##### Table of Contents









U.S. SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                       
|---------- |  | --------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                       
|þ          |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2004                                           
|          
|or        
|          
|o          |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-28378


AMREIT


(Exact name of registrant as specified in its charter)


|                                                                                        |  |                                         
|--------------------------------------------------------------------------------------- |  | ----------------------------------------
|Texas                                                                                   |  | 76-0410050                              
|(State or other jurisdiction of
    incorporation or organization)                      |  | (I.R.S. Employer
    Identification No.)
|                                                                                       
|8 Greenway Plaza, Suite 1000
    Houston, Texas(Address of principal executive offices) |  | 77046(Zip Code)                         

Registrants telephone number, including area code:


(713) 850-1400


Section 12 (b) of the Act:


|                                                            |  |                                     
|----------------------------------------------------------- |  | ------------------------------------
|Title of Class                                              |  | Name of Exchange on Which Registered
|                                                            |  |                                     
|Securities registered pursuant to
    Class A Common Shares |  | American Stock Exchange             

Securities registered under Section 12(g) of the
Exchange Act:


None


þ o


þ


o þ






DOCUMENTS INCORPORATED BY REFERENCE












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TABLE OF CONTENTS



|                                                                            |                                                                                                         |  |  |  |  |  |  | 
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                     
|                                                                            | Item 1. Description of Business                                                                        
|                                                                            | Item 2. Description of Property                                                                        
|                                                                            | Item 3. Legal Proceedings                                                                              
|                                                                            | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                                                                    
|                                                                            | Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities 
|                                                                            | Item 6. Selected Financial Data                                                                        
|                                                                            | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                                                            | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                    
|                                                                            | Item 8. Financial Statements and Supplementary Data                                                    
|                                                                            | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|                                                                            | Item 9A. Controls and Procedures                                                                       
|                                                                            | Item 9B. Other Information                                                                             
|PART III                                                                   
|                                                                            | Item 10. Directors and Trust Managers of the Registrant                                                
|                                                                            | Item 11. Executive Compensation                                                                        
|                                                                            | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                                            | Item 13. Certain Relationships and Related Transactions                                                
|                                                                            | Item 14. Principal Accountant Fees and Services                                                        
|PART IV                                                                    
|                                                                            | Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.                            
|SIGNATURES                                                                 
|Report of Independent Registered Public Accounting Firm                    
|PART I -- FINANCIAL INFORMATION                                            
|                                                                            | Item 1. Financial Statements                                                                           
|CONSOLIDATED BALANCE SHEETS                                                
|CONSOLIDATED STATEMENTS OF OPERATIONS                                      
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY                            
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                      
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                 
|SCHEDULE III -- Consolidated Real Estate Owned and Accumulated Depreciation
|Certification of CEO Pursuant to Rule 13a-14(a)                            
|Certification of CFO Pursuant to Rule 13a-14(a)                            
|Certification of CEO Pursuant to Section 906                               
|Certification of CFO Pursuant to Section 906                               



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PART I







|        |                        
|------- | -----------------------
|Item 1. | Description of Business

General


tm






Our Strategy












| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | economic, demographic and regulatory conditions in the
    propertys local and regional market;     
|
| |  | location, environmental condition, construction quality and
    design and condition of the property;
|
| |  | current and projected cash flow of the property and the
    potential to increase cash flow;         
|
| |  | potential for capital appreciation of the property;                                                  

2



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| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | terms of tenant leases, including the relationship between the
    propertys current rents and market rents and the ability
    to increase rents upon lease rollover;
|
| |  | occupancy and demand by tenants for properties of a similar type
    in the market area;                                                                               
|
| |  | potential to complete a strategic renovation, expansion or
    re-tenanting of the property;                                                                           
|
| |  | the propertys current expense structure and the potential
    to increase operating margins; and                                                                      
|
| |  | competition from comparable properties in the market area.                                                                                                             





Our Structure






| |   |                               
| | - | ------------------------------
| |  | Real Estate Operating Business
|
| |  | Securities Business, and      
|
| |  | Retail Partnership Business   






3



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|                    |          
|------------------- | ---------
|(PORTFOLIO GRAPHIC) | Portfolio











4



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|                                                        |                                              
|------------------------------------------------------- | ---------------------------------------------
|(REAL ESTATE OPERATING AND DEVELOPMENT COMPANY GRAPHIC) | Real Estate Operating and Development Company











|                             |                   
|---------------------------- | ------------------
|(SECURITIES COMPANY GRAPHIC) | Securities Company



5



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|                              |                    
|----------------------------- | -------------------
|(RETAIL PARTNERSHIPS GRAPHIC) | Retail Partnerships







6



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Competition




Compliance with Governmental Regulations






Employees




Financial Information




7



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|        |                        
|------- | -----------------------
|Item 2. | Description of Property

General






Land


Buildings


Leases


Location of Properties






th th


8



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th




|                                  |                                         |      |         |  |       |  |    |     |  |  |          |         |  |  |     |    |  
|--------------------------------- | --------------------------------------- | ---- | ------- |  | ----- |  | -- | --- |  |  | -------- | ------- |  |  | --- | -- | -
|Grocery-Anchored Shopping Centers |                                         | City |         |  | State |  |    | GLA |  |  | % Leased |        
|                                  |                                         |      |         |  |       |  |    |     |  |  |          |        
|MacArthur Park                    |                                         |      | Dallas  |  |       |  | TX |     |  |  | 198,443  |         |  |  | 100 | % 
|Plaza in the Park                 |                                         |      | Houston |  |       |  | TX |     |  |  | 138,663  |         |  |  | 95  | % 
|Cinco Ranch                       |                                         |      | Houston |  |       |  | TX |     |  |  | 97,297   |         |  |  | 100 | % 
|                                  |                                         |      |         |  |       |  |    |     |  |  |          |        
|                                  | Grocery-Anchored Shopping Centers Total |      |         |  |       |  |    |     |  |  |          | 434,403 |  |  |     | 98 | %

|                              |                                     |      |               |  |       |  |    |     |  |  |          |         |  |  |     |    |  
|----------------------------- | ----------------------------------- | ---- | ------------- |  | ----- |  | -- | --- |  |  | -------- | ------- |  |  | --- | -- | -
|Multi-Tenant Shopping Centers |                                     | City |               |  | State |  |    | GLA |  |  | % Leased |        
|                              |                                     |      |               |  |       |  |    |     |  |  |          |        
|Bakery Square                 |                                     |      | Houston       |  |       |  | TX |     |  |  | 34,614   |         |  |  | 100 | % 
|Uptown Plaza                  |                                     |      | Houston       |  |       |  | TX |     |  |  | 26,400   |         |  |  | 95  | % 
|Woodlands Plaza               |                                     |      | The Woodlands |  |       |  | TX |     |  |  | 20,018   |         |  |  | 100 | % 
|Sugarland Plaza               |                                     |      | Sugarland     |  |       |  | TX |     |  |  | 16,750   |         |  |  | 100 | % 
|Terrace Shops                 |                                     |      | Houston       |  |       |  | TX |     |  |  | 16,395   |         |  |  | 100 | % 
|Copperfield Medical           |                                     |      | Houston       |  |       |  | TX |     |  |  | 14,000   |         |  |  | 100 | % 
|Courtyard at Post Oak         |                                     |      | Houston       |  |       |  | TX |     |  |  | 13,597   |         |  |  | 100 | % 
|San Felipe and Winrock**      |                                     |      | Houston       |  |       |  | TX |     |  |  | 8,400    |         |  |  | **  |   
|                              |                                     |      |               |  |       |  |    |     |  |  |          |        
|                              | Multi-Tenant Shopping Centers Total |      |               |  |       |  |    |     |  |  |          | 150,174 |  |  |     | 99 | %

|                              |                                     |      |                |  |       |  |    |     |  |  |          |        |  |  |     |     |  
|----------------------------- | ----------------------------------- | ---- | -------------- |  | ----- |  | -- | --- |  |  | -------- | ------ |  |  | --- | --- | -
|Single-Tenant (Ground Leases) |                                     | City |                |  | State |  |    | GLA |  |  | % Leased |       
|                              |                                     |      |                |  |       |  |    |     |  |  |          |       
|CVS Corporation               |                                     |      | Houston        |  |       |  | TX |     |  |  | 13,824   |        |  |  | 100 | %  
|Darden Restaurants            |                                     |      | Peachtree City |  |       |  | GA |     |  |  | 6,867    |        |  |  | 100 | %  
|Carlson Restaurants           |                                     |      | Hanover        |  |       |  | MD |     |  |  | 6,802    |        |  |  | 100 | %  
|410-Blanco**                  |                                     |      | San Antonio    |  |       |  | TX |     |  |  | 5,000    |        |  |  | **  |    
|Bank of America               |                                     |      | Houston        |  |       |  | TX |     |  |  | 4,420    |        |  |  | 100 | %  
|Comerica Bank**               |                                     |      | Houston        |  |       |  | TX |     |  |  | 4,277    |        |  |  | **  |    
|Washington Mutual             |                                     |      | Houston        |  |       |  | TX |     |  |  | 3,685    |        |  |  | 100 | %  
|Washington Mutual             |                                     |      | The Woodlands  |  |       |  | TX |     |  |  | 3,685    |        |  |  | 100 | %  
|Yum Brands*                   |                                     |      | Houston        |  |       |  | TX |     |  |  | 2,818    |        |  |  | 100 | %  
|                              |                                     |      |                |  |       |  |    |     |  |  |          |       
|                              | Single-Tenant (Ground Leases) Total |      |                |  |       |  |    |     |  |  |          | 51,378 |  |  |     | 100 | %

9



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|                               |                                  |      |              |  |       |  |         |     |  |  |          |         |  |  |     |    |  
|------------------------------ | -------------------------------- | ---- | ------------ |  | ----- |  | ------- | --- |  |  | -------- | ------- |  |  | --- | -- | -
|Single-Tenant (Fee Simple)     |                                  | City |              |  | State |  |         | GLA |  |  | % Leased |        
|                               |                                  |      |              |  |       |  |         |     |  |  |          |        
|Vacant*                        |                                  |      | Baton Rouge  |  |       |  | LA      |     |  |  | 20,575   |         |  |  | 0   | % 
|Baptist Memorial Medical Plaza |                                  |      | Memphis      |  |       |  | TN      |     |  |  | 15,000   |         |  |  | 100 | % 
|Comp USA                       |                                  |      | Roseville    |  |       |  | MN      |     |  |  | 15,000   |         |  |  | 100 | % 
|Energy Wellness                |                                  |      | Sugarland    |  |       |  | TX      |     |  |  | 15,000   |         |  |  | 100 | % 
|Transworld Entertainment       |                                  |      | Independence |  |       |  | MO      |     |  |  | 14,047   |         |  |  | 100 | % 
|Golden Corral                  |                                  |      | Houston      |  |       |  | TX      |     |  |  | 12,000   |         |  |  | 100 | % 
|Golden Corral                  |                                  |      | Humble       |  |       |  | TX      |     |  |  | 12,000   |         |  |  | 100 | % 
|Carlson Restaurants            |                                  |      | Houston      |  |       |  | TX      |     |  |  | 8,500    |         |  |  | 100 | % 
|Pier One Imports Inc.          |                                  |      | Longmont     |  |       |  | CO      |     |  |  | 8,014    |         |  |  | 100 | % 
|Hollywood Entertainment Corp.  |                                  |      | Lafayette    |  |       |  | LA      |     |  |  | 7,488    |         |  |  | 100 | % 
|Hollywood Entertainment Corp.  |                                  |      | Ridgeland    |  |       |  | MS      |     |  |  | 7,488    |         |  |  | 100 | % 
|Radio Shack Corporation        |                                  |      | Dallas       |  |       |  | TX      |     |  |  | 5,200    |         |  |  | 100 | % 
|IHOP Corporation #1483         |                                  |      | Sugarland    |  |       |  | TX      |     |  |  | 4,020    |         |  |  | 100 | % 
|IHOP Corporation #1737         |                                  |      | Centerville  |  |       |  | UT      |     |  |  | 4,020    |         |  |  | 100 | % 
|IHOP Corporation #4462         |                                  |      | Memphis      |  |       |  | TN      |     |  |  | 4,020    |         |  |  | 100 | % 
|IHOP Corporation #5318         |                                  |      | Topeka       |  |       |  | KS      |     |  |  | 4,020    |         |  |  | 100 | % 
|Payless Shoesources Inc.       |                                  |      | Austin       |  |       |  | TX      |     |  |  | 4,000    |         |  |  | 100 | % 
|AFC, Inc.                      |                                  |      | Atlanta      |  |       |  | GA      |     |  |  | 2,583    |         |  |  | 100 | % 
|Jack in the Box Inc.           |                                  |      | Dallas       |  |       |  | TX      |     |  |  | 2,238    |         |  |  | 100 | % 
|Advance Auto* ** ****          |                                  |      | Various      |  |       |  | Various |     |  |  | 49,000   |         |  |  | **  |   
|                               |                                  |      |              |  |       |  |         |     |  |  |          |        
|                               | Single-Tenant (Fee Simple) Total |      |              |  |       |  |         |     |  |  |          | 214,213 |  |  |     | 88 | %

|                          |                            |      |         |  |       |  |         |     |  |  |          |         |  |  |     |    |  
|------------------------- | -------------------------- | ---- | ------- |  | ----- |  | ------- | --- |  |  | -------- | ------- |  |  | --- | -- | -
|Single-Tenant (Leasehold) |                            | City |         |  | State |  |         | GLA |  |  | % Leased |        
|                          |                            |      |         |  |       |  |         |     |  |  |          |        
|IHOP Corporation***       |                            |      | Various |  |       |  | Various |     |  |  | 60,300   |         |  |  | 100 | % 
|                          | Company Total GLA/% Leased |      |         |  |       |  |         |     |  |  |          | 910,468 |  |  |     | 97 | %
|                          |                            |      |         |  |       |  |         |     |  |  |          |        






| |   |              
| | - | -------------
| | * | Held for Sale



| |    |                                                                        
| | -- | -----------------------------------------------------------------------
| | ** | Under Development (GLA represents proposed leasable square
    footage)



|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|*** | IHOP leasehold properties are located in NM, LA, OR, VA, TX, CA,
    TN CO, VA, NY, OR, KS and MO. Each of the properties has a GLA
    of 4,020 square feet.



|     |                                                                                                                      
|---- | ---------------------------------------------------------------------------------------------------------------------
|**** | Advance Auto properties are located in MO and IL. Each of the
    properties has a proposed GLA of 7,000 square feet.

