares of the Trust. Exercise of the Exchange Right is by delivery of written notice to the UPREIT. If such a notice is given, the Trust may purchase the subject units by issuance of shares to the limited partner. Each limited partner is limited to giving not more than two notices of exercise of Exchange Rights during each calendar year. An Exchange Right may not be exercised with respect to the lesser of 100 Partnership Units or all of the remaining Partnership Units then held by the limited partner.

Issuance of Partnership Units to limited partners is made under claimed exemptions from registration under applicable federal and state regulation of the issuance of securities. As such, they may not be transferred by the limited partner if, in the opinion of legal counsel to the UPREIT that such transfer would require such registration. Further, transfers may not be made if, in the opinion of legal counsel to the UPREIT that such transfer would result in the UPREIT being taxed as a corporation or if the transfer would impair the qualification of the Trust as a REIT.

DISTRIBUTION REINVESTMENT PLAN

The Trust, as general partner of the UPREIT, has established a Distribution Reinvestment Plan (the “Distribution Reinvestment Plan”) for limited partners. To participate, the limited partner must be either an “accredited investor” or a “sophisticated investor” with sufficient knowledge and experience in financial and business matters to adequately assess the merits of participating in the Distribution Reinvestment Plan and reside in a jurisdiction which permits participation in the Distribution Reinvestment Plan without an effective registration under the Securities law and regulations of that jurisdiction. To participate, a limited partner is to complete a written election. A participant may terminate their participation on thirty days prior notice.

Under the Distribution Reinvestment Plan, in lieu of receipt of a cash payment of the distribution otherwise due, a limited partner will be issued additional limited partnership units at a rate based on 95% of the offering price established by the Board of Trustees for the shares of the Trust (exclusive of subscription fees that may be payable with respect to certain classes) rounded up to the next full cent. Fractional units to one hundredth of a thousand (i.e., four decimal points) will be issued. The Distribution Reinvestment Plan may be terminated or modified by the UPREIT on not less than ten days prior notice of termination or modification.

DESCRIPTION OF PROPERTIES

The following table is a listing of the real estate properties owned as of December 31, 2019 directly by the UPREIT or by an entity wholly owned by the UPREIT (including the former Shopko store located in New Prague, Wisconsin and the Cummins Building located in DePere, Wisconsin which were sold in May 2020) . The properties are primarily listed in the order in which they were acquired. The properties are multi-family residential apartment or townhome complexes or commercial real estate properties. The table includes the original purchase price, the mortgage balance at the end of 2019, the size of commercial properties or the number of units for residential properties, the level of physical occupancy of the property at the end of 2019 and if the property was acquired from a Trustee or an affiliate of a Trustee. Typically, the apartments are leased for initial terms from six to twelve months with month-to-month terms thereafter. The commercial properties are typically leased for terms from one to twenty years with options to renew the term.

Of the 80 properties owned at the end of 2019, 30 (or approximately 38%) were acquired from a member of our Board of Trustees or from an entity owned - at least in part - by a member of our Board of Trustees. In 2015, we acquired seven properties for approximately $105.5 million (two involving approximately $53.9 million from Trustees or their affiliates). In 2016, we acquired seven properties for approximately $76.2 million (one involving approximately $6.9 million from an affiliate of a Trustee). In 2017, we acquired three properties for approximately $48 million (two involving approximately $28.8 million from an affiliate of a Trustee). In 2018, we acquired one property for approximately $9.1 million (which was not acquired from a Trustee or their affiliates). In 2019, we acquired seven properties for approximately $41.35 million (none were acquired from a Trustee or their affiliates). For additional information regarding the acquisitions from affiliates since 2014, see “Acquisitions from Affiliates” in “Interests of Management and Others in Certain Transactions.”

In addition to the properties listed in the foregoing tables, the UPRIET also holds non-controlling membership interests or the limited partnership interests in the following limited liability companies or limited partnerships:

COMPENSATION PAID TO ADVISOR AND OTHER PROPERTY MANAGERS

ADVISORY MANAGEMENT AGREEMENT

Neither the Trust nor the UPREIT have employees. Since 2007, the Trust has engaged Dakota REIT Management, LLC (the “Advisor”) to provide the staff to oversee and manage the operations of the Trust, including, the discharge of its responsibilities as general partner of the UPREIT. The services are provided under the terms of an Advisory Management Agreement (the “Management Agreement”), the most current version of which was made on October 31, 2019, but effective as of January 1, 2020. Under the Management Agreement, the Advisor is responsible for all operations of the Trust under the direction of the Board of Trustees of the Trust and in compliance with the Declaration of Trust and the UPREIT’s Partnership Agreement. A copy of the Management Agreement has been filed as an exhibit to the Offering Statement the Trust has filed with the SEC of which this Offering Circular is a part.

As compensation for its services under the Management Agreement the Advisor is to be paid:

As required by the Declaration of Trust, the Management Agreement, however, requires the Advisor to refund to the Trust UPREIT unit issuance and mortgage refinance fees to the extent the aggregate fees exceed the lesser of 2% of the Trust’s average “invested assets” or 25% of the Trusts “net income” for the calendar year. The Management Agreement defines “invested assets” as the current market value of the real estate investments and “net income” as revenues less expenses other than depreciation and other non-cash reserves and excludes from the definition gains from sales of UPREIT assets. Provided, however, the independent members of the Board of Trustees of the Trust may waive the refund of fees if they believe the year involved unusual or non-recurring factors resulted in extraordinary expenses for the year.

