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U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
  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 1000Houston, Texas
    
    77046(Address of principal executive offices)
    
    (Zip Code)
 (713) 850-1400
 Securities registered pursuant to Section 12 (b) of the Exchange Act:
 Title of Class
    
    Name of Exchange on Which RegisteredClass A Common Shares
    
    American Stock Exchange
 Securities registered under Section 12(g) of the Exchange Act: None
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ
 $39.2 million
  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
  
 Form10-KItem No.
    
    
    
    Report PagePART I1.
    
    Business
    
    
    31A.
    
    Risk Factors
    
    
    91B.
    
    Unresolved Staff Comments
    
    
    162.
    
    Properties
    
    
    173.
    
    Legal Proceedings
    
    
    224.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART II5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    236.
    
    Selected Financial Data
    
    
    257.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    277A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    388.
    
    Consolidated Financial Statements and Supplementary Data
    
    
    399.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    399A.
    
    Controls and Procedures
    
    
    399B.
    
    Other Information
    
    
    39PART III10.
    
    Trust Managers and Executive Officers of the Registrant
    
    
    4011.
    
    Executive Compensation
    
    
    4012.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    4013.
    
    Certain Relationships and Related Transactions
    
    
    4014.
    
    Principal Accounting Fees and Services
    
    
    40PART IV15.
    
    Exhibits and Financial Statement Schedules
    
    
    41Eighth Modification Agreement effective 11/4/2005Subsidiaries of the CompanyCertification pursuant to Rule 13a-14(a) of CEOCertification pursuant to Rule 13a-14(a) of CFOCEO certification pursuant to 18 U.S.C. Section 1350CFO certification pursuant to 18 U.S.C. Section 1350
  2




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PART I
 
 Item 1. Business
 General
 real estate development and operating company asset advisory group an
institutional-grade portfolio of Irreplaceable Corners
    Our Strategy
    3




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Our Structure
  Real Estate Development and Operating Group
    4




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Asset Advisory Group
  Securities Operations
   Merchant Development Funds
  5




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Portfolio of Irreplaceable Corners
      6




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Competition
  Compliance with Governmental Regulations
  7




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Employees
  Financial Information
  8




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Item 1A. Risk Factors
 Risks Associated with an Investment in AmREIT
 Our class A common shares have limited average daily trading volume.
  There may be significant fluctuations in our quarterly results.
  
    
    interest rate changes;
    
    the volume and timing of our property acquisitions;
    
    the amount and timing of income generated by our real estate operating and
development and securities company subsidiaries, as well as our retail
partnerships;
    
    the recognitions of gains or losses on property sales;
    
    the level of competition in our market; and
    
    general economic conditions, especially those affecting the retail industries.
  The conversion and conversion premium associated with the class C and class D
common shares may dilute the interest of the Class A common shares.
    9




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
    
    The price of our publicly traded class A common shares;
    
    The multiple and valuation at which our class A common shares trade;
    
    Our ability to grow earnings, net income and FFO as well as dividends; and
    
    Our ability to redeem these shares is based on our ability to access the debt and equity markets as well as
on the liquidity in our balance sheet generated primarily by asset sales.
 Conversion of class B common shares could put downward pressure on the market
price of our class A common shares.
  Distribution payments in respect of our Class A common share are subordinate to
payments on debt and other series of common shares.
  The economic performance and value of our shopping centers depend on many
factors, each of which could have an adverse impact on our cash flows and
operating results.
  
    
    Changes in the national, regional and local economic climate;
    
    Local conditions such as an oversupply of space or a reduction in demand for retail real
estate in the area;
    
    The attractiveness of the properties to tenants;
    
    Competition from other available space;
    
    Our ability to provide adequate management services and to maintain our properties;
    
    Increased operating costs, if these costs cannot be passed through to tenants; and
    
    The expense of periodically renovating, repairing and releasing spaces.
  10




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Our dependence on rental income may adversely affect our ability to meet our
debt obligations and make distributions to our shareholders.
  