10



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|                |             |        |        |       |               |  |       |      |  
|--------------- | ----------- | ------ | ------ | ----- | ------------- |  | ----- | ---- | -
|                |             | Rental |        |       | Rental        | 
|State/City      |             | Income |        |       | Concentration | 
|                |             |        |        |       |               | 
|Texas  Houston |             | $      | 7,879  |       |               |  | 67.4  | %   
|Texas  Dallas  |             |        | 244    |       |               |  | 2.1   | %   
|Texas  other   |             |        | 323    |       |               |  | 2.8   | %   
|                |             |        |        |       |               | 
|                | Total Texas |        |        | 8,446 |               |  |       | 72.3 | %
|                |             |        |        |       |               | 
|Louisiana       |             |        | 373    |       |               |  | 3.2   | %   
|Tennessee       |             |        | 517    |       |               |  | 4.4   | %   
|Minnesota       |             |        | 268    |       |               |  | 2.3   | %   
|Missouri        |             |        | 256    |       |               |  | 2.2   | %   
|Kansas          |             |        | 253    |       |               |  | 2.2   | %   
|Colorado        |             |        | 246    |       |               |  | 2.1   | %   
|Georgia         |             |        | 198    |       |               |  | 1.7   | %   
|Oregon          |             |        | 181    |       |               |  | 1.6   | %   
|Virginia        |             |        | 172    |       |               |  | 1.5   | %   
|Utah            |             |        | 161    |       |               |  | 1.4   | %   
|Mississippi     |             |        | 155    |       |               |  | 1.3   | %   
|Maryland        |             |        | 142    |       |               |  | 1.2   | %   
|New York        |             |        | 124    |       |               |  | 1.1   | %   
|California      |             |        | 111    |       |               |  | 0.9   | %   
|New Mexico      |             |        | 85     |       |               |  | 0.6   | %   
|Illinois        |             |        |       |       |               |  |      |     
|                |             |        |        |       |               | 
|Total           |             | $      | 11,688 |       |               |  | 100.0 | %   
|                |             |        |        |       |               | 

Grocery-anchored Shopping Centers


www.sec.gov






11



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Multi-tenant Shopping Centers








Single-tenant Properties








Land to be Developed








12



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Property Acquisitions and Dispositions






| |                                  
| | ---------------------------------
| | Grocery-anchored Shopping Centers









| |                              
| | -----------------------------
| | Multi-tenant Shopping Centers





13



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| |                         
| | ------------------------
| | Single-tenant Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders






PART II







|        |                                                                                                   
|------- | --------------------------------------------------------------------------------------------------
|Item 5. | Market for Common Equity, Related Stockholder Matters
    and Issuer Purchase of Equity Securities



|                |                |      |   |      |     |  |   |           |  |  |   |      | 
|--------------- | -------------- | ---- | - | ---- | --- |  | - | --------- |  |  | - | ---- | 
|Calendar Period |                | High |   |      | Low |  |   | Dividends | 
|                |                |      |   |      |     |  |   |           | 
|2004            |                |      |   |      |     |  |   |           |  |  |   |     
|                | Fourth Quarter |      | $ | 8.32 |     |  | $ | 7.45      |  |  | $ | .122 | 
|                | Third Quarter  |      | $ | 8.20 |     |  | $ | 6.60      |  |  | $ | .120 | 
|                | Second Quarter |      | $ | 7.35 |     |  | $ | 6.30      |  |  | $ | .118 | 
|                | First Quarter  |      | $ | 7.20 |     |  | $ | 6.25      |  |  | $ | .116 | 
|2003            |                |      |   |      |     |  |   |           |  |  |   |     
|                | Fourth Quarter |      | $ | 6.68 |     |  | $ | 6.30      |  |  | $ | .114 | 
|                | Third Quarter  |      | $ | 6.56 |     |  | $ | 6.15      |  |  | $ | .112 | 
|                | Second Quarter |      | $ | 6.80 |     |  | $ | 6.10      |  |  | $ | .111 | 
|                | First Quarter  |      | $ | 6.80 |     |  | $ | 6.05      |  |  | $ | .109 | 







14



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15



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



AmREIT


Selected Historical


Consolidated Financial and Other Data


|                                                                   |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |           |            |   |   |           |            |  
|------------------------------------------------------------------ | ------------------------------------------------------- | ------------ | ---------- | ----------- | ------------ | - | ---------- | ------------ | - | - | ------------ | ---------- | - | ------------ | --------- | ---------- | - | - | --------- | ---------- | -
|                                                                   |                                                         | December 31, |            |             | December 31, |   |            | December 31, |   |   | December 31, |            |   | December 31, |          
|                                                                   |                                                         | 2004         |            |             | 2003         |   |            | 2002         |   |   | 2001         |            |   | 2000         |          
|                                                                   |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |          
|Balance sheet data (at end of period)                              |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |           |            |   |   |           |           
|                                                                   | Real estate investments before accumulated depreciation |              | $          | 160,592,291 |              |   | $          | 70,539,056   |   |   | $            | 47,979,848 |   |              | $         | 30,726,025 |   |   | $         | 30,020,340 |  
|                                                                   | Total assets                                            |              |            | 203,150,530 |              |   |            | 101,326,607  |   |   |              | 73,975,753 |   |              |           | 38,828,393 |   |   |           | 36,522,276 |  
|                                                                   | Notes payable                                           |              |            | 105,964,278 |              |   |            | 48,484,625   |   |   |              | 33,586,085 |   |              |           | 16,971,549 |   |   |           | 15,472,183 |  
|Other data                                                         |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |           |            |   |   |           |           
|                                                                   | Funds from operations, available to class A(1)          |              |            | (2,032,000  | )            |   |            | 603,000      |   |   |              | (845,000   | ) |              |           | 979,000    |   |   |           | 223,000    |  
|                                                                   | Adjusted funds from operations, available to class A(2) |              |            | 2,070,000   |              |   |            | 1,520,000    |   |   |              | 1,060,000  |   |              |           | 979,000    |   |   |           | 223,000    |  
|Operating Data                                                     |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |           |            |   |   |           |           
|Revenues                                                           |                                                         |              | 21,758,780 |             |              |   | 10,289,742 |              |   |   | 6,099,654    |            |   |              | 4,350,966 |            |   |   | 2,345,390 |           
|Operating expenses(3)                                              |                                                         |              | 18,591,002 |             |              |   | 8,686,171  |              |   |   | 6,524,874    |            |   |              | 3,274,324 |            |   |   | 2,137,379 |           
|Other expenses (income)                                            |                                                         |              | 2,457,271  |             |              |   | 1,773,257  |              |   |   | 1,578,472    |            |   |              | 1,735,565 |            |   |   | 1,866,743 |           
|Income from discontinued operations(4)                             |                                                         |              | (1,949,020 | )           |              |   | 1,381,190  |              |   |   | 1,344,919    |            |   |              | 1,449,431 |            |   |   | 1,446,240 |           
|Gain (loss) on sale of real estate acquired for resale             |                                                         |              | 1,826,500  |             |              |   | 787,245    |              |   |   |             |            |   |              |          |            |   |   |          |           
|                                                                   |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |          
|Net income (loss)                                                  |                                                         | $            | 587,987    |             |              | $ | 1,998,749  |              |   | $ | (658,773     | )          |   | $            | 790,508   |            |   | $ | (212,492  | )         
|Net income (loss) available to class A shareholders                |                                                         | $            | (3,865,575 | )           |              | $ | 56,093     |              |   | $ | (1,524,066   | )          |   | $            | 790,508   |            |   | $ | (212,492  | )         
|                                                                   |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |          
|Net (loss) income per class A common share 
    basic and diluted |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |           |            |   |   |           |           
|                                                                   | (Loss) income before discontinued operations            |              | $          | (1.15       | )            |   | $          | (0.76        | ) |   | $            | (1.16      | ) |              | $         | (0.28      | ) |   | $         | (0.70      | )
|                                                                   | (Loss) income from discontinued operations              |              |            | (0.04       | )            |   |            | 0.78         |   |   |              | 0.54       |   |              |           | 0.62       |   |   |           | 0.61       |  
|                                                                   |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |          
|Net income (loss)                                                  |                                                         | $            | (1.19      | )           |              | $ | 0.02       |              |   | $ | (0.62        | )          |   | $            | 0.34      |            |   | $ | (0.09     | )         
|                                                                   |                                                         |              |            |             |              |   |            |              |   |   |              |            |   |              |          
|Distributions per share  class A                                  |                                                         |              | 0.48       |             |              | $ | 0.45       |              |   | $ | 0.35         |            |   | $            | 0.26      |            |   | $ | 0.10      |           






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | AmREIT has adopted the National Association of Real Estate
    Investment Trusts (NAREIT) definition of FFO. FFO is
    calculated as net income (computed in accordance with generally
    accepted accounting principles) excluding gains or losses from
    sales of depreciable operating property, depreciation and
    amortization of real estate assets, and excluding results
    defined as extraordinary items under generally
    accepted accounting principles. The Company considers FFO to be
    an appropriate supplemental measure of operating performance
    because, by excluding gains or losses on dispositions and
    excluding depreciation, FFO is a helpful tool that can assist in
    the comparison of the operating performance of a companys
    real estate between periods, or as compared to different
    companies. FFO should not be considered an alternative to cash
    flows from operating, investing and financing activities in
    accordance with general accepted accounting principles and is
    not necessarily indicative of cash available to meet cash needs.
    AmREITs computation of FFO may differ from the methodology
    for calculating FFO utilized by other equity REITs and,
    therefore, may not be comparable to such other REITS. FFO is not
    defined by generally accepted accounting principles and should
    not be considered an alternative to net income as an indication
    of AmREITs performance, or of cash flows as a measure of
    liquidity. Please see reconciliation of Income (loss) before
    discontinued operations to FFO in Item 7 below under Funds
    From Operations.
|   
|(2) | Based on the adherence to the NAREIT definition of FFO, we have
    not added back the $1.7 million, $915 thousand or
    $1.90 million charge to earnings during 2004, 2003 and
    2002, respectively, resulting from shares issued to
    Mr. Taylor as deferred merger cost stemming from the sale
    of his advisory company to AmREIT in June 1998. Additionally, we
    have not added back the $2.4 million charge to earnings for
    the year ended December 31, 2004, resulting from two asset
    impairments and corresponding write-downs of value. Adding these
    charges back to earnings would result in Adjusted FFO of
    $2.07 million, $1.52 million and $1.06 million,
    for the years ended December 31, 2004, 2003 and 2002,
    respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

16



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##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Operating expenses for the years ended December 31, 2004,
    2003 and 2002 include a charge of $1.7 million, $915
    thousand and $1.9 million, respectively, resulting from
    shares issued to Mr. Taylor as deferred merger cost
    stemming from the sale of his advisory company to AmREIT in June
    1998.
|   
|(4) | Income from discontinued operations in 2004 includes an
    impairment charge of $2.4 million, resulting from two asset
    impairments and corresponding write-downs of value.                                                                                                                                      

17



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Forward-Looking Statements






Executive Overview








18



---



##### Table of Contents









Summary of Critical Accounting Policies




Revenue Recognition




Real Estate Valuation


19



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##### Table of Contents







Valuation of Receivables


Real Estate Acquisitions Business
Combinations


Liquidity and Capital Resources




|                     |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                     |  | 2004 |         |   | 2003 |   |         | 2002 | 
|                     |  |      |         |   |      |   |         |      | 
|Operating activities |  | $    | 7,250   |   |      | $ | 925     |      |  | $ | 3,459   |  
|Investing activities |  |      | (53,665 | ) |      |   | (21,719 | )    |  |   | (14,851 | )
|Financing activities |  |      | 47,344  |   |      |   | 20,319  |      |  |   | 13,672  |  



20



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##### Table of Contents





tm










21



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##### Table of Contents







Contractual Obligations




|                                        |                            |      |        |        |      |   |       |      |  |   |       |   |  |      |        |   |            |   |       |       |  |   |        |     |  |   |         |        | 
|--------------------------------------- | -------------------------- | ---- | ------ | ------ | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ------ | - | ---------- | - | ----- | ----- |  | - | ------ | --- |  | - | ------- | ------ | 
|                                        |                            | 2005 |        |        | 2006 |   |       | 2007 |  |   | 2008  |   |  | 2009 |        |   | Thereafter |   |       | Total | 
|                                        |                            |      |        |        |      |   |       |      |  |   |       |   |  |      |        |   |            |   |       |       | 
|Unsecured debt:                         |                            |      |        |        |      |   |       |      |  |   |       |   |  |      |        |   |            |   |       |       |  |   |        |     |  |   |         |       
|                                        | Revolving credit facility* |      | $      | 38,014 |      |   | $     |     |  |   | $     |  |  |      | $      |  |            |   | $     |      |  |   | $      |    |  |   | $       | 38,014 | 
|                                        | 5.46% dissenter notes      |      |        |       |      |   |       |     |  |   |       |  |  |      |        |  |            |   |       |      |  |   |        | 760 |  |   |         | 760    | 
|Secured debt**                          |                            |      | 1,103  |        |      |   | 1,184 |      |  |   | 1,271 |   |  |      | 14,775 |   |            |   | 2,338 |       |  |   | 45,186 |     |  |   | 65,857  |       
|Interest*                               |                            |      | 5,577  |        |      |   | 4,240 |      |  |   | 4,164 |   |  |      | 4,077  |   |            |   | 3,108 |       |  |   | 24,502 |     |  |   | 45,668  |       
|Non-cancelable operating lease payments |                            |      | 228    |        |      |   | 224   |      |  |   | 224   |   |  |      | 224    |   |            |   | 146   |       |  |   |       |     |  |   | 1,046   |       
|                                        |                            |      |        |        |      |   |       |      |  |   |       |   |  |      |        |   |            |   |       |       | 
|Total contractual obligations           |                            | $    | 44,922 |        |      | $ | 5,648 |      |  | $ | 5,659 |   |  | $    | 19,076 |   |            | $ | 5,592 |       |  | $ | 70,448 |     |  | $ | 151,345 |       
|                                        |                            |      |        |        |      |   |       |      |  |   |       |   |  |      |        |   |            |   |       |       | 






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Interest expense includes our interest obligations on our
    revolving credit facility as well as on our fixed rate loans.
    Our revolving credit facility is a variable-rate debt
    instrument, and its outstanding balance fluctuates throughout
    the year based on our liquidity needs. This table assumes that
    the balance outstanding ($38 million) and the interest rate
    as of December 31, 2004 (4.4%) remain constant throughout
    all periods presented.



|   |                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Secured debt as shown above is $1.3 million less than total
    secured debt as reported due to the premium recorded on
    above-market debt assumed in conjunction with certain of our
    2004 property acquisitions.