The table below shows the amounts of such fees paid to the Advisor by the Trust in the years 2018 and 2019:

The Management Agreement has a term of one year, but may be extended by the Trust with the approval of a majority of the members of the Board of Trustees of the Trust who are not affiliates of the Advisor. In addition either the Advisor or the Trust may terminate the Management Agreement with sixty days’ prior written notice; with the determination for termination by the Trust being made by a majority of the members of the Board of Trustees who are not affiliated with the Advisor.

PROPERTY MANAGEMENT AGREEMENTS

The UPREIT currently has agreements for the management or leasing of properties with nine property management companies. The table on the following page identifies those companies, the properties managed and the fees under the agreements. Four of the property management companies are or were affiliated with members of our Board of Trustees. George Gaukler and Jim Knutson were owners of Valley Rental Services, Inc. and the Advisor; however, Mr. Knutson sold his interests in Valley Rental Services in 2019. Matthew Pedersen became an owner of the Advisor in 2020. Kevin Christianson is the owner of Property Resources Group, Inc. Craig Lloyd is an owner of Lloyd Property Management Company. In the years 2018 and 2019, we paid $2,083,440 and $2,269,609 in management fees. Of those fees, approximately 55.7% and 54.3% were paid to affiliates of Mr. Gaukler (and Mr. Knutson with respect to periods in which he was an owner of Valley Rental Services or the Advisor); approximately 7.8% and 8.3% were paid to an affiliate of Mr. Lloyd; and approximately 8.1% and 7% were paid to an affiliate of Mr. Christianson in 2018 and 2019, respectively.

AFFILIATES OF THE TRUST PARTICIPATING IN SERVICE PROVIDERS

George Gaukler is a member of the Trust’s Board of Trustees, an executive officer of the Trust and a shareholder of the Trust and a limited partner of the UPREIT. He is also an owner of:

Jim Knutson is a member of the Board of Trustees, an executive officer and a shareholder of the Trust and a limited partner of the UPREIT. He was an owner of Valley Realty, Inc., Horizon Real Estate Group, LLC and Valley Rental Service, Inc. prior to his sale of his interests in those entities in 2018 and 2019. Mr. Knutson remains an owner of the Advisor, but has agreed to sell his interests in the Advisor in installments to Matthew Pedersen and James Haley with the final installment being in January 2024.

Kevin Christianson is a member of the Board of Trustees and a shareholder of the Trust. Mr. Christianson is a member of Property Resources Group, LLC, a commercial property management company which has managed properties for the UPREIT.

Craig Lloyd is a member of the Board of Trustees and a shareholder of the Trust and a limited partner of the UPREIT. Mr. Lloyd is a shareholder or member of entities which are part of the Lloyd Companies which have managed properties for the UPREIT and marketed leasing of commercial space owned by the UPREIT.

Matthew Pedersen is a member of the Board of Trustees and a shareholder of the Trust. As of January 1, 2020, Mr. Pedersen became an owner of the Advisor. Mr. Pedersen is an owner of an accounting firm that has provided limited accounting services to the Trust or the UPREIT from time to time.

James Haley is the Chief Financial Officer and an owner of the Advisor. Mr. Haley also owns 27,327 Class A Shares.

Danel Jung is the Chief Operating Officer of and holds a profits interest in the Advisor.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the notes thereto included elsewhere in this Offering Circular. This discussion contains forward-looking statements that are based on management’s current expectations, estimates, and projections about our business and operations. The cautionary statements made in the Offering Circular should be read as applying to all related forward-looking statements whenever they appear in this Offering Circular. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss under “RISK FACTORS” and elsewhere in this Offering Circular. You should read “RISK FACTORS” and “Cautionary Note Regarding Forward Looking Statements.”

GENERAL OVERVIEW

The Trust is organized under the laws of the state of North Dakota. We are the general partner of and owned approximately 55% and 56% of the UPREIT as of December 31, 2018 and 2019. The UPREIT is the sole member of ten limited liability companies (the “LLC’s”) established to hold interests in various real estate properties in accordance with requirements of the mortgage lenders which financed our investment in such properties. We also hold limited partnership interests ranging from 34% to 50% interests in four limited partnerships and a limited liability company, each of which owns and operates apartment buildings located in Williston, North Dakota. Below is an outline of our structure and the ownership interests as of December 31, 2019:

We seek to operate as a real estate investment trust (a “REIT”) in compliance with the conditions set out in Section 856 of the Internal Revenue Code. Specifically we seek to operate as an “Umbrella Partnership Real Estate Investment Trust,” which is a REIT that holds substantially all of its investments through a limited partnership entity for which the REIT is the general partner.

The financial statements included in this Offering Circular are consolidated financial statements which include the financial statements of the Trust as well as those of the UPREIT and the wholly owned LLC’s. All significant intercompany transactions and balances have been eliminated in consolidation. For example, if funds were due the Trust by the UPREIT, the balance sheets of each would reflect the amount as a payable by or receivable due the entity, but by consolidation of the financial statements, the amounts effectively cancel out the intercompany debt.