    
    Delay lease commencements;
    
    Decline to extend or renew leases upon expiration;
    
    Fail to make rental payments when due; or
    
    Close stores or declare bankruptcy.
  Tenant, geographic or retail product concentrations in our real estate
portfolio could make us vulnerable to negative economic and other trends.
     11




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We may increase our leverage without shareholder approval.
   If we cannot meet our REIT distribution requirements, we may have to borrow
funds or liquidate assets to maintain our REIT status.
  We will be subject to conflicts of interest.
    12




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Risks Associated with an Investment in Real Estate
 Real estate investments are relatively illiquid.
  Our properties are subject to general real estate operating risks.
  We may construct improvements, the cost of which may not be recoverable.
   13




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An uninsured loss or a loss that exceeds the policies on our properties could
subject us to lost capital or revenue on those properties.
  We will have no economic interest in leasehold estate properties.
  We may invest in joint ventures.
  
    
    the potential inability of our joint venture partner to perform;
    
    the joint venture partner may have economic or business interests or
goals which are inconsistent with or adverse to ours;
    
    the joint venture partner may take actions contrary to our requests or
instructions or contrary to our objectives or policies; and
    
    the joint venturers may not be able to agree on matters relating to
the property they jointly own. Although
 14




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each joint owner will have a
right of first refusal to purchase the other owners interest, in the
event a sale is desired, the joint owner may not have sufficient
resources to exercise such right of first refusal.
  Our properties may be subject to environmental liabilities.
    15




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Risks Associated with Federal Income Taxation of AmREIT
 Our failure to qualify as a REIT for tax purposes would result in taxation of
us as a corporation and the reduction of funds available for shareholder
distribution.
   We may be liable for prohibited transaction tax and/or penalties.
  Changes in the tax law may adversely affect our REIT status.
  
 Item 1B. Unresolved Staff Comments
  16




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Item 2. Properties
 General
   Land
 Buildings -
 Leases -
 Location of Properties
   th
 17




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th th
  AnnualizedBase Rent asof DecemberMulti-Tenant Shopping Centers
    
    Major Tenants
    
    City
    
    State
    
    Date Acquired
    
    GLA
    
    31, 2005
    
    % LeasedUptown Park
    
    McCormick & Schmick's
    
    Houston
    
    TX
    
    
    06/01/05
    
    
    
    169,110
    
    
    
    $4,067,373
    
    
    
    85
    %Southbank  Riverwalk
    
    Hard Rock Café
    
    San Antonio
    
    TX
    
    
    09/30/05
    
    
    
    46,673
    
    
    
    1,351,495
    
    
    
    96
    %MacArthur Park
    
    Kroger
    
    Dallas
    
    TX
    
    12/04 and 12/05
    
    
    237,381
    
    
    
    3,982,955
    
    
    
    98
    %Plaza in the Park
    
    Kroger
    
    Houston
    
    TX
    
    
    07/01/04
    
    
    
    139,971
    
    
    
    2,529,012
    
    
    
    97
    %Cinco Ranch
    
    Kroger
    
    Houston
    
    TX
    
    
    07/01/04
    
    
    
    97,302
    
    
    
    1,245,833
    
    
    
    100
    %Bakery Square
    
    Walgreens & Bank of America
    
    Houston
    
    TX
    
    
    07/21/04
    
    
    
    34,614
    
    
    
    849,460
    
    
    
    100
    %Uptown Plaza
    
    CVS/pharmacy
    
    Houston
    
    TX
    
    
    12/10/03
    
    
    
    28,000
    
    
    
    1,236,646
    
    
    
    100
    %Woodlands Plaza
    
    FedEx/Kinkos & Rug Gallery
    
    The Woodlands
    
    TX
    
    
    06/03/98
    
    
    
    20,018
    
    
    
    373,317
    
    
    
    100
    %Sugarland Plaza
    
    Mattress Giant
    
    Sugarland
    
    TX
    
    
    07/01/98
    
    
    
    16,750
    
    
    
    349,545
    
    
    
    100
    %Terrace Shops
    
    Starbucks
    
    Houston
    
    TX
    
    
    12/15/03
    
    
    
    16,395
    
    
    
    385,342
    
    
    
    100
    %Baptist Memorial Medical Plaza
    
    Baptist Memorial & Auto Zone
    
    Memphis
    
    TN
    
    
    07/23/02
    
    
    
    15,000
    
    
    
    222,643
    
    
    
    100
    %Courtyard at Post Oak
    
    Verizon Wireless
    
    Houston
    
    TX
    
    
    06/15/04
    
    
    