22



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|     |                |         |   |     |         |  |   |         |  |  |         |     |  |  |   |     | 
|---- | -------------- | ------- | - | --- | ------- |  | - | ------- |  |  | ------- | --- |  |  | - | --- | 
|     |                | Class A |   |     | Class B |  |   | Class C |  |  | Class D |    
|     |                |         |   |     |         |  |   |         |  |  |         |    
|2004 |                |         |   |     |         |  |   |         |  |  |         |     |  |  |   |    
|     | Fourth Quarter |         | $ | 418 |         |  | $ | 416     |  |  | $       | 727 |  |  | $ | 224 | 
|     | Third Quarter  |         | $ | 410 |         |  | $ | 425     |  |  | $       | 710 |  |  | $ | 33  | 
|     | Second Quarter |         | $ | 383 |         |  | $ | 429     |  |  | $       | 677 |  |  |   | N/A | 
|     | First Quarter  |         | $ | 345 |         |  | $ | 434     |  |  | $       | 379 |  |  |   | N/A | 
|2003 |                |         |   |     |         |  |   |         |  |  |         |     |  |  |   |    
|     | Fourth Quarter |         | $ | 320 |         |  | $ | 437     |  |  | $       | 156 |  |  |   | N/A | 
|     | Third Quarter  |         | $ | 308 |         |  | $ | 443     |  |  | $       | 15  |  |  |   | N/A | 
|     | Second Quarter |         | $ | 310 |         |  | $ | 439     |  |  |         | N/A |  |  |   | N/A | 
|     | First Quarter  |         | $ | 307 |         |  | $ | 453     |  |  |         | N/A |  |  |   | N/A | 





Results of Operations




| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Comparison of the year ended December 31, 2004 to the
    year ended December 31, 2003



| |         
| | --------
| | Revenues







| |         
| | --------
| | Expenses



23



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##### Table of Contents





Revenues








| |      
| | -----
| | Other







Results of Operations




| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Comparison of the year ended December 31, 2003 to the
    year ended December 31, 2002



| |         
| | --------
| | Revenues







24



---



##### Table of Contents







| |         
| | --------
| | Expenses

Revenues






Funds From Operations




25



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##### Table of Contents





|                                                                           |                                   |      |        |        |      |   |       |        |   |   |        |      |  
|-------------------------------------------------------------------------- | --------------------------------- | ---- | ------ | ------ | ---- | - | ----- | ------ | - | - | ------ | ---- | -
|                                                                           |                                   | 2004 |        |        | 2003 |   |       | 2002   |  
|                                                                           |                                   |      |        |        |      |   |       |        |  
|Income (loss)  before discontinued operations                             |                                   | $    | 711    |        |      | $ | (169  | )      |   | $ | (2,003 | )   
|(Loss) income  from discontinued operations                               |                                   |      | (123   | )      |      |   | 2,168 |        |   |   | 1,345  |     
|Plus depreciation of real estate assets  from
    operations              |                                   |      | 1,897  |        |      |   | 713   |        |   |   | 451    |     
|Plus depreciation of real estate assets  from
    discontinued operations |                                   |      | 74     |        |      |   | 146   |        |   |   | 179    |     
|Less (gain) loss on sale of real estate assets acquired for
    investment |                                   |      | (137   | )      |      |   | (312  | )      |   |   | 48     |     
|                                                                           | Less class B, C & D distributions |      |        | (4,454 | )    |   |       | (1,943 | ) |   |        | (865 | )
|                                                                           |                                   |      |        |        |      |   |       |        |  
|Total Funds From Operations available to class A
    shareholders*         |                                   | $    | (2,032 | )      |      | $ | 603   |        |   | $ | (845   | )   
|Cash dividends paid to class A shareholders                                |                                   | $    | 1,556  |        |      | $ | 1,245 |        |   | $ | 866    |     
|                                                                           |                                   |      |        |        |      |   |       |        |  
|Dividends in excess of FFO*                                                |                                   | $    | (3,588 | )      |      | $ | (642  | )      |   | $ | (1,711 | )   






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Based on adherence to the NAREIT definition of FFO, we have not
    added back the $1.7 million, $915 thousand or
    $1.9 million charge to earnings during 2004, 2003 and 2002,
    respectively, resulting from shares issued to Mr. Taylor as
    the deferred merger consideration. Additionally, we have not
    added back the $2.4 million charge to earnings for the year
    ended December 31, 2004, resulting from two asset
    impairments and corresponding write-downs of value. Adding these
    charges back to earnings would result in $2.07 million,
    $1.52 million and $1.06 million adjusted funds from
    operations available to class A shareholders, respectively
    and in adjusted FFO in excess of dividends available to
    class A shareholders of $498 thousand, $272 thousand and
    $193 thousand, respectively.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk





26



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##### Table of Contents








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Financial Statements








| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Shareholders Equity for the
    Years Ended December 31, 2004, 2003 and 2002
| | Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2004, 2003 and 2002          



Financial Statement Schedule









|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures




Changes in Internal Controls









|         |                  
|-------- | -----------------
|Item 9B. | Other Information



27



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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Trust Managers of the
    Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



|                                                           |  |                      |   |  |                     |                         |                        |                           |  |  |         | 
|---------------------------------------------------------- |  | -------------------- | - |  | ------------------- | ----------------------- | ---------------------- | ------------------------- |  |  | ------- | 
|                                                           |  | (a)                  |   |  | (b)                 |                         |                        | (c)                       | 
|                                                           |  |                      |   |  |                     |                         |                        |                           | 
|                                                           |  |                      |   |  |                     | Number of Securities    |                       
|                                                           |  |                      |   |  |                     | Remaining Available for |                       
|                                                           |  | Number of Securities |   |  |                     |                         | Future Issuances Under |                          
|                                                           |  | to be Issued         |   |  | Weighted Average    |                         |                        | Equity Compensation Plans | 
|                                                           |  | Upon Exercise of     |   |  | Exercise Price of   |                         |                        | (Excluding Securities     | 
|Plan Category                                              |  | Outstanding Options  |   |  | Outstanding Options |                         |                        | Reflected in Column (a))  | 
|                                                           |  |                      |   |  |                     |                         |                        |                           | 
|Equity compensation plans approved by security holders     |  |                      |  |  |                     |                         |                       |                           |  |  | 712,192 | 
|Equity compensation plans not approved by security holders |  |                      |  |  |                     |                         |                       |                           |  |  |        | 






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



28



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##### Table of Contents






PART IV







|         |                                                                       
|-------- | ----------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statements, Schedules and Reports
    on Form 8-K.



| |     |         
| | --- | --------
| | (a) | Exhibits

| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .1  |  | Amended and Restated Declaration of Trust (included as
    Exhibit 3.1 of the Exhibits to the Companys Annual
    Report on Form 10-KSB for the year ended December 31, 2002,
    and incorporated herein by reference).                                                                                                                                                                  
|
| | 3  | .2  |  | By-Laws, dated December 22, 2002 (included as
    Exhibit 3.1 of the Exhibits to the Companys Annual
    Report on Form 10-KSB for the year ended December 31, 2002,
    and incorporated herein by reference).                                                                                                                                                                           
|
| | 10 | .1  |  | Revolving Credit Agreement, dated November 6, 1998, by and
    among AmREIT, Inc., certain lenders and Wells Fargo Bank, as the
    Agent, relating to a $30,000,000 loan (included as
    Exhibit 10.1 of the Exhibits to the Companys
    Quarterly Report on Form 10-QSB for the quarter ended
    September 30, 1998 and incorporated herein by reference).                           
|
| | 10 | .2  |  | Amended and Restated Revolving Credit Agreement, effective
    August 1, 2000, by and among AmREIT, Inc., certain lenders
    and Wells Fargo Bank, as the Agent, relating to a $13,000,000
    loan (included as Exhibit 10.1 of the Exhibits to the
    Companys Quarterly Report on Form 10-QSB for the quarter
    ended September 30, 1998 and incorporated herein by
    reference).
|
| | 10 | .3  |  | Revolving Credit Agreement, effective September 4, 2003, by
    and among AmREIT and Wells Fargo Bank, as the Agent, relating to
    a $20,000,000 loan (included as Exhibit 10.3 of the
    Exhibits to the Companys Annual Report on Form 10-KSB
    for the year ended December 31, 2003 and incorporated
    herein by reference).                                                    
|
| | 10 | .4  |  | Amended and Restated Revolving Credit Agreement, effective
    December 8, 2003, by and among AmREIT and Wells Fargo Bank,
    as the Agent, relating to a $30,000,000 loan (included as
    Exhibit 10.4 of the Exhibits to the Companys Annual
    Report on Form 10-KSB for the year ended December 31,
    2003 and incorporated herein by reference).                                
|
| | 21 |     |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                               
|
| | 31 | .1* |  | Certification pursuant to Rule 13a-14(a) of Chief Executive
    Officer dated March 30, 2004.                                                                                                                                                                                                                                                                                              
|
| | 31 | .2* |  | Certification pursuant to Rule 13a-14(a) of Chief Financial
    Officer dated March 30, 2004.                                                                                                                                                                                                                                                                                              
|
| | 32 | .1* |  | Chief Executive Officer certification pursuant to 18 U.S.C.
    Section 1350, adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                       
|
| | 32 | .2* |  | Chief Financial Officer certification pursuant to 18 U.S.C.
    Section 1350, adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                       






|  |               
|- | --------------
|* | Filed herewith

Reports on Form 8-K










29



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##### Table of Contents






SIGNATURES






| |                                      
| | -------------------------------------
| | AmREIT                               
|
| | /s/ H. Kerr Taylor                   
| |                                      
| | H. Kerr Taylor,                      
| | President and Chief Executive Officer



|                                                            |  |                                                                                                          |  |                |  | 
|----------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                                           
|/s/ H. Kerr TaylorH.
    KERR TAYLOR                        |  | President, Chairman of the Board, Chief Executive Officer and
    Director (Principal Executive Officer) |  | March 31, 2005
|                                                           
|/s/ Robert S. Cartwright, Jr.ROBERT
    S. CARTWRIGHT, JR., |  | Trust Manager                                                                                            |  | March 31, 2005
|                                                           
|/s/ G. Steven DawsonG.
    STEVEN DAWSON,                   |  | Trust Manager                                                                                            |  | March 31, 2005
|                                                           
|/s/ Philip W. TaggartPHILIP
    W. TAGGART,                 |  | Trust Manager                                                                                            |  | March 31, 2005
|                                                           
|/s/ Chad C. BraunCHAD
    C. BRAUN,                         |  | Chief Financial Officer, Executive Vice President and Secretary
    (Principal Accounting Officer)       |  | March 31, 2005

30



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##### Table of Contents



AMREIT AND SUBSIDIARIES


INDEX TO FINANCIAL STATEMENTS


|                                                                                                                      |  |      |              | 
|--------------------------------------------------------------------------------------------------------------------- |  | ---- | ------------ | 
|                                                                                                                      |  | Page |             
|                                                                                                                      |  |      |             
|FINANCIAL STATEMENTS:                                                                                                 |  |      |              | 
|Report of Independent Registered Public
    Accounting Firm                                                           |  |      | F-2          | 
|Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                                      |  |      | F-3          | 
|Consolidated Statements of Operations for
    the years ended December 31, 2004, 2003 and 2002                        |  |      | F-4          | 
|Consolidated Statements of
    Shareholders Equity for the years ended December 31,
    2004, 2003 and 2002          |  |      | F-5          | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2004, 2003 and 2002                        |  |      | F-6 to F-7   | 
|Notes to Consolidated Financial
    Statements                                                                        |  |      | F-8 to F-25  | 
|FINANCIAL STATEMENT SCHEDULE:                                                                                         |  |      |              | 
|Schedule III Consolidated Real Estate
    Owned and Accumulated Depreciation for the year ended
    December 31, 2004 |  |      | F-26 to F-27 | 



F-1



---



##### Table of Contents









Report of Independent Registered Public Accounting Firm














| |             
| | ------------
| | /s/ KPMG LLP





F-2



---



##### Table of Contents






PART I  FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements

AmREIT AND SUBSIDIARIES








CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                                  |                             |             |             |             |   |             |            |            | 
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ----------- | ----------- | ----------- | - | ----------- | ---------- | ---------- | 
|                                           |                                                                                                                                  | December 31,                |            
|                                           |                                                                                                                                  |                             |            
|                                           |                                                                                                                                  | 2004                        |             |             | 2003        |  
|                                           |                                                                                                                                  |                             |             |             |             |  
|ASSETS                                    
|Real estate investments at cost:           |                                                                                                                                  |                             |             |             |             |   |             |           
|                                           | Land                                                                                                                             |                             | $           | 68,137,786  |             |   | $           | 36,242,482 |           
|                                           | Buildings                                                                                                                        |                             |             | 88,211,128  |             |   |             | 33,906,917 |           
|                                           | Tenant improvements                                                                                                              |                             |             | 4,243,377   |             |   |             | 389,657    |           
|                                           |                                                                                                                                  |                             |             |             |             |  
|                                           |                                                                                                                                  |                             | 160,592,291 |             |             |   | 70,539,056  |           
|                                           | Less accumulated depreciation and amortization                                                                                   |                             |             | (3,561,494  | )           |   |             | (2,520,633 | )         
|                                           |                                                                                                                                  |                             |             |             |             |  
|                                           |                                                                                                                                  |                             | 157,030,797 |             |             |   | 68,018,423  |           
|                                           | Real estate held for sale, net                                                                                                   |                             |             | 6,325,643   |             |   |             | 4,384,342  |           
|                                           | Net investment in direct financing leases held for investment                                                                    |                             |             | 19,218,854  |             |   |             | 22,046,210 |           
|                                           | Investment in retail partnerships and other affiliates                                                                           |                             |             | 1,978,568   |             |   |             | 544,892    |           
|                                           |                                                                                                                                  |                             |             |             |             |  
|                                           |                                                                                                                                  | Net real estate investments |             |             | 184,553,862 |   |             |            | 94,993,867 | 
|Cash and cash equivalents                  |                                                                                                                                  |                             | 2,960,377   |             |             |   | 2,031,440   |           
|Tenant receivables                         |                                                                                                                                  |                             | 1,338,044   |             |             |   | 1,039,220   |           
|Accounts receivable                        |                                                                                                                                  |                             | 36,547      |             |             |   | 36,279      |           
|Accounts receivable  related party        |                                                                                                                                  |                             | 909,825     |             |             |   | 201,774     |           
|Notes receivable                           |                                                                                                                                  |                             |            |             |             |   | 999,777     |           
|Deferred costs                             |                                                                                                                                  |                             | 1,040,461   |             |             |   | 672,278     |           
|Intangible lease cost, net                 |                                                                                                                                  |                             | 10,627,959  |             |             |   | 613,171     |           
|Other assets                               |                                                                                                                                  |                             | 1,683,455   |             |             |   | 738,801     |           
|                                           |                                                                                                                                  |                             |             |             |             |  
|TOTAL ASSETS                               |                                                                                                                                  | $                           | 203,150,530 |             |             | $ | 101,326,607 |           
|                                           |                                                                                                                                  |                             |             |             |             |  
|                                          
|LIABILITIES AND SHAREHOLDERS EQUITY      
|Liabilities:                               |                                                                                                                                  |                             |             |             |             |   |             |           
|                                           | Notes payable                                                                                                                    |                             | $           | 105,964,278 |             |   | $           | 48,484,625 |           
|                                           | Accounts payable and other liabilities                                                                                           |                             |             | 4,829,231   |             |   |             | 3,102,048  |           
|                                           | Below market leases, net                                                                                                         |                             |             | 2,503,898   |             |   |             |           |           
|                                           | Security deposits                                                                                                                |                             |             | 368,267     |             |   |             | 97,040     |           
|                                           |                                                                                                                                  |                             |             |             |             |  
|                                           |                                                                                                                                  | TOTAL LIABILITIES           |             |             | 113,665,674 |   |             |            | 51,683,713 | 
|                                           |                                                                                                                                  |                             |             |             |             |  
|Minority interest                          |                                                                                                                                  |                             | 1,114,709   |             |             |   | 846,895     |           
|Shareholders equity:                      |                                                                                                                                  |                             |             |             |             |   |             |           
|                                           | Preferred shares, $.01 par value, 10,000,000 shares
    authorized, none issued                                                  |                             |             |            |             |   |             |            |           
|                                           | Class A Common shares, $.01 par value,
    50,000,000 shares authorized, 3,462,767 and
    2,939,404 shares issued, respectively |                             |             | 34,628      |             |   |             | 29,394     |           
|                                           | Class B Common shares, $.01 par value,
    3,000,000 shares authorized, 2,246,283 and
    2,362,522 shares issued, respectively  |                             |             | 22,463      |             |   |             | 23,625     |           
|                                           | Class C Common shares, $.01 par value,
    4,400,000 shares authorized, 4,079,174 and
    1,402,788 shares issued, respectively  |                             |             | 40,792      |             |   |             | 14,028     |           
|                                           | Class D Common shares, $.01 par value,
    17,000,000 shares authorized, 2,090,765 and 0 shares
    issued, respectively         |                             |             | 20,908      |             |   |             |           |           
|                                           | Capital in excess of par value                                                                                                   |                             |             | 104,114,487 |             |   |             | 59,350,988 |           
|                                           | Accumulated distributions in excess of earnings                                                                                  |                             |             | (15,037,804 | )           |   |             | (9,616,551 | )         
|                                           | Deferred compensation                                                                                                            |                             |             | (770,336    | )           |   |             | (143,710   | )         
|                                           | Cost of treasury shares, 9,116 and 133,822 Class A shares,
    respectively                                                      |                             |             | (54,991     | )           |   |             | (861,775   | )         
|                                           |                                                                                                                                  |                             |             |             |             |  
|                                           |                                                                                                                                  | TOTAL SHAREHOLDERS EQUITY  |             |             | 88,370,147  |   |             |            | 48,795,999 | 
|                                           |                                                                                                                                  |                             |             |             |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                                                  | $                           | 203,150,530 |             |             | $ | 101,326,607 |           
|                                           |                                                                                                                                  |                             |             |             |             |  