We currently operate residential and commercial properties located in Iowa, Minnesota, Nebraska, North Dakota, and South Dakota. As of the end of 2019, our residential property consisted of 3,527 apartment units and 122 townhomes. Our commercial property consisted of 2,314,487 square feet, of which: (i) approximately 45% was retail (including approximately 257,000 square feet being small shopping centers with a grocery store anchor tenant, approximately 183,000 square feet being small shopping centers with a “big box” retailer as anchor tenant and approximately 51,000 square feet being single tenant retail space); (ii) approximately 32% being office space (including approximately 161,500 square feet being single tenant office space); (iii) approximately 21% being “flex space” where the tenant may allocate the space among warehouse, production and office uses (approximately 117,500 square feet being single tenant flex space); and (iv) approximately 2% being self-storage space.

The table below identifies by state the number of residential properties and the aggregate number of residential units in such properties as well as the number of commercial properties and the aggregate number of square feet of such properties we held at of the end of 2019 and 2018 (including two properties we sold in 2020).

RECENT DEVELOPMENTS

In May 2020, we sold two of our properties. The former Shopko store property located in New Prague, Minnesota was sold for $1,285,000 resulting in a Gain (loss) of ($1,077,719) and in connection with the sale, the UPREIT incurred selling costs of $97,318. The Cummins Building located in DePere, Wisconsin was sold for $1,825,000, resulting in a Gain (loss) of of $400,282 and in connection with the sale, the UPREIT incurred selling costs of $90,304.

In January and in April 2020, we paid distributions of $0.20 per share to shareholders of record as of December 31, 2019 and March 31, 2020, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2019, we had approximately $3,615,900 in cash, approximately $850,700 of additional funds held by certain property managers and approximately $12,300,300 of restricted funds. The restricted funds are primarily from tenant security deposits (approximately $2,729,600) escrows for real estate taxes and insurance as well as replacement cost reserves maintained in accordance with arrangements with mortgage lenders (approximately $7,775,650) and non-lender mandated reserves (approximately $1,795,100). In addition, as of December 31, 2019, we had available to us $5,000,000 under unsecured lines of credit and $5,500,000 in lines of credit secured by mortgages upon several of our North Dakota properties. As of December 31, 2019, $4,900,000 been drawn under those lines of credit ($2,600,000 under the unsecured and $2,300,000 under the secured lines of credit).

The Trust uses leverage in the acquisition and holding of its properties by borrowing funds and securing the repayment of borrowed funds with mortgages upon its properties. This includes use of refinancing to “pull equity” from existing properties as well as revolving credit facilities. The list of properties under “DESCRIPTION OF PROPERITES” includes information regarding such mortgage indebtedness, but in general, as of December 31, 2019, we had $387,324,648 owed under 77 loans secured by mortgages with various maturity dates. In 2020, 12 of the loans involving approximately $22,521,808 of principal are scheduled to mature. In 2021, nine loans involving approximately $30,999,753 of principal are currently scheduled to mature. In 2022, seven loans involving approximately $35,916,175 of principal are currently scheduled to mature.

The Trust seeks to pay distributions on its outstanding shares on a quarterly basis. As general partner of the UPREIT, the Trust seeks to have the UPREIT pay distributions to the Trust as general partner and to the limited partners on a quarterly basis. Each of the Trust and the UPREIT maintain a Distribution Reinvestment Plan that permits shareholders or limited partners to direct that the full amount of their distributions be reinvested into shares or limited partnership units, as applicable. In each instance, the number of shares or limited partnership units issued is based on 95% of the selling price for the shares most recently offered or contemplated to be offered by the Trust (exclusive of exclusive of subscription fees that may be payable with respect to certain classes) rounded up to the next full cent.

See “SECURITIES BEING OFFERED – Distributions” for information related to the distributions declared for payment to shareholders as well as the elections by shareholders to receive additional shares in lieu of cash payment of distribution. Participation by limited partners in the UPREIT’s distribution reinvestment plan has not been as extensive as is the participation by shareholders in the Trust’s plan. Of the distributions declared for payment in January 2020 to limited partners as of the end of 2019, and the distributions declared for payment in April 2020 to limited partners as of the end of the first quarter of 2020, approximately 27.9% and 22.1%, respectively were reinvested into additional units. This compares to approximately 60% and 56.1% of the distributions to shareholders in those two quarters being reinvested.

We anticipate participation by shareholders in the distribution reinvestment plans will continue, but if more shareholders elect to take distributions in cash and fewer UPREIT limited partners invest distributions into limited partnership units, our liquidity could be adversely affected.

RESULTS OF OPERATIONS

The following table summarizes certain information related to our operations for the periods indicated (the information for calendar years 2019, 2018 and 2017:

Our revenue from our rental operations 65,915,533 in 2019 compared to 2018 by $60,376,411 (an approximately 9.2% increase with commercial lease revenue of $32,989,358 (an approximately 9% increase) in 2019 over 2018, and residential lease revenue of 32,926,175 (an approximately 9.4% increase) in in 2019 compared to 2018. We attribute the increase in our commercial revenue to the purchase of two new properties in 2019. We attribute the increase in our residential revenue to: (i) the purchase of 414 units in the Bismarck, North Dakota; (ii) fewer new apartment units being added to the Fargo, North Dakota market (where 18 of our 33 residential properties are located); and (iii) reduction in vacancy rates for many of our properties.

While we have seen substantial increase in our commercial revenue through acquisitions of commercial properties and we believe that commercial properties can provide a greater rate of return, we understand they also carry more risk due to the properties being dependent upon a relatively smaller number of tenants than involved with residential rental properties of the type we hold. We have experienced termination of operations by a number of retail tenants in our properties and anticipate additional challenges to the retail sector due to the COVID-19 Pandemic.