    13,597
    
    
    
    477,361
    
    
    
    100
    %San Felipe and Winrock (1) (2)
    
    
    (1
    ) (2)
    
    Houston
    
    TX
    
    
    11/17/03
    
    
    
    8,400
    
    
    
    
    
    
    
    Multi-Tenant Shopping Centers
Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843,211
    
    
    
    $17,070,982
    
    
    
    96
    %
 AnnualizedBase Rent asof DecemberSingle Tenant (Ground Leases)
    
    
    
    
    
    City
    
    State
    
    Date Acquired
    
    GLA
    
    31, 2005
    
    % LeasedCVS Corporation
    
    
    
    
    
    Houston
    
    TX
    
    
    01/10/03
    
    
    
    13,824
    
    
    
    $327,167
    
    
    
    100
    %Darden Restaurants
    
    
    
    
    
    Peachtree City
    
    GA
    
    
    12/18/98
    
    
    
    6,867
    
    
    
    79,366
    
    
    
    100
    %Carlson Restaurants
    
    
    
    
    
    Hanover
    
    MD
    
    
    09/16/03
    
    
    
    6,802
    
    
    
    150,421
    
    
    
    100
    %Citibank (1) (6)
    
    
    
    
    
    San Antonio
    
    TX
    
    
    12/17/04
    
    
    
    4,439
    
    
    
    
    
    
    
    100
    %Comerica Bank (1) (6)
    
    
    
    
    
    The Woodlands
    
    TX
    
    
    04/30/04
    
    
    
    4,277
    
    
    
    
    
    
    
    100
    %Washington Mutual
    
    
    
    
    
    Houston
    
    TX
    
    
    12/11/96
    
    
    
    3,685
    
    
    
    98,160
    
    
    
    100
    %Washington Mutual
    
    
    
    
    
    The Woodlands
    
    TX
    
    
    09/23/96
    
    
    
    3,685
    
    
    
    61,060
    
    
    
    100
    %Single Tenant (Ground Leases) Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,579
    
    
    
    $716,174
    
    
    
    100
    %
 18




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AnnualizedBase Rent asDate
    
    
    
    
    
    of DecemberSingle Tenant (Fee Simple)
    
    Major Tenants
    
    City
    
    State
    
    Acquired
    
    
    GLA
    
    
    31, 2005
    
    % LeasedEnergy Wellness
    
    
    
    
    
    Sugarland
    
    TX
    
    
    07/23/02
    
    
    
    15,000
    
    
    
    $187,857
    
    
    
    100
    %Golden Corral
    
    
    
    
    
    Houston
    
    TX
    
    
    07/23/02
    
    
    
    12,000
    
    
    
    182,994
    
    
    
    100
    %Golden Corral
    
    
    
    
    
    Humble
    
    TX
    
    
    07/23/02
    
    
    
    12,000
    
    
    
    181,688
    
    
    
    100
    %Carlson Restaurants
    
    
    
    
    
    Houston
    
    TX
    
    
    07/23/02
    
    
    
    8,500
    
    
    
    200,000
    
    
    
    100
    %IHOP Corporation
    
    
    
    
    
    Sugarland
    
    TX
    
    
    09/22/99
    
    
    
    4,020
    
    
    
    188,664
    
    
    
    100
    %IHOP Corporation (5)
    
    
    
    
    
    Centerville
    
    UT
    
    
    07/25/02
    
    
    
    4,020
    
    
    
    161,707
    
    
    
    100
    %IHOP Corporation (5)
    
    
    
    
    
    Memphis
    
    TN
    
    
    08/23/02
    
    
    
    4,020
    
    
    
    177,780
    
    
    
    100
    %IHOP Corporation
    
    
    
    
    
    Topeka
    
    KS
    
    
    09/30/99
    
    
    
    4,020
    
    
    
    157,892
    
    
    
    100
    %AFC, Inc.
    