F-3



---



##### Table of Contents



AmREIT AND SUBSIDIARIES








CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                                          |                                            |                                            |            |           |            |   |            |           |            |   |            |           |           | 
|--------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------ | ---------- | --------- | ---------- | - | ---------- | --------- | ---------- | - | ---------- | --------- | --------- | 
|                                                                                                          |                                            | Years Ended December 31,                   |           
|                                                                                                          |                                            |                                            |           
|                                                                                                          |                                            | 2004                                       |            |           | 2003       |   |            | 2002      |           
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Revenues:                                                                                                 |                                            |                                            |            |           |            |   |            |           |            |   |            |          
|                                                                                                          | Rental income from operating leases        |                                            | $          | 9,778,242 |            |   | $          | 4,036,789 |            |   | $          | 2,390,007 |          
|                                                                                                          | Earned income from direct financing leases |                                            |            | 2,029,290 |            |   |            | 2,015,123 |            |   |            | 1,383,532 |          
|                                                                                                          | Real estate fee income                     |                                            |            | 1,851,582 |            |   |            | 1,031,201 |            |   |            | 1,222,944 |          
|                                                                                                          | Securities commission income               |                                            |            | 7,656,145 |            |   |            | 2,958,226 |            |   |            | 846,893   |          
|                                                                                                          | Asset management fee income                |                                            |            | 361,344   |            |   |            | 240,465   |            |   |            | 252,072   |          
|                                                                                                          | Interest and other income                  |                                            |            | 82,177    |            |   |            | 7,938     |            |   |            | 4,206     |          
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|                                                                                                          |                                            | Total revenues                             |            |           | 21,758,780 |   |            |           | 10,289,742 |   |            |           | 6,099,654 | 
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Expenses:                                                                                                 |                                            |                                            |            |           |            |   |            |           |            |   |            |          
|                                                                                                          | General operating and administrative       |                                            |            | 5,719,301 |            |   |            | 3,418,994 |            |   |            | 2,487,431 |          
|                                                                                                          | Property expense                           |                                            |            | 1,560,790 |            |   |            | 466,225   |            |   |            | 313,498   |          
|                                                                                                          | Legal and professional                     |                                            |            | 1,646,303 |            |   |            | 877,979   |            |   |            | 679,154   |          
|                                                                                                          | Securities commissions                     |                                            |            | 5,942,685 |            |   |            | 2,288,027 |            |   |            | 653,034   |          
|                                                                                                          | Depreciation and amortization              |                                            |            | 2,040,053 |            |   |            | 720,258   |            |   |            | 487,387   |          
|                                                                                                          | Deferred merger costs                      |                                            |            | 1,681,870 |            |   |            | 914,688   |            |   |            | 1,904,370 |          
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|                                                                                                          |                                            | Total expenses                             |            |           | 18,591,002 |   |            |           | 8,686,171  |   |            |           | 6,524,874 | 
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Operating income (loss)                                                                                   |                                            |                                            | 3,167,778  |           |            |   | 1,603,571  |           |            |   | (425,220   | )        
|Other income (expense):                                                                                   |                                            |                                            |            |           |            |   |            |           |            |   |            |          
|Income from retail partnerships and other affiliates                                                      |                                            |                                            | 1,121,100  |           |            |   | 312,147    |           |            |   | 416,904    |          
|Federal income tax (expense) benefit for taxable REIT
    subsidiary                                      |                                            |                                            | (15,799    | )         |            |   | 254,041    |           |            |   | (61,721    | )        
|Interest expense                                                                                          |                                            |                                            | (3,375,499 | )         |            |   | (2,160,890 | )         |            |   | (1,625,645 | )        
|Minority interest in income of consolidated joint ventures                                                |                                            |                                            | (187,073   | )         |            |   | (178,555   | )         |            |   | (308,010   | )        
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Income (loss) before discontinued operations                                                              |                                            |                                            | 710,507    |           |            |   | (169,686   | )         |            |   | (2,003,692 | )        
|(Loss) income from discontinued operations                                                                |                                            |                                            | (1,949,020 | )         |            |   | 1,381,190  |           |            |   | 1,344,919  |          
|Gain on sales of real estate acquired for resale                                                          |                                            |                                            | 1,826,500  |           |            |   | 787,245    |           |            |   |           |          
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|                                                                                                          |                                            | (Loss) income from discontinued operations |            |           | (122,520   | ) |            |           | 2,168,435  |   |            |           | 1,344,919 | 
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Net income (loss)                                                                                         |                                            |                                            | 587,987    |           |            |   | 1,998,749  |           |            |   | (658,773   | )        
|Distributions paid to class B, C and D shareholders                                                       |                                            |                                            | (4,453,562 | )         |            |   | (1,942,656 | )         |            |   | (865,293   | )        
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Net (loss) income available to class A shareholders                                                       |                                            | $                                          | (3,865,575 | )         |            | $ | 56,093     |           |            | $ | (1,524,066 | )        
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Net (loss) income per class A common share 
    basic and diluted                                        |                                            |                                            |            |           |            |   |            |           |            |   |            |          
|                                                                                                          | Loss before discontinued operations        |                                            | $          | (1.15     | )          |   | $          | (0.76     | )          |   | $          | (1.16     | )        
|                                                                                                          | (Loss) income from discontinued operations |                                            | $          | (0.04     | )          |   | $          | 0.78      |            |   | $          | 0.54      |          
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|                                                                                                          | Net (loss) income                          |                                            | $          | (1.19     | )          |   | $          | 0.02      |            |   | $          | (0.62     | )        
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           
|Weighted average class A common shares used to compute net
    (loss) income per share, basic and diluted |                                            |                                            | 3,251,285  |           |            |   | 2,792,190  |           |            |   | 2,469,725  |          
|                                                                                                          |                                            |                                            |            |           |            |   |            |           |           



F-4



---



##### Table of Contents



AmREIT AND SUBSIDIARIES








CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


For the years ended December 31, 2004, 2003 and 2002


|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |   |          |          |   |   |            |            |  
|---------------------------- | --------------------------------------------------------------------------------------- | ------------- | ------- | ---------- | ------------- | ----------- | ------------- | ------------ | - | - | ------------ | ---------- | - | -------- | -------- | -------- | ----- | - | -------- | -------- | - | - | ---------- | ---------- | -
|                             |                                                                                         |               |         |            |               | Accumulated |               |              |   |   |              |            |  
|                             |                                                                                         |               |         | Capital in |               |             | Distributions |              |   |   |              | Cost of    |   |          |         
|                             |                                                                                         | Common Shares |         |            | Excess of Par |             |               | in Excess of |   |   | Deferred     |            |   | Treasury |          |          |      
|                             |                                                                                         | Amount        |         |            | Value         |             |               | Earnings     |   |   | Compensation |            |   | Shares   |          |          | Total |  
|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |  
|Balance at December 31, 2001 |                                                                                         | $             | 23,856  |            |               | $           | 21,655,852    |              |   | $ | (6,037,757   | )          |   | $        |         |          |       | $ | (288,170 | )        |   | $ | 15,353,781 |           
|                             | Net loss                                                                                |               |         |           |               |             |               |             |   |   |              | (658,773   | ) |          |          |         |       |   |          |         |   |   |            | (658,773   | )
|                             | Issuance of common shares, Class A                                                      |               |         | 3,023      |               |             |               | 1,901,347    |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | 1,904,370  |  
|                             | Issuance of common shares, Class A  for
    class B conversion                         |               |         | 1,248      |               |             |               |             |   |   |              |            |   |          |          |          |       |   |          |          |   |   |            | 1,248      |  
|                             | Issuance of common shares, Class B, net of
    124,750 shares that converted to Class A |               |         | 24,642     |               |             |               | 23,468,401   |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | 23,493,043 |  
|                             | Issuance of restricted shares, Class A                                                  |               |         | 250        |               |             |               | 157,017      |   |   |              |           |   |          |          | (256,877 | )     |   |          | 185,119  |   |   |            | 85,509     |  
|                             | Amortization of deferred compensation                                                   |               |         |           |               |             |               |             |   |   |              |           |   |          |          | 51,524   |       |   |          |         |   |   |            | 51,524     |  
|                             | Repurchase of common shares, Class A (46,069 shares)                                    |               |         |           |               |             |               |             |   |   |              |           |   |          |          |         |       |   |          | (294,138 | ) |   |            | (294,138   | )
|                             | Distributions                                                                           |               |         |           |               |             |               |             |   |   |              | (1,730,316 | ) |          |          |         |       |   |          |         |   |   |            | (1,730,316 | )
|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |  
|Balance at December 31, 2002 |                                                                                         | $             | 53,019  |            |               | $           | 47,182,617    |              |   | $ | (8,426,846   | )          |   | $        | (205,353 | )        |       | $ | (397,189 | )        |   | $ | 38,206,248 |           
|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |  
|                             | Net income                                                                              |               |         |           |               |             |               |             |   |   |              | 1,998,749  |   |          |          |         |       |   |          |         |   |   |            | 1,998,749  |  
|                             | Issuance of common shares, Class A                                                      |               |         | 1,017      |               |             |               |             |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | 1,017      |  
|                             | Conversion of common shares, Class B                                                    |               |         | (1,017     | )             |             |               |             |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | (1,017     | )
|                             | Issuance of restricted shares, Class A                                                  |               |         |           |               |             |               | 15,184       |   |   |              |           |   |          |          | (152,819 | )     |   |          | 137,635  |   |   |            |           |  
|                             | Amortization of deferred compensation                                                   |               |         |           |               |             |               |             |   |   |              |           |   |          |          | 214,462  |       |   |          |         |   |   |            | 214,462    |  
|                             | Repurchase of common shares, Class A (92,700 shares)                                    |               |         |           |               |             |               |             |   |   |              |           |   |          |          |         |       |   |          | (602,221 | ) |   |            | (602,221   | )
|                             | Issuance of common shares, Class C                                                      |               |         | 14,028     |               |             |               | 12,153,187   |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | 12,167,215 |  
|                             | Distributions                                                                           |               |         |           |               |             |               |             |   |   |              | (3,188,454 | ) |          |          |         |       |   |          |         |   |   |            | (3,188,454 | )
|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |  
|Balance at December 31, 2003 |                                                                                         | $             | 67,047  |            |               | $           | 59,350,988    |              |   | $ | (9,616,551   | )          |   | $        | (143,710 | )        |       | $ | (861,775 | )        |   | $ | 48,795,999 |           
|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |  
|                             | Net income                                                                              |               |         |            |               |             |               |              |   |   |              | 587,987    |   |          |          |          |       |   |          |          |   |   |            | 587,987    |  
|                             | Issuance of common shares, Class A                                                      |               |         | 5,235      |               |             |               | 2,740,476    |   |   |              |           |   |          |          | 26,963   |       |   |          | 65,060   |   |   |            | 2,837,734  |  
|                             | Conversion of common shares, Class B                                                    |               |         | (1,162     | )             |             |               |             |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | (1,162     | )
|                             | Issuance of restricted shares, Class A                                                  |               |         |           |               |             |               | 7,257        |   |   |              |           |   |          |          | (917,981 | )     |   |          | 741,724  |   |   |            | (169,000   | )
|                             | Amortization of deferred compensation                                                   |               |         |           |               |             |               |             |   |   |              |           |   |          |          | 264,392  |       |   |          |         |   |   |            | 264,392    |  
|                             | Issuance of common shares, Class C                                                      |               |         | 27,227     |               |             |               | 24,242,002   |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | 24,269,229 |  
|                             | Retirement of common shares, Class C                                                    |               |         | (464       | )             |             |               | (463,826     | ) |   |              |           |   |          |          |         |       |   |          |         |   |   |            | (464,290   | )
|                             | Issuance of common shares, Class D                                                      |               |         | 20,908     |               |             |               | 18,237,590   |   |   |              |           |   |          |          |         |       |   |          |         |   |   |            | 18,258,498 |  
|                             | Distributions                                                                           |               |         |           |               |             |               |             |   |   |              | (6,009,240 | ) |          |          |         |       |   |          |         |   |   |            | (6,009,240 | )
|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |  
|Balance at December 31, 2004 |                                                                                         | $             | 118,791 |            |               | $           | 104,114,487   |              |   | $ | (15,037,804  | )          |   | $        | (770,336 | )        |       | $ | (54,991  | )        |   | $ | 88,370,147 |           
|                             |                                                                                         |               |         |            |               |             |               |              |   |   |              |            |   |          |          |          |       |  