Interest paid on our mortgage indebtedness is our single largest expense. We paid $15,743,462 of interest in 2017 and $16,467,680 in 2018 and $17,623,020 in 2019. The weighted average rate of interest we were paying at the end of 2018 and 2019 were approximately 4.32% and 4.36%, respectively. We had anticipated increases in interest rates in 2020 and in subsequent years; however, the actions taken by the Federal Reserve in response to the economic slowdown associated with the COVID-19 pandemic may result in lower borrowing rates in the near term. We seek to stager the maturity dates of our mortgage indebtedness to reduce the significance of sudden increases in the interest rates we might be required to pay under refinanced mortgages debt. As well, we have entered into interest rate swap contracts to modify our interest rate risks.

Real estate taxes we pay for our properties is also a significant operating expense. While many of our commercial leases require the tenant to pay as “additional rent” the property taxes charged to us, such is not the case with our residential properties. We estimate that the taxes we have paid in 2019 on properties we also held in 2018 was approximately 6.5% higher in 2019 over what we paid in 2018.

Since most of our properties are located in the upper Midwest region, weather can have a significant effect on the operating expenses for our properties. For example, the 2018-2019 winter season involved greater snowfall and colder temperatures resulting in greater utility and snow removal expenses than in the milder 2017-2018 season. The utility and snow removal expenses in the 2019-2020 winter season were even larger than those from the 2018-2019 winter season.

Revenue from our rental operations provides most of our income. We also obtain other income (or loss) from our investment in a non-controlling interest in an entity holding real estate interests, interest paid to us (primarily from loans we make), gain from sale of assets and operating guarantee payments (which are financial assurances we receive when we are purchasing newly constructed properties and the seller agrees to pay us if the rent we actually receive is less than an agreed amount specified in the operating guaranty).

In 2019, our loss from our Equity Investments was $462,725 compared to a loss of $674,558 in 2018 and $1,089,481 in 2017. These reflect the operating results for the five limited partnerships in which we hold non-controlling interests (See the following paragraph for information related to the operating results for these entities) and thus are not included in our consolidated report of income and expenses from rental operations (See the list of “Partial Interests Held by UPREIT” in the diagram under “General Overview” in this section for identification of the five entities and our ownership. We attribute the losses on our Equity Investments to the market for apartments located in Williston, North Dakota which are owned by the five entities as a result of continued reduction in the activity in the oil fields in the region compared to that when the apartments were being constructed.

In 2019 the aggregate losses for the operations by the five entities we hold non-controlling interests in was $727,264 compared to losses of $1,401,682 in 2018 and $2,144,022 in 2017 (See Footnote 8 to the Consolidated Financial Statements for condensed unaudited financial information related to the five entities). We anticipated that the Williston apartment markets would continue to improve; however, the recent substantial reduction in oil prices may have a material adverse effect on the Williston residential market. The vacancy rates with respect to the properties operated by these entities is not included in our discussion above of our overall vacancy rates, which is limited to the properties for which the UPREIT directly or indirectly completely owns. With respect to the five entities we hold non-controlling interests in, our risk of loss if the entities continue to experience negative operations is limited to the $6.275 million we have invested in the entities in the aggregate. Such investments range from $325 thousand with respect to the Bakken Heights V entity to $2.5 million with respect to the Dakota Roseland IX and XII entity.

We seek to manage interest rate risks of significant unanticipated fluctuations in our variable interest rate borrowings through the establishment of “interest rate swap contracts” and we had five of such contracts in effect, as of December 31, 2019, compared to three at the end of 2018. We had “other comprehensive income (loss) - change in fair value of interest rate swaps” of ($1,906,485) as of December 31, 2019 and ($649,039) as of December 31, 2018. Such losses are derived from the changes in the fair value of the interest rate swap contracts. Interest rate swap contracts can be traded in certain financial markets and the fair value of those contracts are established quarterly for financial reporting purposes thus creating an unrecognized gain or a loss. If the interest rate swap contracts are held to maturity there would be no gain or loss recognized on the contract. It has been our practice to hold all interest rate swap contracts to maturity.

In 2019, we sold a 38,713 square foot retail property located in Sioux Falls, South Dakota. The property was acquired in 2015 at a price of $4,500,000; however, at that time (we discontinued the accounting practice in 2017) we used an accounting guidance that required properties to be recorded in our financial statements at their appraised value as of the date of acquisition and that resulted in our having an initial book value for the property of $5,298,500. The sale in 2019 resulted in recognition of a loss of $984,867 based on the depreciated value of the property and the selling price. In addition, we incurred commissions and other transaction expenses of $270,183 in connection with the disposition of the property.

CAPITAL EXPENDITURES

Our largest capital expenditure is in the acquisition of properties. Please see “DESCRIPTIONS OF PROPERTIES” in this Offering Circular for information regarding our acquisitions.