    
    
    
    
    Atlanta
    
    GA
    
    
    07/23/02
    
    
    
    2,583
    
    
    
    119,279
    
    
    
    100
    %Advance Auto (1) (2) (3) (4)
    
    
    
    
    
    Various
    
    Various
    
    Various
    
    
    21,000
    
    
    
    107,414
    
    
    
    Single Tenant (Fee Simple) Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,163
    
    
    
    $1,665,275
    
    
    
    100
    %AnnualizedBase Rent asDate
    
    
    
    

    of DecemberSingle Tenant (Leasehold)




    
    City

    
    State

    
    Acquired

    

    
    GLA
    
    
    31, 2005
    
    % LeasedIHOP Corporation (5)




    
    Various
    
    Various
    
    Various
    
    

    60,300
    
    
    

    $1,562,922
    
    
    

    100
    %Company TotalGLA/% Leased
    
    
    
    
    
    

    1,034,253
    
    
    
    $21,015,353
    

    

    

    96
    %
 
 (1)
    
    Under Development (GLA represents proposed leasable square footage)(2)
    
    Held
for Sale(3)
    
    Held in joint venture of which we are the managing 50% owner(4)
    
    Advance Auto properties are located in MO and IL. Each of the properties has a proposed GLA of
7,000 square feet.(5)
    
    IHOP 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. These properties are held by a consolidated
subsidiary, 79.0% of which is owned by us, 19.6% of which is owned by AmREIT Income & Growth
Corporation, one of our merchant development funds, and 1.4% of which is owned by unaffiliated
third parties.(6)
    
    These properties are 100% leased; however, rent does not commence until after December 31,
2005. 19




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Rental
    
    RentalState/City
    
    Income
    
    ConcentrationTexas  Houston
    
    $
    14,365
    
    
    
    63.8
    %Texas  Dallas
    
    
    5,054
    
    
    
    22.4
    %Texas  San Antonio
    
    
    464
    
    
    
    2.1
    %Texas  other
    
    
    228
    
    
    
    1.0
    %Total Texas
    
    
    20,111
    
    
    
    89.3
    %Tennessee
    
    
    518
    
    
    
    2.3
    %Louisiana
    
    
    220
    
    
    
    1.0
    %Kansas
    
    
    255
    
    
    
    1.1
    %Missouri
    
    
    116
    
    
    
    0.5
    %Colorado
    
    
    110
    
    
    
    0.5
    %Georgia
    
    
    199
    
    
    
    0.9
    %Oregon
    
    
    181
    
    
    
    0.8
    %Virginia
    
    
    172
    
    
    
    0.8
    %Utah
    
    
    162
    
    
    
    0.7
    %Maryland
    
    
    150
    
    
    
    0.7
    %New York
    
    
    125
    
    
    
    0.6
    %California
    
    
    111
    
    
    
    0.5
    %New Mexico
    
    
    84
    
    
    
    0.3
    %Total
    
    $
    22,514
    
    
    
    100.0
    %
 Grocery-anchored Shopping Centers
 www.sec.gov
  20




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Neighborhood, Lifestyle and Community Shopping Centers
    Single-tenant Properties
  
  Land to be Developed
  21




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Property Acquisitions and Dispositions
 Shopping Centers
     Single-tenant Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  22




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PART II
 
 Item 5.

    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  Calendar Period
    
    High
    
    Low
    
    Dividends2005Fourth Quarter
    
    $
    7.96
    
    
    $
    6.70
    
    
    $
    .1242Third Quarter
    
    $
    8.49
    
    
    $
    7.25
    
    
    $
    .1242Second Quarter
    
    $
    8.75
    
    
    $
    7.90
    
    
    $
    .1242First Quarter
    
    $
    8.75
    
    
    $
    7.90
    
    
    $
    .12362004Fourth Quarter
    
    $
    8.32
    
    
    $
    7.45
    
    
    $
    .122Third Quarter
    
    $
    8.20
    
    
    $
    6.60
    
    
    $
    .120Second Quarter
    
    $
    7.35
    
    
    $
    6.30
    
    
    $
    .118First Quarter
    
    $
    7.20
    
    
    $
    6.25
    
    
    $
    .116
  Class B Common Shares
 Class C Common Shares
 23




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Class D Common Shares
 24




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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 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Balance sheet data (at end of period)Real estate investments before
accumulated depreciation
    
    $
    290,097
    
    
    $
    198,744
    
    
    $
    98,128
    
    
    $
    72,192
    
    
    $
    38,714Total assets
    
    
    314,971
    
    
    
    203,151
    
    
    
    101,327
    
    
    
    73,976
    
    
    
    38,828Notes payable
    
    
    114,687
    
    
    