F-5



---



##### Table of Contents



AmREIT AND SUBSIDIARIES








CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |             |         |           |             |             |           | 
|---------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------- | ----------- | ----------- | --------- | --------- | ----------- | ----------- | ------- | --------- | ----------- | ----------- | --------- | 
|                                                     |                                                                                              | Years Ended December 31,                                                          |                                          
|                                                     |                                                                                              |                                                                                   |                                          
|                                                     |                                                                                              | 2004                                                                              |                                           |             | 2003        |           |           | 2002        |            
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|Cash flows from operating activities:                |                                                                                              |                                                                                   |                                           |             |             |           |           |             |             |         |           |            
|                                                     | Net income (loss)                                                                            |                                                                                   | $                                         | 587,987     |             |           | $         | 1,998,749   |             |         | $         | (658,773    | )          
|                                                     | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                                                   |                                           |             |             |           |           |             |             |         |           |             |            
|                                                     |                                                                                              | Investment in real estate acquired for resale                                     |                                           |             | (5,053,252  | )         |           |             | (7,807,597  | )       |           |             |            |          
|                                                     |                                                                                              | Proceeds from sales of real estate acquired for resale                            |                                           |             | 6,672,811   |           |           |             | 6,179,145   |         |           |             |            |          
|                                                     |                                                                                              | Gain on sales of real estate acquired for resale                                  |                                           |             | (1,826,500  | )         |           |             | (787,244    | )       |           |             |            |          
|                                                     |                                                                                              | (Gain) loss on sales of real estate acquired for investment                       |                                           |             | (137,246    | )         |           |             | (311,873    | )       |           |             | 47,553      |          
|                                                     |                                                                                              | Impairment charges                                                                |                                           |             | 2,403,144   |           |           |             |            |         |           |             |            |          
|                                                     |                                                                                              | Income from retail partnerships and other affiliates                              |                                           |             | (1,121,100  | )         |           |             | (312,147    | )       |           |             | (416,904    | )        
|                                                     |                                                                                              | Depreciation and amortization                                                     |                                           |             | 2,133,726   |           |           |             | 942,326     |         |           |             | 723,607     |          
|                                                     |                                                                                              | Amortization of deferred compensation                                             |                                           |             | 264,392     |           |           |             | 214,462     |         |           |             | 51,524      |          
|                                                     |                                                                                              | Minority interest in income of consolidated joint ventures                        |                                           |             | 368,962     |           |           |             | 178,311     |         |           |             | 308,010     |          
|                                                     |                                                                                              | Deferred merger costs                                                             |                                           |             | 1,681,870   |           |           |             | 914,688     |         |           |             | 1,904,370   |          
|                                                     |                                                                                              | Increase in tenant receivables                                                    |                                           |             | (325,272    | )         |           |             | (1,146,461  | )       |           |             | (33,638     | )        
|                                                     |                                                                                              | (Increase) decrease in accounts receivable                                        |                                           |             | (268        | )         |           |             | 518,672     |         |           |             | 1,221,608   |          
|                                                     |                                                                                              | (Increase) decrease in accounts receivable  related
    party                    |                                           |             | (708,051    | )         |           |             | (132,840    | )       |           |             | 378,494     |          
|                                                     |                                                                                              | Cash receipts from direct financing leases (less) more than
    income recognized |                                           |             | (4,532      | )         |           |             | 24,854      |         |           |             | 282,805     |          
|                                                     |                                                                                              | Increase in deferred costs                                                        |                                           |             | (142,603    | )         |           |             | (233,668    | )       |           |             | (127,452    | )        
|                                                     |                                                                                              | Increase in other assets                                                          |                                           |             | (491,746    | )         |           |             | (206,282    | )       |           |             | (129,725    | )        
|                                                     |                                                                                              | Increase (decrease) in accounts payable                                           |                                           |             | 2,676,017   |           |           |             | 828,375     |         |           |             | (92,209     | )        
|                                                     |                                                                                              | Increase in security deposits                                                     |                                           |             | 271,227     |           |           |             | 63,110      |         |           |             |            |          
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|                                                     |                                                                                              |                                                                                   | Net cash provided by operating activities |             |             | 7,249,566 |           |             |             | 924,580 |           |             |             | 3,459,270 | 
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|Cash flows from investing activities:                |                                                                                              |                                                                                   |                                           |             |             |           |           |             |             |         |           |            
|                                                     | Improvements to real estate                                                                  |                                                                                   |                                           | (1,511,278  | )           |           |           | (534,554    | )           |         |           | (623,124    | )          
|                                                     | Acquisition of investment properties                                                         |                                                                                   |                                           | (58,210,885 | )           |           |           | (23,922,118 | )           |         |           | (18,951,523 | )          
|                                                     | Notes receivable collections (advances)                                                      |                                                                                   |                                           | 999,777     |             |           |           | (999,777    | )           |         |           |            |            
|                                                     | Additions to furniture, fixtures and equipment                                               |                                                                                   |                                           | (462,949    | )           |           |           | (64,859     | )           |         |           | (25,131     | )          
|                                                     | Investment in retail partnerships and other affiliates                                       |                                                                                   |                                           | (1,533,631  | )           |           |           | (201,070    | )           |         |           |            |            
|                                                     | Distributions from retail partnerships and other affiliates                                  |                                                                                   |                                           | 1,221,055   |             |           |           | 517,661     |             |         |           | 848,508     |            
|                                                     | Proceeds from sale of investment property                                                    |                                                                                   |                                           | 5,851,831   |             |           |           | 3,497,267   |             |         |           | 3,692,544   |            
|                                                     | Decrease (increase) in preacquisition costs                                                  |                                                                                   |                                           | (18,914     | )           |           |           | (11,417     | )           |         |           | 207,435     |            
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|                                                     |                                                                                              | Net cash used in investing activities                                             |                                           |             | (53,664,994 | )         |           |             | (21,718,867 | )       |           |             | (14,851,291 | )        
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|Cash flows from financing activities:                |                                                                                              |                                                                                   |                                           |             |             |           |           |             |             |         |           |            
|                                                     | Proceeds from notes payable                                                                  |                                                                                   |                                           | 57,683,965  |             |           |           | 36,203,535  |             |         |           | 19,253,403  |            
|                                                     | Payments of notes payable                                                                    |                                                                                   |                                           | (46,292,651 | )           |           |           | (24,118,829 | )           |         |           | (3,399,277  | )          
|                                                     | Purchase of treasury shares                                                                  |                                                                                   |                                           |            |             |           |           | (602,221    | )           |         |           | (294,138    | )          
|                                                     | Issuance of common shares                                                                    |                                                                                   |                                           | 46,413,570  |             |           |           | 13,912,816  |             |         |           |            |            
|                                                     | Retirement of common shares                                                                  |                                                                                   |                                           | (464,290    | )           |           |           |            |             |         |           | (106,500    | )          
|                                                     | Issuance costs                                                                               |                                                                                   |                                           | (5,608,369  | )           |           |           | (1,845,357  | )           |         |           | (517,857    | )          
|                                                     | Common dividends paid                                                                        |                                                                                   |                                           | (4,286,712  | )           |           |           | (3,088,698  | )           |         |           | (1,730,316  | )          
|                                                     | Contributions from minority interests                                                        |                                                                                   |                                           |            |             |           |           |            |             |         |           | 809,971     |            
|                                                     | Distributions to minority interests                                                          |                                                                                   |                                           | (101,147    | )           |           |           | (142,387    | )           |         |           | (343,514    | )          
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|                                                     |                                                                                              | Net cash provided by financing activities                                         |                                           |             | 47,344,366  |           |           |             | 20,318,859  |         |           |             | 13,671,772  |          
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|Net increase (decrease) in cash and cash equivalents |                                                                                              |                                                                                   | 928,937                                   |             |             |           | (475,428  | )           |             |         | 2,279,751 |            
|Cash and cash equivalents, beginning of year         |                                                                                              |                                                                                   | 2,031,440                                 |             |             |           | 2,506,868 |             |             |         | 227,117   |            
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            
|Cash and cash equivalents, end of year               |                                                                                              | $                                                                                 | 2,960,377                                 |             |             | $         | 2,031,440 |             |             | $       | 2,506,868 |            
|                                                     |                                                                                              |                                                                                   |                                           |             |             |           |           |             |            

F-6



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##### Table of Contents



Supplemental schedule of cash flow information:




|                               |              |  |   |           |  |  |   |           |  |  |   |           | 
|------------------------------ | ------------ |  | - | --------- |  |  | - | --------- |  |  | - | --------- | 
|Cash paid during the year for: |              |  |   |           |  |  |   |           |  |  |   |          
|                               | Interest     |  | $ | 3,056,474 |  |  | $ | 2,168,546 |  |  | $ | 1,691,927 | 
|                               | Income taxes |  |   | 164,934   |  |  |   | 46,838    |  |  |   | 133,841   | 

Supplemental schedule of noncash investing and financing
activities
















F-7



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##### Table of Contents



AMREIT AND SUBSIDIARIES








NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                                 
|-- | ------------------------------------------------
|1. | DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

tm
















F-8



---



##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                           
|-- | ------------------------------------------
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| |                      
| | ---------------------
| | BASIS OF PRESENTATION





| |                    
| | -------------------
| | REVENUE RECOGNITION







| |                        
| | -----------------------
| | REAL ESTATE INVESTMENTS

Development Properties


Acquired Properties and Acquired Lease
Intangibles Business Combinations


F-9



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Depreciation


Properties Held for Sale




Impairment




| |                   
| | ------------------
| | TENANT RECEIVABLES



F-10



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |               
| | --------------
| | DEFERRED COSTS





| |                      
| | ---------------------
| | DEFERRED COMPENSATION









| |                     
| | --------------------
| | FEDERAL INCOME TAXES



F-11



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                   
| | ------------------
| | EARNINGS PER SHARE





|                                                                      |  |                                  |        |   |      |   |       |      |  |   |        |  
|--------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                      |  | For the Years Ended December 31, |       
|                                                                      |  |                                  |       
|                                                                      |  | 2004                             |        |   | 2003 |   |       | 2002 | 
|                                                                      |  |                                  |        |   |      |   |       |      | 
|(Loss) income to Class A common shareholders (in thousands)*          |  | $                                | (3,866 | ) |      | $ | 56    |      |  | $ | (1,524 | )
|Weighted average class A common shares outstanding (in
    thousands) |  |                                  | 3,251  |   |      |   | 2,792 |      |  |   | 2,470  |  
|Basic and diluted (loss)/income per share*                            |  | $                                | (1.19  | ) |      | $ | 0.02  |      |  | $ | (0.62  | )






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The operating results for 2004, 2003 and 2002 include a charge
    to earnings of $1.7 million, $915 thousand and
    $1.9 million, respectively, which was the market value of
    the class A common shares issued to
    H. Kerr Taylor, President & CEO, related to
    the sale of his advisory company to AmREIT in 1998. The charge
    represented deferred merger costs related to this sale that was
    triggered by the issuance of additional common stock as part of
    the merger with AmREITs affiliated partnerships during
    2002 and the issuance of common C stock in 2003 and in 2004.
    Additionally, these operating results include impairment charges
    of $2.4 million, which are related to two of our
    single-tenant properties that were held for sale during 2004,
    one of which was sold during the year.



| |                 
| | ----------------
| | USE OF ESTIMATES





| |                                    
| | -----------------------------------
| | FAIR VALUE OF FINANCIAL INSTRUMENTS



F-12



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                            
| | -------------------------------------------
| | CONSOLIDATION OF VARIABLE INTEREST ENTITIES

Consolidation of Variable
Interest Entities,






| |                         
| | ------------------------
| | NEW ACCOUNTING STANDARDS

Share-Based Payment


Exchanges of Nonmonetary Assets


F-13



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                        
| | -----------------------
| | DISCONTINUED OPERATIONS



|                                                                                          |                                            |      |        |        |      |   |       |       |   |   |       |       |  
|----------------------------------------------------------------------------------------- | ------------------------------------------ | ---- | ------ | ------ | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                                                                          |                                            | 2004 |        |        | 2003 |   |       | 2002  |  
|                                                                                          |                                            |      |        |        |      |   |       |       |  
|Rental revenue and earned income from DFL                                                 |                                            | $    | 516    |        |      | $ | 1,837 |       |   | $ | 1,721 |      
|Interest and other income                                                                 |                                            |      | 936    |        |      |   | 129   |       |   |   |      |      
|Gain on sale of real estate held for resale                                               |                                            |      | 1,827  |        |      |   | 787   |       |   |   |      |      
|Gain (loss) on sale of real estate held for investment                                    |                                            |      | 137    |        |      |   | 312   |       |   |   | (48   | )    
|                                                                                          |                                            |      |        |        |      |   |       |       |  
|                                                                                          | Total revenues                             |      |        | 3,416  |      |   |       | 3,065 |   |   |       | 1,673 |  
|Property expense                                                                          |                                            |      | (212   | )      |      |   | (64   | )     |   |   |      |      
|General operating and administrative                                                      |                                            |      | (70    | )      |      |   |      |       |   |   | (1    | )    
|Legal and professional                                                                    |                                            |      | (2     | )      |      |   | (3    | )     |   |   |      |      
|Depreciation and amortization                                                             |                                            |      | (73    | )      |      |   | (146  | )     |   |   | (179  | )    
|Income tax                                                                                |                                            |      | (521   | )      |      |   | (491  | )     |   |   | 1     |      
|Interest expense                                                                          |                                            |      | (76    | )      |      |   | (193  | )     |   |   | (149  | )    
|Minority interest                                                                         |                                            |      | (182   | )      |      |   |      |       |   |   |      |      
|Impairment charge                                                                         |                                            |      | (2,403 | )      |      |   |      |       |   |   |      |      
|                                                                                          |                                            |      |        |        |      |   |       |       |  
|                                                                                          | Total expenses                             |      |        | (3,539 | )    |   |       | (897  | ) |   |       | (328  | )
|                                                                                          | (Loss) income from discontinued operations |      |        | (123   | )    |   |       | 2,168 |   |   |       | 1,345 |  
|Basic and diluted (loss) income from discontinued operations per
    class A common share |                                            | $    | (0.04  | )      |      | $ | 0.78  |       |   | $ | 0.54  |      



| |                     
| | --------------------
| | STOCK ISSUANCE COSTS





| |                          
| | -------------------------
| | CASH AND CASH EQUIVALENTS





| |                  
| | -----------------
| | RECLASSIFICATIONS



F-14



---



##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                 
|-- | ----------------
|3. | OPERATING LEASES



|                |  |   |         | 
|--------------- |  | - | ------- | 
|2005            |  | $ | 13,800  | 
|2006            |  |   | 12,867  | 
|2007            |  |   | 12,011  | 
|2008            |  |   | 10,732  | 
|2009            |  |   | 9,654   | 
|2010-thereafter |  |   | 61,866  | 
|                |  |   |        
|                |  | $ | 120,930 | 
|                |  |   |        



|   |                                          
|-- | -----------------------------------------
|4. | NET INVESTMENT IN DIRECT FINANCING LEASES



|                                  |  |      |         |   |      |   |         |  
|--------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                  |  | 2004 |         |   | 2003 |  
|                                  |  |      |         |   |      |  
|Minimum lease payments receivable |  | $    | 48,871  |   |      | $ | 55,094  |  
|Unguaranteed residual value       |  |      | 1,763   |   |      |   | 3,378   |  
|Less: Unearned income             |  |      | (31,415 | ) |      |   | (36,426 | )
|                                  |  |      |         |   |      |  
|                                  |  | $    | 19,219  |   |      | $ | 22,046  |  
|                                  |  |      |         |   |      |  



|                |       |   |        |        | 
|--------------- | ----- | - | ------ | ------ | 
|2005            |       | $ | 2,037  |       
|2006            |       |   | 2,038  |       
|2007            |       |   | 2,137  |       
|2008            |       |   | 2,217  |       
|2009            |       |   | 2,229  |       
|2010-thereafter |       |   | 38,213 |       
|                |       |   |       
|                | Total |   | $      | 48,871 | 
|                |       |   |       



|   |                                                        
|-- | -------------------------------------------------------
|5. | INVESTMENTS IN RETAIL PARTNERSHIPS AND OTHER AFFILIATES



| |                    
| | -------------------
| | Retail Partnerships



AmREIT Opportunity Fund (AOF)


F-15



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




AmREIT Income & Growth Fund, Ltd.
(AIG)


AmREIT Monthly Income & Growth Fund
(MIG)