The acquisitions involved use of cash, proceeds from mortgage financing and issuance to the prior owner of the property of limited partnership units in the UPREIT. The sources for the funding in 2019 and 2018 are described in the table below (with the dollar and Unit amounts expressed in approximate amounts):

In addition to investing in new properties, we invest funds in the improvement and maintenance of our existing properties and pay assessments imposed upon our properties by local governments for funding of the cost of improvement of infrastructure (such as roads, street lighting and storm and sanitation sewers). The following table identifies capital expenditures for various improvements made and special assessments paid in 2019 and 2018:

Site improvements are typically parking lot improvements and landscaping improvements. Building improvements range widely from modest repairs to more significant matters such as replacement of the roofs or sidings of buildings. Tenant improvement allowances represents amounts we have agreed to reimburse commercial property tenants in connection with preparation of the space they are leasing and even the costs of relocating to the space for tenants moving into our property or costs of upgrades for in connection with an extension of the term of the lease by an existing tenant. This cost is often negotiated as part of the negotiation or the lease or renewal of the lease. Flooring and appliance expenditures relate to our residential properties. We anticipate our expenditures for these may continue to increase as the residential properties we hold age as well as to increase the attractiveness of our residential properties in more competitive markets.

When a municipality or other governmental agency makes infrastructure improvements, it often assesses the cost of the improvements upon the owners of the properties adjacent to the improvements. The costs are often permitted to be paid over periods of time ranging from five to 25 years depending on the cost of the improvement. Our practice is to capitalize the amount of the assessment and recognize a corresponding liability to our balance sheet. See the footnotes to the financial statements for more details on our accounting for special assessments. The special assessments payable at the end of 2019 were $4,124 more than those at the end of 2018 due primarily to new special assessment.

The Board of Trustees may determine to establish reserves, or such reserves may be required to be established in connection with mortgage financing of certain of our properties, to fund future repairs and replacements or the making of improvements to properties.

OFF BALANCE SHEET ARRANGEMENTS

At this time we are not aware of any off-balance sheet arrangements that need to be discussed or disclosed.

Board of trustees, Executive Officers and Significant Employees

ORGANIZATIONAL STRUCTURE

The Dakota Real Estate Investment Trust (“the Trust”) is a business trust organized under the laws of North Dakota. The Trust operates under the terms of a Sixth Amended and Restated Declaration of Trust as of June 13, 2017 (the “Declaration of Trust”), and Bylaws, last amended as of April 25, 2017 (the “Bylaws”). The Declaration of Trust currently provides for the Trust to continue until the earlier of a majority vote of the shareholders with voting rights for the termination of the Trust or 21 years following the death of the last of the eight members of the original Board of Trustees; however, the Trust contemplates amending such provision to eliminate the required termination as a result of the deaths of such Trustees as is now permitted under the laws of North Dakota.

The Trust is the sole general partner of the Dakota UPREIT Limited Partnership (the “UPREIT”). The UPREIT operates in accordance with the terms of a Limited Partnership Agreement with all actions by the UPREIT being taken by the Trust as general partner. Neither the Trust, nor the UPREIT have any employees. Rather, they use staff of Dakota REIT Management, LLC (the “Advisor”) and services of various property management companies to manage the operations of the business and of the properties owned by the UPREIT.

The Declaration of Trust and the Bylaws provide for the management of the affairs of the Trust to be vested in a Board of Trustees. They further provide that the Board of Trustees is to have not less than seven and not more than 17 members with the actual number being as determined from time to time by the Board of Trustees. The Bylaws provide that, to serve as a member of the Board of Trustees, the individual must hold a minimum investment in the Trust of $100,000 or a minimum investment in the UPREIT of $200,000. Members of the Board of Trustees are elected by the voting shareholders of the Trust for one year terms at the Annual Meeting of Shareholders; however, the Board of Trustees may fill a vacancy created by the death or resignation of a member of the Board of Trustees or to fill a vacancy created by an increase in the number of members of the Board of Trustees.

The Declaration of Trust and the Bylaws require a majority of the members of the Board of Trustees to be “Independent Trustees.” The Declaration of Trust defines the term “Independent Trustee” as one who is not and has not been associated within the two prior years, directly or indirectly, with a Sponsor or the Advisor of the Trust. Such association is deemed to occur if the Trustee:

(i) owns an interest in the Sponsor, Advisor, or any of their Affiliates;

(ii) is employed by the Sponsor, Advisor or any of their Affiliates;

(iii) is an officer or director of the Sponsor, Advisor, or any of their Affiliates;

(iv) performs services, other than as a Trustee, for the Trust;

(v) is a trustee for more than three REITs organized by the Sponsor or advised by the Advisor; or

(vi) has any “material business or professional relationship” with the Sponsor, Advisor, or any of their Affiliates

A “material business or professional relationship” is deemed to exist when the relationship results in 5% or more of the gross revenue of the Trustee coming from such Sponsor, Advisor or their Affiliates or if the annual gross revenue received by the Trustee from such parties is 5% or more of the Trustee’s net worth; however, it may also be found when the revenue is less than such 5% levels.

The definition indicates an indirect relationship for the Trustee includes circumstances in which the Trustee’s spouse, parents, children, siblings, spouse’s parents, children’s spouses and spouse’ siblings have the association with a Sponsor, the Advisor, Affiliates of a Sponsor or the Advisor or the Trust.

As noted above, having been instrumental in forming the Trust affects whether an individual (or their spouse, parent, child, sibling, mother or father in-law, son or daughter in-law, or brother or sister in-law) would be considered an “Independent Trustee.” The Trust was formed in 1997. The initial members of the Board of Trustees of the Trust consisted of Ray Braun, Kermit E. Bye, Bradley C. Fay, George Gaukler, Brion Henderson, Duane Huber, Gorman King, Jr. and Stan Ryan. Messrs. Bye and Ryan are no longer members of the Board of Trustees and Messrs. Huber and King are deceased.