AmREIT Monthly Income & Growth Fund II
(MIG II)




|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  |    |                |  |  |     |   |  |  |              | 
|----------- |  | ----------- | ---------- |  | -------- |  | --- | -------- |  | ------- | ----------- | - |  | -- | ---- |  | -- |  | -- | -------------- |  |  | --- | - |  |  | ------------ | 
|            |  |             |            |  |          |  |     |          |  | Sharing |             |   | 
|            |  |             |            |  |          |  |     |          |  | Ratios* |             |   | 
|Retail      |  | Capital     |            |  | LP       |  |     | GP       |  |         | Scheduled   |   |  |    |      |  |   
|Partnership |  | Under Mgmt. |            |  | Interest |  |     | Interest |  |         | Liquidation |   |  | LP |      |  | GP |  |    | LP Preference* | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  |    |                | 
|AIG         |  | $           | 10 million |  |          |  | 2.0 | %        |  |         | 1.0         | % |  |    | 2008 |  |    |  | 99 | %              |  |  | 1   | % |  |  | 8%           | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 90 | %              |  |  | 10  | % |  |  | 10%          | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 80 | %              |  |  | 20  | % |  |  | 12%          | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 70 | %              |  |  | 30  | % |  |  | 15%          | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 0  | %              |  |  | 100 | % |  |  | 40% Catch Up | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 60 | %              |  |  | 40  | % |  |  | Thereafter   | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  |    |                | 
|MIG         |  | $           | 15 million |  |          |  | 1.4 | %        |  |         | 1.0         | % |  |    | 2010 |  |    |  | 99 | %              |  |  | 1   | % |  |  | 8%           | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 90 | %              |  |  | 10  | % |  |  | 10%          | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 80 | %              |  |  | 20  | % |  |  | 12%          | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 0  | %              |  |  | 100 | % |  |  | 40% Catch Up | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 60 | %              |  |  | 40  | % |  |  | Thereafter   | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  |    |                | 
|MIG II      |  | $           | 25 million |  |          |  | 1.6 | %        |  |         | 1.0         | % |  |    | 2011 |  |    |  | 99 | %              |  |  | 1   | % |  |  | 8%           | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 85 | %              |  |  | 15  | % |  |  | 12%          | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 0  | %              |  |  | 100 | % |  |  | 40% Catch Up | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  | 60 | %              |  |  | 40  | % |  |  | Thereafter   | 
|            |  |             |            |  |          |  |     |          |  |         |             |   |  |    |      |  |    |  |    |                | 






|  |                                                                                                                                                                                                                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Illustrating the Sharing Ratios and LP Preference provisions
    using AIG as an example, the LPs share in 99% of the cash
    distributions until they receive an 8% preferred return.
    Thereafter, the LPs share in 90% of the cash distributions until
    they receive a 10% preferred return and so on.



| |                
| | ---------------
| | Other affiliate



F-16



---



##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                   |                   |                                         |   |        |        |  |   |        |        | 
|---------------------------------- | ----------------- | --------------------------------------- | - | ------ | ------ |  | - | ------ | ------ | 
|                                   |                   | 2004                                    |   |        | 2003   | 
|                                   |                   |                                         |   |        |        | 
|                                   |                   | (In thousands)                          |  
|Combined Balance Sheet             |                   |                                         |   |        |        |  |   |       
|Assets                            
|                                   | Property, net     |                                         | $ | 35,847 |        |  | $ | 10,682 |       
|                                   | Cash              |                                         |   | 18,697 |        |  |   | 4,667  |       
|                                   | Notes receivable  |                                         |   |       |        |  |   | 4,173  |       
|                                   | Other assets      |                                         |   | 11,103 |        |  |   | 5,739  |       
|                                   |                   |                                         |   |        |        | 
|                                   | TOTAL ASSETS      |                                         |   | 65,647 |        |  |   | 25,261 |       
|                                   |                   |                                         |   |        |        | 
|                                  
|Liabilities and Partners Capital:
|                                   | Notes payable     |                                         |   | 19,017 |        |  |   | 1,228  |       
|                                   | Other liabilities |                                         |   | 1,536  |        |  |   | 979    |       
|                                   | Partners capital  |                                         |   | 45,094 |        |  |   | 23,054 |       
|                                   |                   |                                         |   |        |        | 
|                                   |                   | TOTAL LIABILITIES AND PARTNERS CAPITAL |   | $      | 65,647 |  |   | $      | 25,261 | 
|                                   |                   |                                         |   |        |        | 
|                                   |                   | AMREITS SHARE OF PARTNERS CAPITAL     |   | $      | 1,979  |  |   | $      | 545    | 

|                                 |                               |                |       |       |      |   |       |       |  |   |       |       | 
|-------------------------------- | ----------------------------- | -------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                 |                               | 2004           |       |       | 2003 |   |       | 2002  | 
|                                 |                               |                |       |       |      |   |       |       | 
|                                 |                               | (In thousands) |      
|Combined Statement of Operations |                               |                |       |       |      |   |       |       |  |   |       |      
|Total Revenue                    |                               | $              | 4,788 |       |      | $ | 3,501 |       |  | $ | 2,625 |      
|                                 |                               |                |       |       |      |   |       |       | 
|Expense                          |                               |                |       |       |      |   |       |       |  |   |       |      
|                                 | Interest                      |                |       | 715   |      |   |       | 113   |  |   |       | 359   | 
|                                 | Depreciation and amortization |                |       | 304   |      |   |       | 168   |  |   |       | 189   | 
|                                 | Other                         |                |       | 1,135 |      |   |       | 405   |  |   |       | 189   | 
|                                 |                               |                |       |       |      |   |       |       | 
|                                 | TOTAL EXPENSE                 |                |       | 2,154 |      |   |       | 686   |  |   |       | 737   | 
|                                 |                               |                |       |       |      |   |       |       | 
|                                 | NET INCOME                    |                | $     | 2,634 |      |   | $     | 2,815 |  |   | $     | 1,888 | 
|                                 |                               |                |       |       |      |   |       |       | 
|                                 | AMREITS SHARE OF NET INCOME  |                | $     | 1,121 |      |   | $     | 312   |  |   | $     | 417   | 



|   |                           
|-- | --------------------------
|6. | ACQUIRED LEASE INTANGIBLES



F-17



---



##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|             |      |  |  |              |                        |   |        |                        |  |   |      |  
|------------ | ---- |  |  | ------------ | ---------------------- | - | ------ | ---------------------- |  | - | ---- | -
|             |      |  |  | Amortization |                        |   | Rental |                       
|Year Ending  |      |  |  |              | Expense                |   |        | Income                 | 
|December 31, |      |  |  |              | (in-place lease value) |   |        | (out-of-market leases) | 
|             |      |  |  |              |                        |   |        |                        | 
|             | 2005 |  |  |              |                        | $ | 3,062  |                        |  | $ | (268 | )
|             | 2006 |  |  |              |                        |   | 1,435  |                        |  |   | (271 | )
|             | 2007 |  |  |              |                        |   | 1,069  |                        |  |   | (206 | )
|             | 2008 |  |  |              |                        |   | 978    |                        |  |   | (186 | )
|             | 2009 |  |  |              |                        |   | 856    |                        |  |   | (182 | )



|   |              
|-- | -------------
|7. | NOTES PAYABLE



|                                       |                              |                     |        |        |         |  |        |        |        | 
|-------------------------------------- | ---------------------------- | ------------------- | ------ | ------ | ------- |  | ------ | ------ | ------ | 
|                                       |                              | 2004                |        |        | 2003    | 
|                                       |                              |                     |        |        |         | 
|Notes Payable:                         |                              |                     |        |        |         |  |        |       
|                                       | Fixed rate mortgage loans    |                     | $      | 67,190 |         |  | $      | 21,826 |       
|                                       | Variable rate mortgage loans |                     |        |       |         |  |        | 3,107  |       
|                                       | Fixed rate unsecured loans   |                     |        | 760    |         |  |        | 760    |       
|                                       |                              |                     |        |        |         | 
|                                       |                              | Total notes payable |        |        | 67,950  |  |        |        | 25,693 | 
|Variable-rate unsecured line of credit |                              |                     | 38,014 |        |         |  | 22,792 |       
|                                       |                              |                     |        |        |         | 
|                                       |                              | Total               |        | $      | 105,964 |  |        | $      | 48,485 | 
|                                       |                              |                     |        |        |         | 





F-18



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |       |           |        |        |            |   |        |          |  |   |        |         | 
|------------------------------ | ----- | --------- | ------ | ------ | ---------- | - | ------ | -------- |  | - | ------ | ------- | 
|                               |       | Scheduled |        |        |            |   |       
|                               |       | Principal |        |        | Term-Loan  |   |        | Total    | 
|Scheduled Payments by Year     |       | Payments  |        |        | Maturities |   |        | Payments | 
|                               |       |           |        |        |            |   |        |          | 
|2005 (includes Line of Credit) |       | $         | 39,117 |        |            | $ |       |          |  | $ | 39,117 |        
|2006                           |       |           | 1,184  |        |            |   |       |          |  |   | 1,184  |        
|2007                           |       |           | 1,271  |        |            |   |       |          |  |   | 1,271  |        
|2008                           |       |           | 1,365  |        |            |   | 13,410 |          |  |   | 14,775 |        
|2009                           |       |           | 1,453  |        |            |   | 885    |          |  |   | 2,338  |        
|Beyond five years              |       |           | 30,059 |        |            |   | 15,887 |          |  |   | 45,946 |        
|Unamortized debt premiums      |       |           |       |        |            |   | 1,333  |          |  |   | 1,333  |        
|                               |       |           |        |        |            |   |        |          | 
|                               | Total |           | $      | 74,449 |            |   | $      | 31,515   |  |   | $      | 105,964 | 
|                               |       |           |        |        |            |   |        |          | 



|   |               
|-- | --------------
|8. | CONCENTRATIONS





|                               |  |      |       |  |      |   |       |      |  |   |       | 
|------------------------------ |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|Tenant                         |  | 2004 |       |  | 2003 |   |       | 2002 | 
|                               |  |      |       |  |      |   |       |      | 
|IHOP Corporation               |  | $    | 2,499 |  |      | $ | 2,731 |      |  | $ | 1,784 | 
|CVS/pharmacy                   |  |      | 935   |  |      |   |      |      |  |   |      | 
|Kroger                         |  |      | 804   |  |      |   |      |      |  |   |      | 
|Landrys                       |  |      | 436   |  |      |   |      |      |  |   |      | 
|Golden Corral                  |  |      | 429   |  |      |   | 430   |      |  |   | 167   | 
|TGI Fridays                   |  |      | 342   |  |      |   | 240   |      |  |   | 83    | 
|Hollywood Entertainment        |  |      | 306   |  |      |   | 312   |      |  |   | 273   | 
|Texas Childrens               |  |      | 274   |  |      |   | 286   |      |  |   | 137   | 
|River Oaks Imaging             |  |      | 272   |  |      |   | 280   |      |  |   | 264   | 
|Comp USA                       |  |      | 268   |  |      |   | 268   |      |  |   | 123   | 
|Footstar, Inc.                 |  |      | 260   |  |      |   | 740   |      |  |   | 735   | 
|Baptist Memorial Hospital      |  |      | 223   |  |      |   | 223   |      |  |   | 102   | 
|Dr. Pucillo                    |  |      | 189   |  |      |   | 189   |      |  |   | 87    | 
|Mattress Giant, Inc.           |  |      | 175   |  |      |   | 179   |      |  |   | 168   | 
|Washington Mutual              |  |      | 159   |  |      |   | 159   |      |  |   | 158   | 
|Wherehouse Entertainment Corp. |  |      | 138   |  |      |   | 386   |      |  |   | 381   | 
|Pier 1                         |  |      | 135   |  |      |   | 135   |      |  |   | 62    | 
|Office Max, Inc.               |  |      |      |  |      |   | 256   |      |  |   | 509   | 
|                               |  |      |       |  |      |   |       |      | 
|                               |  | $    | 7,844 |  |      | $ | 6,814 |      |  | $ | 5,033 | 
|                               |  |      |       |  |      |   |       |      | 

F-19



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                     
|-- | --------------------
|9. | FEDERAL INCOME TAXES







|                  |       |            |      |       |      |  |      |       |   |  |       |       |  
|----------------- | ----- | ---------- | ---- | ----- | ---- |  | ---- | ----- | - |  | ----- | ----- | -
|                  |       | 2004       |      |       |      |  |     
|                  |       | (estimate) |      |       | 2003 |  |      | 2002  |  
|                  |       |            |      |       |      |  |      |       |  
|Ordinary income   |       |            | 48.8 | %     |      |  | 52.8 | %     |   |  | 0.0   | %    
|Qualified         |       |            | 19.6 | %     |      |  |     |       |   |  |      |      
|Return of capital |       |            | 31.0 | %     |      |  | 31.8 | %     |   |  | 100.0 | %    
|Capital gain      |       |            | 0.6  | %     |      |  | 15.4 | %     |   |  | 0.0   | %    
|                  |       |            |      |       |      |  |      |       |  
|                  | Total |            |      | 100.0 | %    |  |      | 100.0 | % |  |       | 100.0 | %
|                  |       |            |      |       |      |  |      |       |  



|    |                                           
|--- | ------------------------------------------
|10. | STOCKHOLDERS EQUITY AND MINORITY INTEREST

Class A Common Shares


Class B Common Shares


Class C Common Shares


F-20



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Class D Common Shares


Minority Interest




|    |                           
|--- | --------------------------
|11. | RELATED PARTY TRANSACTIONS









F-21



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                                          
|--- | -----------------------------------------
|12. | REAL ESTATE ACQUISITIONS AND DISPOSITIONS











F-22



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|    |            
|--- | -----------
|13. | COMMITMENTS





|                  |       |   |     |       | 
|----------------- | ----- | - | --- | ----- | 
|2005              |       | $ | 228 |      
|2006              |       |   | 224 |      
|2007              |       |   | 224 |      
|2008              |       |   | 224 |      
|2009              |       |   | 146 |      
|2010 & thereafter |       |   |    |      
|                  |       |   |    
|                  | Total |   | $   | 1,046 | 
|                  |       |   |    



|    |                  
|--- | -----------------
|14. | SEGMENT REPORTING







F-23



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                    |  |           |        |             |             |   |       |            |        |   |              |           |  |           |       |   |       |   |        |   |  |   |         |  
|--------------------------------------------------- |  | --------- | ------ | ----------- | ----------- | - | ----- | ---------- | ------ | - | ------------ | --------- |  | --------- | ----- | - | ----- | - | ------ | - |  | - | ------- | -
|                                                    |  |           |        | Real Estate |             |   |       |            |        |   |              |           | 
|                                                    |  |           |        | Operating & |             |   |       |            | Retail |   |              | Corporate |  |           |      
|2004                                                |  | Portfolio |        |             | Development |   |       | Securities |        |   | Partnerships |           |  | and Other |       |   | Total |  
|                                                    |  |           |        |             |             |   |       |            |        |   |              |           |  |           |       |   |       |  
|Revenue                                             |  | $         | 11,688 |             |             | $ | 1,971 |            |        | $ | 7,656        |           |  | $         | 361   |   |       | $ | 83     |   |  | $ | 21,759  |  
|Income from retail partnership and other affiliates |  |           |       |             |             |   |      |            |        |   |             |           |  |           | 1,121 |   |       |   |       |   |  |   | 1,121   |  
|Expenses                                            |  |           | (7,163 | )           |             |   |      |            |        |   | (5,951       | )         |  |           | (7    | ) |       |   | (7,366 | ) |  |   | (20,487 | )
|Deferred merger cost                                |  |           |       |             |             |   |      |            |        |   |             |           |  |           |      |   |       |   | (1,682 | ) |  |   | (1,682  | )
|Income (loss) before discontinued operations        |  | $         | 4,525  |             |             | $ | 1,971 |            |        | $ | 1,705        |           |  | $         | 1,475 |   |       | $ | (8,965 | ) |  | $ | 711     |  

|                                                    |  |           |        |             |             |   |       |            |        |   |              |           |  |           |     |  |       |   |        |   |  |   |        |  
|--------------------------------------------------- |  | --------- | ------ | ----------- | ----------- | - | ----- | ---------- | ------ | - | ------------ | --------- |  | --------- | --- |  | ----- | - | ------ | - |  | - | ------ | -
|                                                    |  |           |        | Real Estate |             |   |       |            |        |   |              |           | 
|                                                    |  |           |        | Operating & |             |   |       |            | Retail |   |              | Corporate |  |           |    
|2003                                                |  | Portfolio |        |             | Development |   |       | Securities |        |   | Partnerships |           |  | and Other |     |  | Total |  
|                                                    |  |           |        |             |             |   |       |            |        |   |              |           |  |           |     |  |       |  
|Revenue                                             |  | $         | 6,052  |             |             | $ | 1,031 |            |        | $ | 2,958        |           |  | $         | 240 |  |       | $ | 9      |   |  | $ | 10,290 |  
|Income from retail partnership and other affiliates |  |           |       |             |             |   |      |            |        |   |             |           |  |           | 312 |  |       |   |       |   |  |   | 312    |  
|(Expenses)/Income                                   |  |           | (3,526 | )           |             |   | 169   |            |        |   | (2,241       | )         |  |           | 39  |  |       |   | (4,298 | ) |  |   | (9,857 | )
|Deferred merger cost                                |  |           |       |             |             |   |      |            |        |   |             |           |  |           |    |  |       |   | (915   | ) |  |   | (915   | )
|Income (loss) before discontinued operations        |  | $         | 2,526  |             |             | $ | 1,200 |            |        | $ | 717          |           |  | $         | 591 |  |       | $ | (5,204 | ) |  | $ | (170   | )

|                                                    |  |           |        |             |             |   |       |            |        |   |              |           |  |           |     |   |       |   |        |   |  |   |        |  
|--------------------------------------------------- |  | --------- | ------ | ----------- | ----------- | - | ----- | ---------- | ------ | - | ------------ | --------- |  | --------- | --- | - | ----- | - | ------ | - |  | - | ------ | -
|                                                    |  |           |        | Real Estate |             |   |       |            |        |   |              |           | 
|                                                    |  |           |        | Operating & |             |   |       |            | Retail |   |              | Corporate |  |           |    
|2002                                                |  | Portfolio |        |             | Development |   |       | Securities |        |   | Partnerships |           |  | and Other |     |   | Total |  
|                                                    |  |           |        |             |             |   |       |            |        |   |              |           |  |           |     |   |       |  
|Revenue                                             |  | $         | 3,774  |             |             | $ | 1,223 |            |        | $ | 847          |           |  | $         | 252 |   |       | $ | 4      |   |  | $ | 6,100  |  
|Income from retail partnership and other affiliates |  |           |       |             |             |   |      |            |        |   |             |           |  |           | 417 |   |       |   |       |   |  |   | 417    |  
|Expenses                                            |  |           | (2,735 | )           |             |   | (46   | )          |        |   | (657         | )         |  |           | (12 | ) |       |   | (3,167 | ) |  |   | (6,617 | )
|Deferred merger cost                                |  |           |       |             |             |   |      |            |        |   |             |           |  |           |    |   |       |   | (1,904 | ) |  |   | (1,904 | )
|Income (loss) before discontinued operations        |  | $         | 1,039  |             |             | $ | 1,177 |            |        | $ | 190          |           |  | $         | 657 |   |       | $ | (5,067 | ) |  | $ | (2,004 | )

F-24



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##### Table of Contents



AMREIT AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                
|--- | -----------------------------------------------
|15. | SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)



|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |       |  |   |        |       | 
|------------------------------------------------------------------ | ----------------- | ------- | ------ | ----- | ------- | - | ------ | ------- |  | - | ------- | ----- |  | - | ------ | ----- | 
|                                                                   |                   | 1st     |        |       | 2nd     |   |        | 3rd     |  |   | 4th     |      
|                                                                   |                   | Quarter |        |       | Quarter |   |        | Quarter |  |   | Quarter |      
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|2004:                                                              |                   |         |        |       |         |   |        |         |  |   |         |       |  |   |        |      
|Revenues as originally reported                                    |                   | $       | 4,552  |       |         | $ | 4,713  |         |  | $ | 5,797   |       |  | $ | 7,031  |      
|Reclassified to discontinued operations                            |                   |         | (85    | )     |         |   | (305   | )       |  |   | 56      |       |  |   |       |      
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|                                                                   | Adjusted Revenues |         |        | 4,467 |         |   |        | 4,408   |  |   |         | 5,853 |  |   |        | 7,031 | 
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|Net loss for class A common shareholders                           |                   |         | (1,178 | )     |         |   | (1,009 | )       |  |   | (48     | )     |  |   | (1,630 | )    
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|Net loss per class A common share  basic and
    diluted          |                   |         | (0.40  | )     |         |   | (0.31  | )       |  |   | (0.01   | )     |  |   | (0.48  | )    
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|2003:                                                              |                   |         |        |       |         |   |        |         |  |   |         |       |  |   |        |      
|Revenues as originally reported                                    |                   | $       | 2,142  |       |         | $ | 2,884  |         |  | $ | 3,193   |       |  | $ | 4,621  |      
|Reclassified to discontinued operations                            |                   |         | (409   | )     |         |   | (531   | )       |  |   | (596    | )     |  |   | (1,015 | )    
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|                                                                   | Adjusted Revenues |         |        | 1,733 |         |   |        | 2,353   |  |   |         | 2,597 |  |   |        | 3,606 | 
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|Net income (loss) for class A common shareholders                  |                   |         | 6      |       |         |   | 210    |         |  |   | 202     |       |  |   | (362   | )    
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      
|Net income (loss) per class A common share 
    basic and diluted |                   |         | 0.00   |       |         |   | 0.08   |         |  |   | 0.07    |       |  |   | (0.13  | )    
|                                                                   |                   |         |        |       |         |   |        |         |  |   |         |      

F-25



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##### Table of Contents



AMREIT AND SUBSIDIARIES








SCHEDULE III  Consolidated Real Estate Owned and
Accumulated Depreciation


For the year ended December 31, 2004


|                                   |                        |              |            |            |      |   |             |               |  |                |           |   |  |            |             |   |              |      |            |             |              |   |          |           |  |  |          |  |  |   |            |            | 
|---------------------------------- | ---------------------- | ------------ | ---------- | ---------- | ---- | - | ----------- | ------------- |  | -------------- | --------- | - |  | ---------- | ----------- | - | ------------ | ---- | ---------- | ----------- | ------------ | - | -------- | --------- |  |  | -------- |  |  | - | ---------- | ---------- | 
|                                   |                        |              |            |            |      |   |             | Investment in |  |                |           |   |  |            |             |   |             
|                                   |                        | Building and |            |            |      |   | Real Estate |               |  | Direct Finance |           |   |  |            | Accumulated |   |              | Date |            |             | Encumbrances |  
|Property Description               |                        | Improvements |            |            | Land |   |             | Held for Sale |  |                | Lease     |   |  | Total Cost |             |   | Depreciation |      |            | Acquired    |              |   | (Note A) |          
|                                   |                        |              |            |            |      |   |             |               |  |                |           |   |  |            |             |   |              |      |            |             |              |   |          |          
|SHOPPING CENTERS                   |                        |              |            |            |      |   |             |               |  |                |           |   |  |            |             |   |              |      |            |             |              |   |          |           |  |  |          |  |  |   |            |           
|Copperfield Medical, Texas         |                        | $            | 1,531,977  |            |      | $ | 534,086     |               |  | $              |          |   |  | $          |            |   |              | $    | 2,066,063  |             |              | $ | 331,627  |           |  |  | 9-26-95  |  |  | $ |           |           
|Lake Woodlands Plaza, Texas        |                        |              | 3,494,004  |            |      |   | 1,369,064   |               |  |                |          |   |  |            |            |   |              |      | 4,863,068  |             |              |   | 541,557  |           |  |  | 6-3-98   |  |  |   |           |           
|Sugar Land Plaza, Texas            |                        |              | 3,016,816  |            |      |   | 1,280,042   |               |  |                |          |   |  |            |            |   |              |      | 4,296,858  |             |              |   | 501,960  |           |  |  | 7-1-98   |  |  |   | 2,336,364  |           
|Uptown Plaza, Texas                |                        |              | 5,033,359  |            |      |   | 7,796,383   |               |  |                |          |   |  |            |            |   |              |      | 12,829,742 |             |              |   | 133,053  |           |  |  | 12-10-03 |  |  |   |           |           
|Terrace Shops, Texas               |                        |              | 2,575,931  |            |      |   | 2,212,278   |               |  |                |          |   |  |            |            |   |              |      | 4,788,209  |             |              |   | 72,096   |           |  |  | 12-15-03 |  |  |   | 2,788,802  |           
|Courtyard Square, Texas            |                        |              | 1,777,160  |            |      |   | 4,133,640   |               |  |                |          |   |  |            |            |   |              |      | 5,910,800  |             |              |   | 33,921   |           |  |  | 6-15-04  |  |  |   |           |           
|Plaza in the Park, Texas           |                        |              | 17,380,465 |            |      |   | 13,261,792  |               |  |                |          |   |  |            |            |   |              |      | 30,642,257 |             |              |   | 291,311  |           |  |  | 7-01-04  |  |  |   | 18,080,604 |           
|Cinco Ranch, Texas                 |                        |              | 11,565,300 |            |      |   | 2,668,226   |               |  |                |          |   |  |            |            |   |              |      | 14,233,526 |             |              |   | 188,657  |           |  |  | 7-01-04  |  |  |   | 8,554,686  |           
|Bakery Square, Texas               |                        |              | 4,806,518  |            |      |   | 4,325,612   |               |  |                |          |   |  |            |            |   |              |      | 9,132,130  |             |              |   | 71,000   |           |  |  | 7-21-04  |  |  |   | 5,192,547  |           
|McArthur Park, Texas               |                        |              | 26,468,785 |            |      |   | 8,647,098   |               |  |                |          |   |  |            |            |   |              |      | 35,115,883 |             |              |   | 13,551   |           |  |  | 12-27-04 |  |  |   | 13,985,700 |           
|                                   |                        |              |            |            |      |   |             |               |  |                |           |   |  |            |             |   |              |      |            |             |              |   |          |          
|                                   | Total Shopping Centers |              |            | 77,650,315 |      |   |             | 46,228,221    |  |                |           |  |  |            |             |  |              |      |            | 123,878,536 |              |   |          | 2,178,733 |  |  |          |  |  |   |            | 50,938,703 | 
|SINGLE-TENANT                      |                        |              |            |            |      |   |             |               |  |                |           |   |  |            |             |   |              |      |            |             |              |   |          |           |  |  |          |  |  |   |            |           
|Radio Shack, Texas                 |                        |              | 788,330    |            |      |   | 337,856     |               |  |                |          |   |  |            |            |   |              |      | 1,126,186  |             |              |   | 213,033  |           |  |  | 06-15-94 |  |  |   |           |           
|Blockbuster Music, Missouri        |                        |              | 1,247,461  |            |      |   | 534,483     |               |  |                |          |   |  |            |            |   |              |      | 1,781,944  |             |              |   | 202,616  |           |  |  | 11-14-94 |  |  |   |           |           
|Washington Mutual, Texas           |                        |              |           |            |      |   | 562,846     |               |  |                |          |   |  |            |            |   |              |      | 562,846    |             |              |   | n/a      |           |  |  | 09-23-96 |  |  |   |           |           
|Washington Mutual, Texas           |                        |              |           |            |      |   | 851,974     |               |  |                |          |   |  |            |            |   |              |      | 851,974    |             |              |   | n/a      |           |  |  | 12-11-96 |  |  |   |           |           
|Just For Feet, Louisiana           |                        |              |           |            |      |   |            |               |  |                | 1,654,243 |   |  |            |            |   |              |      | 1,654,243  |             |              |   | n/a      |           |  |  | 06-09-97 |  |  |   |           |           
|Hollywood Video, Louisiana         |                        |              | 784,123    |            |      |   | 443,544     |               |  |                |          |   |  |            |            |   |              |      | 1,227,667  |             |              |   | 115,847  |           |  |  | 10-31-97 |  |  |   |           |           
|Hollywood Video, Mississippi       |                        |              | 835,854    |            |      |   | 450,000     |               |  |                |          |   |  |            |            |   |              |      | 1,285,854  |             |              |   | 150,025  |           |  |  | 12-30-97 |  |  |   | 946,147    |           
|Smokey Bones, Georgia              |                        |              |           |            |      |   | 713,386     |               |  |                |          |   |  |            |            |   |              |      | 713,386    |             |              |   | n/a      |           |  |  | 12-18-98 |  |  |   |           |           
|IHOP, Texas                        |                        |              |           |            |      |   | 740,882     |               |  |                |          |   |  |            | 1,018,731   |   |              |      | 1,759,613  |             |              |   | n/a      |           |  |  | 9-22-99  |  |  |   | 1,233,301  |           
|IHOP, Kansas                       |                        |              |           |            |      |   | 450,984     |               |  |                |          |   |  |            | 1,012,056   |   |              |      | 1,463,040  |             |              |   | n/a      |           |  |  | 9-30-99  |  |  |   |           |           
|IHOP, Oregon                       |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,051,599   |   |              |      | 1,051,599  |             |              |   | Note B   |           |  |  | 4-16-02  |  |  |   | 833,990    |           
|IHOP, Texas                        |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 904,315     |   |              |      | 904,315    |             |              |   | Note B   |           |  |  | 4-16-02  |  |  |   | 715,275    |           
|IHOP, New York                     |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,145,256   |   |              |      | 1,145,256  |             |              |   | Note B   |           |  |  | 4-16-02  |  |  |   | 894,094    |           
|IHOP, Kansas                       |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 892,563     |   |              |      | 892,563    |             |              |   | Note B   |           |  |  | 4-16-02  |  |  |   | 705,941    |           
|IHOP, New Mexico                   |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 867,918     |   |              |      | 867,918    |             |              |   | Note B   |           |  |  | 4-23-02  |  |  |   | 711,656    |           
|IHOP, Louisiana                    |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,411,295   |   |              |      | 1,411,295  |             |              |   | Note B   |           |  |  | 4-23-02  |  |  |   | 1,176,016  |           
|IHOP, Virginia                     |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 751,789     |   |              |      | 751,789    |             |              |   | Note B   |           |  |  | 4-23-02  |  |  |   | 592,566    |           
|IHOP, Oregon                       |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 712,494     |   |              |      | 712,494    |             |              |   | Note B   |           |  |  | 5-17-02  |  |  |   | 585,038    |           
|IHOP, Missouri                     |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,183,192   |   |              |      | 1,183,192  |             |              |   | Note B   |           |  |  | 5-17-02  |  |  |   | 971,179    |           
|IHOP, Virginia                     |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 848,413     |   |              |      | 848,413    |             |              |   | Note B   |           |  |  | 6-21-02  |  |  |   | 672,735    |           
|IHOP, Virginia                     |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 857,685     |   |              |      | 857,685    |             |              |   | Note B   |           |  |  | 7-18-02  |  |  |   | 678,597    |           
|Jack in the Box, Texas             |                        |              | 504,230    |            |      |   | 216,099     |               |  |                |          |   |  |            |            |   |              |      | 720,329    |             |              |   | 31,784   |           |  |  | 7-23-02  |  |  |   |           |           
|Baptist Memorial Health, Tennessee |                        |              | 1,456,017  |            |      |   | 624,006     |               |  |                |          |   |  |            |            |   |              |      | 2,080,023  |             |              |   | 90,287   |           |  |  | 7-23-02  |  |  |   |           |           
|Payless Shoe Source, Texas         |                        |              | 498,098    |            |      |   | 212,907     |               |  |                |          |   |  |            |            |   |              |      | 711,005    |             |              |   | 31,397   |           |  |  | 7-23-02  |  |  |   |           |           
|Golden Corral, Texas               |                        |              | 1,099,817  |            |      |   | 722,949     |               |  |                |          |   |  |            |            |   |              |      | 1,822,766  |             |              |   | 69,326   |           |  |  | 7-23-02  |  |  |   |           |           
|Golden Corral, Texas               |                        |              | 1,297,850  |            |      |   | 556,222     |               |  |                |          |   |  |            |            |   |              |      | 1,854,072  |             |              |   | 81,809   |           |  |  | 7-23-02  |  |  |   |           |           
|TGI Fridays, Texas                |                        |              | 1,453,769  |            |      |   | 623,043     |               |  |                |          |   |  |            |            |   |              |      | 2,076,812  |             |              |   | 91,637   |           |  |  | 7-23-02  |  |  |   |           |           
|Guitar Center, Minnesota           |                        |              | 1,782,470  |            |      |   | 763,917     |               |  |                |          |   |  |            |            |   |              |      | 2,546,387  |             |              |   | 112,357  |           |  |  | 7-23-02  |  |  |   |           |           
|Popeyes, Georgia                  |                        |              | 778,772    |            |      |   | 333,758     |               |  |                |          |   |  |            |            |   |              |      | 1,112,530  |             |              |   | 49,089   |           |  |  | 7-23-02  |  |  |   |           |           
|Energy Wellness Center, Texas      |                        |              | 1,276,836  |            |      |   | 547,214     |               |  |                |          |   |  |            |            |   |              |      | 1,824,050  |             |              |   | 80,484   |           |  |  | 7-23-02  |  |  |   |           |           
|Pier One Imports, Colorado         |                        |              | 1,000,563  |            |      |   | 422,722     |               |  |                |          |   |  |            |            |   |              |      | 1,423,285  |             |              |   | 63,070   |           |  |  | 7-23-02  |  |  |   |           |           
|IHOP, Utah                         |                        |              |           |            |      |   | 457,492     |               |  |                |          |   |  |            | 1,093,910   |   |              |      | 1,551,402  |             |              |   | n/a      |           |  |  | 7-25-02  |  |  |   | 1,176,286  |           
|IHOP, Tennessee                    |                        |              |           |            |      |   | 469,502     |               |  |                |          |   |  |            | 1,127,072   |   |              |      | 1,596,574  |             |              |   | n/a      |           |  |  | 7-26-02  |  |  |   | 1,271,250  |           
|IHOP, California                   |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,006,844   |   |              |      | 1,006,844  |             |              |   | Note B   |           |  |  | 8-23-02  |  |  |   | 707,460    |           
|IHOP, Texas                        |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,167,221   |   |              |      | 1,167,221  |             |              |   | Note B   |           |  |  | 8-23-02  |  |  |   | 849,138    |           
|IHOP, Tennessee                    |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,070,932   |   |              |      | 1,070,932  |             |              |   | Note B   |           |  |  | 8-23-02  |  |  |   | 737,249    |           
|IHOP, Colorado                     |                        |              |           |            |      |   |            |               |  |                |          |   |  |            | 1,095,569   |   |              |      | 1,095,569  |             |              |   | Note B   |           |  |  | 8-23-02  |  |  |   | 793,479    |           
|CVS Pharmacy, Texas                |                        |              |           |            |      |   | 2,688,996   |               |  |                |          |   |  |            |            |   |              |      | 2,688,996  |             |              |   | n/a      |           |  |  | 1-10-03  |  |  |   |           |           
|TGI Fridays, Maryland             |                        |              |           |            |      |   | 1,474,474   |               |  |                |          |   |  |            |            |   |              |      | 1,474,474  |             |              |   | n/a      |           |  |  | 9-16-03  |  |  |   |           |           