The Bylaws permit, but does not require establishment by the Board of Trustees of committees. The Board of Trustees has appointed Kevin Christianson, George Gaukler, Brion Henderson, Matthew Pedersen, Jerry Slusky and Gene Smestad as members of the Finance Committee for the Trust. The Finance Committee reviews and analyzes proposed investment opportunities prior to their submission to the full Board of Trustees for consideration for investment. The Board appointed John Otterstatter, Jerry Slusky and Gene Smestad to review the agreement between the Trust and the Advisor.

The Bylaws provide for the appointment by the Board of Trustees of a Chairman of the Board, a President, an Executive Vice President, a Secretary, a Treasurer and such additional officers of the Trust as the Board of Trustees designates. The table on the following page identifies the offices held and the individuals holding them.

CONFLICTS OF INTEREST OF MEMBERS OF THE BOARD OF TRUSTEES

The Declaration of Trust does not require Trustees to refrain from engaging in business activities of the types conducted by the Trust or the UPREIT and they will not have an obligation to present to the Trust or the UPREIT any investment opportunities which come to them other than in their capacities as a Trustee, regardless of whether those opportunities are within the UPREIT’s investment policies. The UPREIT holds interests in properties that may compete for tenants with adjacent or nearby properties in which a Trustee holds an interest. Certain of the Trustees, directly or through their affiliates, have organized and served as principals of other entities which may have investment objectives similar to those of the UPREIT. Such Trustees may have legal and financial obligations with respect to these entities, which are similar to their obligations owed to the Trust.

As a result of their current and possible future interests in other business activities, including in investments of the type made by the Trust or the UPREIT, Trustees will have conflicts of interest in allocating their time between their duties to the Trust and other activities in which they are involved. In particular, that may be an issue for Mr. Gaukler, Mr. Knutson and Mr. Pedersen as their duties with the Advisor involves greater demand upon their time than is required of other Trustees not associated with the Advisor. While none of the Advisor, Mr. Gaukler, Mr. Knutson and Mr. Pedersen are affiliated with any other public real estate programs, they are not prohibited from participating in any public or private investor programs that invest in similar properties on a leveraged, or mortgaged, basis; and such programs with investment objectives similar to UPREIT.

The Trust and the UPREIT have engaged in transactions with members of the Board of Trustees or their affiliates from time to time. For information regarding such transactions, refer to “COMPENSATION PAID TO ADVISOR AND OTHER PROPERTY MANAGERS” and “INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.”

The Declaration of Trust contains a number of requirements with respect to transactions between the Trust and Trustees or affiliates of Trustees and operations of the Trust in general. These include Independent Trustee review and approval of operating expenses, the terms under which the Advisor is engaged to provide services, the Trust’s investment policies, acquisitions from a Trustee or a Trustee’s affiliate and the level of debt incurred by the Trust among other matters. All transactions between a Trustee or an affiliate of a Trustee have been subject to such required Independent Trustees review and approval.

The lawyers, accountants, and other experts who have been or will be called upon to perform services for the Trust or the UPREIT may also perform services for the Advisor or affiliates of a member of the Board of Trustees. It is important to point out that such professional advisors do not represent the interests of holders of shares in the Trust or limited partnership units issued by the UPREIT.

MEMBERS OF THE TRUST’S BOARD OF TRUSTEES AND EXECUTIVE OFFICERS

The following table sets forth the name, position(s) held, age, the year first elected to the Board of Trustees and if such Trustee is an Independent Trustee for each member of the Board of Trustees as well as its executive officers.

⁽¹⁾ Affiliate of firm that has provided accounting services to the Trust

⁽²⁾ Affiliate of firm providing property management or real estate brokerage services to the Trust

⁽³⁾ Affiliate of the Advisor and property managers providing services to the Trust

Ray Braun. Mr. Braun was one of the initial members of the Board of Trustees in 1997 and continues to serve as a Trustee. In 2006, Mr. Braun retired from the Ludvigson Braun & Company, an accounting firm located in Valley City North Dakota. Mr. Braun became a Licensed Public Accountant in 1975.

Kevin Christianson. Mr. Christianson first became a member of the Board of Trustees in 1999 and has served as a member of the Trust’s Finance Committee since 1999. Mr. Christianson has served as President of Paces Lodging Corporation since 1993 and President of Property Resources Group since 2001. Paces Development Corporation is based in Fargo, North Dakota and designs and constructs commercial properties. Property Resources Group is a commercial real estate broker and property management company licensed in Arizona, Minnesota, North Dakota and South Dakota.

Bradley Fay. Mr. Fay has served on the Board of Trustees and as Secretary of the since the formation of the Trust in 1997. Mr. Fay qualifies as one of the “Independent Trustees of the Trust.” In 1989, Mr. Fay participated in the formation of Dakota Growers Pasta Company, now a subsidiary of Post Holdings. Mr. Fay is a participant in oil and gas development businesses targeting the Bakken and Three Forks reservoirs in western North Dakota.

George Gaukler. Mr. Gaukler may be viewed as the founder of the Trust and has been a member of the Board of Trustees and President of the Trust since its formation in 1997. In 2008, he was appointed to the Finance Committee. After graduation from Valley City State College in the 1960’s Mr. Gaukler formed Valley Realty, Inc. a real estate development company that subsequently expanded its services to include property management and real estate sales. Mr. Gaukler is an active developer and investor in residential and commercial real estate. Mr. Gaukler is President and an owner of the Advisor. Mr. Gaukler is also an owner of Valley Realty, Inc. (which has provided real estate brokerage services to the Trust) and both Valley Rental Service, Inc. and Horizon Real Estate Group, LLC (which provide property management services to the Trust) and several construction related businesses, including Hi Line Construction Inc., Valley Electric Service, Inc., Valley Lumber Company, East & West Excavating, LLC, JSM Woodworks, LLP, Naasz Masonry, LLC and Landscape Elements ND, LLC (which have provided products or services to the Trust).

Joe Hauer. Mr. Hauer was first elected to the Board of Trustees in 2010. Mr. Hauer qualifies as one of the “Independent Trustees of the Trust.” In 1978, Mr. Hauer established J&L Development, Inc. a real estate holding company with properties in Arizona and North Dakota. Along with other members of his family, he participates in Arikota, LLP, another real estate holding company. He has also engaged in the printing business through United Printing with offices in Bismarck, North Dakota and Phoenix, Arizona.

Kenneth Heen. Mr. Heen joined the Board of Trustees in 2015. Mr. Heen qualifies as one of the “Independent Trustees of the Trust.” Mr. Heen’s career has principally focused on agricultural lending. Mr. Heen retired as President and Chief Executive Officer of American State Bank and Trust Co. of Williston, North Dakota in 2012, which he joined in 1991, but continues to serve as a member of its board of directors.

Brion Henderson. Mr. Henderson was one of the initial members of the Board of Trustees in 1997 and he was appointed as Chairman of the Board in 2016 and as a member of the Finance Committee in 1999. Mr. Henderson qualifies as one of the “Independent Trustees of the Trust.” He has been the President of Evergreen Grain Co. located in Tower City, North Dakota since 1985. Evergreen Grain Co. engages in the shipping and storage of grain.

Stan Johnson. Mr. Johnson was elected to the Board of Trustees in 2002. Mr. Johnson qualifies as one of the “Independent Trustees of the Trust.” Since the 1980’s, Mr. Johnson has engaged in the insurance agency business. His independent agency has been located in Fargo, North Dakota since 1987.

Jim Knutson. In 2003, Mr. Knutson was appointed as the Executive Vice President of the Trust and was first elected to the Board of Trustees in 2012. Mr. Knutson joined Valley Realty, Inc. in 1973 and was an owner of it until he sold his interest in the corporation in 2018. Valley Realty, Inc. provides property management, finance and construction management services to owners and operators of multi-family residential and other commercial properties, including the UPREIT. Mr. Knutson is an owner of the Advisor and was its Executive Vice President until January 1, 2020. Mr. Knutson was an owner of Valley Rental Service, Inc. and Horizon Real Estate Group, LLC, which provided property management services to the UPREIT, until he sold his interests in those companies in 2018.

Craig Lloyd. Mr. Lloyd joined the Board of Trustees in 2017. He is Chairman of the Lloyd Companies, based in Sioux Falls, South Dakota, a diversified real estate development, marketing and management firm. Mr. Lloyd has coordinated the construction and development of over 6,000 apartment units, over 1.5 million square feet of office and retail space and the development of more than 600 acres of land for mixed use purposes. He is licensed as a real estate broker in Iowa, Minnesota, Nebraska, North Dakota and South Dakota.

Jon Otterstatter. Mr. Otterstatter joined the Board of Trustees in 2018. He is a co-founder of Preventice Technologies, Inc. and currently serves as its Chief Executive Officer and is a member of its Board of Directors. Preventice has offices in Rochester, Minnesota and Houston, Texas. Preventice offers remote monitoring devices and other products and services used in health care. Prior to founding Preventice, Mr. Otterstatter held executive positions with technology firms.

Matthew Pedersen. Mr. Pedersen was elected to the Board of Trustees and was appointed to the Finance Committee in 2015. Mr. Pedersen became a Certified Public Accountant in 1996 and was employed by Arthur Andersen’s Washington, D.C. office from 1996 to 1998 where he focused on private equity, real estate and securities offerings. In 1998, Mr. Pedersen joined Great Plains Software and then Microsoft following its acquisition of Great Plains Software in 2001. In 2008, Mr. Pedersen with two other co-investors established a real estate investment company with 250 apartment units located in eastern North Dakota. In 2019, the Advisor appointed Mr. Pedersen as its Chief Investment Officer. In January 2015, he acquired ownership of Ludvigson Braun & Co. (see information under biographical disclosure for Ray Braun). Effective as of January 1, 2020, Mr. Pedersen became an owner of the Advisor and its Executive Vice President.

Roy Sheppard. Mr. Sheppard has served as a member of the Board of Trustees since 1998. Mr. Shepard qualifies as one of the “Independent Trustees” of the Trust. He is the managing partner of CSi Computers, a computer and networking sales and service firm located in Jamestown, North Dakota. He also is an owner and President of Cable Services, Inc., a cable television and internet provider also based in Jamestown, North Dakota.

Jerry Slusky. Mr. Slusky was elected to the Board of Trustees in 2015 and, in 2018, he was appointed to the Finance Committee. Mr. Slusky qualifies as one of the “Independent Trustees” of the Trust. Mr. Slusky is licensed to practice law in the states of Nebraska, Iowa and Florida. He is currently a member of the Smith, Slusky, Pohern & Rogers, LLP firm located in Omaha, Nebraska. Mr. Slusky’s practice focuses on real estate planning and development, zoning and finance of real estate investments.