F-26



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##### Table of Contents



|                             |                     |              |            |            |      |                      |               |            |               |                |         |           |            |            |             |                      |              |       |           |             |              |  |          |           |  |     |            |  |  |  |   |            | 
|---------------------------- | ------------------- | ------------ | ---------- | ---------- | ---- | -------------------- | ------------- | ---------- | ------------- | -------------- | ------- | --------- | ---------- | ---------- | ----------- | -------------------- | ------------ | ----- | --------- | ----------- | ------------ |  | -------- | --------- |  | --- | ---------- |  |  |  | - | ---------- | 
|                             |                     |              |            |            |      | Real Estate          |               |            | Investment in |                |         |           |            |            |             |                      |              |      
|                             |                     | Building and |            |            |      |                      | Held for Sale |            |               | Direct Finance |         |           |            |            | Accumulated |                      |              | Date  |           |             | Encumbrances | 
|Property Description         |                     | Improvements |            |            | Land |                      |               | (Note D)   |               |                | Lease   |           |            | Total Cost |             |                      | Depreciation |       |           | Acquired    |              |  | (Note A) |          
|                             |                     |              |            |            |      |                      |               |            |               |                |         |           |            |            |             |                      |              |       |           |             |              |  |          |          
|5/8wYUM Brands, Texas        |                     |              |           |            |      |                      |              |            |               | $              | 631,034 |           |            |            |            |                      |              | $     | 631,034   |             |              |  | n/a      |           |  |     | 10-14-03   |  |  |  |  |           
|San Felipe at Winrock, Texas |                     |              |           |            |      | $                    | 2,349,590     |            |               |                |        |           |            |            |            |                      |              |       | 2,349,590 |             |              |  | n/a      |           |  |     | 11-17-03   |  |  |  |  |           
|Bank of America, Texas       |                     |              |           |            |      |                      | 2,502,413     |            |               |                |        |           |            |            |            |                      |              |       | 2,502,413 |             |              |  | n/a      |           |  |     | 11-17-03   |  |  |  |  |           
|Advance Auto, Missouri       |                     |              |           |            |      |                      |              |            |               |                | 361,187 |           |            |            |            |                      |              |       | 361,187   |             |              |  | n/a      |           |  |     | 2-13-04    |  |  |  |  |           
|Research Forest, Texas       |                     |              |           |            |      |                      | 516,709       |            |               |                |        |           |            |            |            |                      |              |       | 516,709   |             |              |  | n/a      |           |  |     | 4-30-04    |  |  |  |  |           
|Advance Auto, Illinois       |                     |              |           |            |      |                      |              |            |               |                | 637,166 |           |            |            |            |                      |              |       | 637,166   |             |              |  | n/a      |           |  |     | 6-3-04     |  |  |  |  |           
|Advance Auto, Missouri       |                     |              |           |            |      |                      |              |            |               |                | 356,307 |           |            |            |            |                      |              |       | 356,307   |             |              |  | n/a      |           |  |     | 9-24-04    |  |  |  |  |           
|Advance Auto, Missouri       |                     |              |           |            |      |                      |              |            |               |                | 732,076 |           |            |            |            |                      |              |       | 732,076   |             |              |  | n/a      |           |  |     | 9-28-04    |  |  |  |  |           
|Advance Auto, Illinois       |                     |              |           |            |      |                      |              |            |               |                | 899,731 |           |            |            |            |                      |              |       | 899,731   |             |              |  | n/a      |           |  |     | 9-30-04    |  |  |  |  |           
|Advance Auto, Illinois       |                     |              |           |            |      |                      |              |            |               |                | 455,588 |           |            |            |            |                      |              |       | 455,588   |             |              |  | n/a      |           |  |     | 10-19-04   |  |  |  |  |           
|Advance Auto, Illinois       |                     |              |           |            |      |                      |              |            |               |                | 598,311 |           |            |            |            |                      |              |       | 598,311   |             |              |  | n/a      |           |  |     | 11-16-04   |  |  |  |  |           
|410 and Blanco, Texas        |                     |  $          | 14,804,190 |            |      | 1,341,597 21,909,565 |               |            |  6,325,643   |                |         |  $       | 19,218,854 |            |             | 1,341,597 62,258,252 |              | n/a $ | 1,382,761 |             |              |  | 12-17-04 |           |  |  $ | 16,251,397 | 
|                             | Total Single-Tenant |              | $          | 92,454,505 |      |                      | $             | 68,137,786 |               |                | $       | 6,325,643 |            |            | $           | 19,218,854           |              |       | $         | 186,136,788 |              |  | $        | 3,561,494 |  |     |            |  |  |  | $ | 67,190,100 | 
|                             | Total               |              |            |            |      |                      |               |            |               |                |         |           |            |            |             |                      |              |       |           |             |              |  |          |           |  |     |            |  |  |  |   |            | 
|                             |                     |              |            |            |      |                      |               |            |               |                |         |           |            |            |             |                      |              |       |           |             |              |  |          |          






| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Note A  Encumbrances do not include
    $38.0 million outstanding under a $41 million 1-year
    revolving credit facility, payable to Wells Fargo bank secured
    by a pool of properties that include four multi-tenant,
    twenty-one single-tenant properties and one property under
    development.
|
| | Note B  The portion of the lease relating to the
    building of this property has been recorded as a direct
    financing lease for financial reporting purposes. Consequently,
    depreciation is not applicable.                                                                                       
|
| | Note C  Activity within real estate and accumulated
    depreciation during the three years in the period ended
    December 31, 2004 is as follows:                                                                                                                                                       

|                             |  |      |             |             |              |   |           |  
|---------------------------- |  | ---- | ----------- | ----------- | ------------ | - | --------- | -
|                             |  |      |             | Accumulated |             
|                             |  | Cost |             |             | Depreciation |  
|                             |  |      |             |             |              |  
|Balance at December 31, 2001 |  | $    | 30,563,730  |             |              | $ | 1,998,701 |  
|Acquisitions/additions       |  |      | 20,103,861  |             |              |   |          |  
|Disposals                    |  |      | (2,875,168  | )           |              |   | (238,591  | )
|Depreciation expense         |  |      |            |             |              |   | 262,042   |  
|                             |  |      |             |             |              |  
|Balance at December 31, 2002 |  | $    | 47,792,423  |             |              | $ | 2,022,152 |  
|Acquisitions/additions       |  |      | 29,435,427  |             |              |   |          |  
|Disposals                    |  |      | (4,984,583  | )           |              |   | (267,016  | )
|Depreciation expense         |  |      |            |             |              |   | 765,497   |  
|                             |  |      |             |             |              |  
|Balance at December 31, 2003 |  | $    | 72,243,267  |             |              | $ | 2,520,633 |  
|Acquisitions/additions       |  |      | 104,136,245 |             |              |   |          |  
|Disposals                    |  |      | (7,682,772  | )           |              |   | (478,806  | )
|Impairment charge            |  |      | (1,300,000  | )           |              |   |           |  
|Transfer to held for sale    |  |      | (478,806    | )           |              |   |           |  
|Depreciation expense         |  |      |            |             |              |   | 1,519,667 |  
|                             |  |      |             |             |              |  
|Balance at December 31, 2004 |  | $    | 166,917,934 |             |              | $ | 3,561,494 |  
|                             |  |      |             |             |              |  



| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Note D  The carrying amount of real estate held for
    sale is net of accumulated amortization of $479 thousand.

F-27



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##### Table of Contents



EXHIBIT INDEX


| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .1  |  | Amended and Restated Declaration of Trust (included as
    Exhibit 3.1 of the Exhibits to the Companys Annual
    Report on Form 10-KSB for the year ended December 31, 2002,
    and incorporated herein by reference).                                                                                                                                                                  
| | 3  | .2  |  | By-Laws, dated December 22, 2002 (included as
    Exhibit 3.1 of the Exhibits to the Companys Annual
    Report on Form 10-KSB for the year ended December 31, 2002,
    and incorporated herein by reference).                                                                                                                                                                           
|
| | 10 | .1  |  | Revolving Credit Agreement, dated November 6, 1998, by and
    among AmREIT, Inc., certain lenders and Wells Fargo Bank, as the
    Agent, relating to a $30,000,000 loan (included as
    Exhibit 10.1 of the Exhibits to the Companys
    Quarterly Report on Form 10-QSB for the quarter ended
    September 30, 1998 and incorporated herein by reference).                           
|
| | 10 | .2  |  | Amended and Restated Revolving Credit Agreement, effective
    August 1, 2000, by and among AmREIT, Inc., certain lenders
    and Wells Fargo Bank, as the Agent, relating to a $13,000,000
    loan (included as Exhibit 10.1 of the Exhibits to the
    Companys Quarterly Report on Form 10-QSB for the quarter
    ended September 30, 1998 and incorporated herein by
    reference).
|
| | 10 | .3  |  | Revolving Credit Agreement, effective September 4, 2003, by
    and among AmREIT and Wells Fargo Bank, as the Agent, relating to
    a $20,000,000 loan (included as Exhibit 10.3 of the
    Exhibits to the Companys Annual Report on Form 10-KSB
    for the year ended December 31, 2003 and incorporated
    herein by reference).                                                    
|
| | 10 | .4  |  | Amended and Restated Revolving Credit Agreement, effective
    December 8, 2003, by and among AmREIT and Wells Fargo Bank,
    as the Agent, relating to a $30,000,000 loan (included as
    Exhibit 10.4 of the Exhibits to the Companys Annual
    Report on Form 10-KSB for the year ended December 31,
    2003 and incorporated herein by reference).                                
|
| | 21 |     |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                               
|
| | 31 | .1* |  | Certification pursuant to Rule 13a-14(a) of Chief Executive
    Officer dated March 30, 2004.                                                                                                                                                                                                                                                                                              
|
| | 31 | .2* |  | Certification pursuant to Rule 13a-14(a) of Chief Financial
    Officer dated March 30, 2004.                                                                                                                                                                                                                                                                                              
|
| | 32 | .1* |  | Chief Executive Officer certification pursuant to 18 U.S.C.
    Section 1350, adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                       
| | 32 | .2* |  | Chief Financial Officer certification pursuant to 18 U.S.C.
    Section 1350, adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                       






|  |               
|- | --------------
|* | Filed herewith