Gene Smestad. Mr. Smestad has been a member of the Board of Trustees since 2010. Mr. Smestad qualifies as one of the “Independent Trustees” of the Trust. He was appointed to the Finance Committee in 2010 and in 2016 was appointed as Vice-Chairman of the Board. In 2008, he retired after a 32 year career with AgCounty Farm Credit Services of Fargo, North Dakota. At the time of his retirement, Mr. Smestad was the President and Chief Executive Officer of the farmer owned lender with management over 28 branch offices located in eastern North Dakota and west central Minnesota.

Liability of the Members of the Board of Trustees

Members of the Board of Trustees are to have no liability for any loss suffered by the Trust which arises from the action or inaction of them, if they, in good faith determined that their conduct was in the best interest of the Trust and such conduct did not constitute negligence or misconduct.

Pursuant to the terms of the Declaration of Trust, the Trust is to indemnify the Trustees with respect to suits or proceedings or against whom a claim or liability is asserted by reason that he was or is a Trustee or Affiliate. However, indemnification by the Trust will be provided only if:

SIGNIFICANT STAFF OF THE ADVISOR

Neither the Trust nor the UPREIT has employees. They rely upon the Advisor and its staff to conduct the operations of the Trust and the UPREIT. George Gaukler, Jim Knutson and Matthew Pedersen, who are officers of the Trust and members of its Board of Trustees (see their biographical information above) are owners of the Advisor. The Advisor currently has eleven full time employees, including the following individuals:

Danel Jung. Ms. Jung joined the Advisor in 2019 as its Chief Operating Officer. After earning her degree in Computer Science from North Dakota State University in 2002 Ms. Jung joined Microsoft. During her tenure at Microsoft Ms. Jung contributed to several global integrations, defining business strategy and operations, and earned the Microsoft Platinum Award in 2018 for her leadership in defining new offerings &; optimizing operations to contribute significantly to Microsoft’s bottom line. Ms. Jung has been granted a profits interest in the Advisor.

James Haley. Mr. Haley joined the Advisor as its Chief Financial Officer in 2007. After receiving his degree in Accounting from Central Missouri State University in 1992 he worked in public accounting and received his certified public accountant designation in 1993. In 1995, Mr. Haley located in Fargo, North Dakota and participated in real estate development and construction. Mr. Haley became one of the owners of the Advisor in 2012.

Mark Richman. Mr. Richman joined the Advisor in 2011 and is its Director of Business Development. After graduating from North Dakota State University in 1976, Mr. Richman began his career in commercial real estate. He holds designations as a Certified Commercial Investment Member from the CCIM Institute and a Certified Property Manager from the Institute of Real Estate Management.

COMPENSATION OF TRUSTEES AND EXECUTIVE OFFICERS

TRUSTEE COMPENSATION

Members of our Board of Trustees, other than George Gaukler, Jim Knutson and Matthew Pedersen (the “Non-Compensated Trustees”) are compensated based upon their attendance at meetings held in person or by telephone conference of the full Board of Trustees or of a committee established by the Board of Trustees. In 2018 and 2019, the aggregate fees paid to members of our Board of Trustees for their attendance at meetings was $84,502 and $75,024, respectively. Members of the Board of Trustees are reimbursed for travel expenses incurred in attending meetings.

Effective July 1, 2016, we modified the compensation of members of our Board of Trustees to be:

The table below sets forth the compensation for each of the three highest paid persons who are Trustees for the year ended December 31, 2019.

Mr. Smestad, Mr. Henderson and Mr. Slusky are members of the Finance Committee and received $400 for attending each of three meetings of the Finance Committee during 2019. Mr. Smestad and Mr. Slusky were also members of the committee appointed by the Board of Trustees to review the terms of the agreement with the Advisor and received $800 in connection with that committee.

COMPENSATION OF EXECUTIVE OFFICERS

The Trust has five executive officers. They are the Chairman of the Board, a Vice Chairman of the Board, a President, an Executive Vice President, Treasurer and a Secretary. No compensation has been paid with respect to those positions; however, the Chairman of the Board receives $1,200 for participation in regular meetings of the Board of Trustees while other Trustees will receive $1,000 for their attendance.

George Gaukler is the President of the Trust and Jim Knutson is Executive Vice President of the Trust. The Trust does not pay compensation to Mr. Gaukler or Mr. Knutson for acting as officers Mr. Gaukler and Mr. Knutson are both owners of the Advisor. For information regarding the compensation paid to the Advisor by the Trust, see “COMPENSATION PAID TO ADVISOR AND OTHER PROPERTY MANAGERS”.

SECURITY OWNERSHIP OF Management and certain securityholders

The Bylaws of the Trust requires that nominees to serve as Trustees must hold an investment of not less than, $100,000 in the Trust or not less than $200,000 in the UPREIT. The following table depicts the security ownership of the Trustees of the Trust in the Trust and in Limited Partnership Units in the UPREIT, as of March 31, 2020 and includes Shares and Units issued under the reinvestment plans of the Trust and the UPREIT to participants under such plans with respect to shares or units held as of such date. No one holds Class A Shares, Class I and UPREIT Units that, if converted, would result in ownership of 10% or more of the voting power in the Trust. The Trust’s address of 3003 32nd Avenue South, Suite 250, Fargo, North Dakota 58103 is the “business address” for each of the Trustees named below.