    105,964
    
    
    
    48,485
    
    
    
    33,586
    
    
    
    16,972Shareholders equity
    
    
    187,285
    
    
    
    88,370
    
    
    
    48,796
    
    
    
    38,207
    
    
    
    15,354Other dataFunds from operations,
available to class A (1)
    
    
    3,644
    
    
    
    (2,003
    )
    
    
    607
    
    
    
    (845
    )
    
    
    979Operating
Data (for the year ended)Revenues (4)
    
    
    34,686
    
    
    
    15,266
    
    
    
    7,402
    
    
    
    5,161
    
    
    
    3,311Operating expenses (2) (4)
    
    
    24,268
    
    
    
    13,305
    
    
    
    6,923
    
    
    
    6,366
    
    
    
    3,167Other expenses (income)
    
    
    6,871
    
    
    
    2,371
    
    
    
    1,692
    
    
    
    1,492
    
    
    
    1,626Income (loss) from discontinued operations (3)
    
    
    3,356
    
    
    
    (829
    )
    
    
    2,425
    
    
    
    2,038
    
    
    
    2,273Gain on sale of real estate acquired for resale
    
    
    3,223
    
    
    
    1,827
    
    
    
    787
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    10,126
    
    
    $
    588
    
    
    $
    1,999
    
    
    $
    (659
    )
    
    $
    791Net income (loss) available to class A shareholders
    
    $
    881
    
    
    $
    (3,866
    )
    
    $
    56
    
    
    $
    (1,524
    )
    
    $
    2,526Net (loss) income per common share  basic and diluted(Loss) income before discontinued operations
    
    $
    (1.09
    )
    
    $
    (1.50
    )
    
    $
    (1.13
    )
    
    $
    (1.44
    )
    
    $
    (0.63
    )(Loss) income from discontinued operations
    
    
    1.26
    
    
    
    0.31
    
    
    
    1.15
    
    
    
    0.83
    
    
    
    0.97Net income (loss)
    
    $
    0.17
    
    
    $
    (1.19
    )
    
    $
    0.02
    
    
    $
    (0.61
    )
    
    $
    0.34Distributions per share  class A
    
    $
    0.50
    
    
    $
    0.48
    
    
    $
    0.45
    
    
    $
    0.35
    
    
    $
    0.26
 25




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
   Executive Overview
 real estate development and operating company asset advisory group institutional-grade portfolio of Irreplaceable Corners
  Real Estate Development and Operating Group
  27




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Asset Advisory Group
   Portfolio of Irreplaceable Corners
     28




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Summary of Critical Accounting Policies
  Revenue Recognition
    29




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Real Estate Valuation
  Valuation of Receivables
 Real Estate Acquisitions Business Combinations
 30




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##### Table of Contents



Liquidity and Capital Resources
  2005
    
    2004
    
    2003Operating activities
    
    $
    14,069
    
    
    $
    7,250
    
    
    $
    924Investing activities
    
    
    (107,519
    )
    
    
    (99,801
    )
    
    
    (21,719
    )Financing activities
    
    
    96,405
    
    
    
    93,480
    
    
    
    20,319
  TM
  31




---



##### Table of Contents



32




---



##### Table of Contents



Contractual Obligations
  2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    TotalUnsecured debt:Revolving credit facility *
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5.46% dissenter notes**
    
    
    760
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    760Secured debt ***
    
    
    1,171
    
    
    
    1,257
    
    
    
    14,759
    
    
    
    1,448
    
    
    
    1,560
    
    
    
    92,626
    
    
    
    112,821Interest *
    
    
    6,589
    
    
    
    6,705
    
    
    
    6,614
    
    
    
    5,686
    
    
    
    2,955
    
    
    
    35,259
    
    
    
    63,808Non-cancelable operating lease payments
    
    
    295
    
    
    
    305
    
    
    
    299
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    1,092Total contractual obligations
    
    $
    8,815
    
    
    $
    8,267
    
    
    $
    21,672
    
    
    $
    7,327
    
    
    $
    4,515
    
    
    $
    127,885
    
    
    $
    178,481
 
 *
    
    Interest expense does not include any interest obligation on our revolving credit facility
as we have no balance outstanding on the facility as of December 31, 2005. This table assumes that
we will continue to have no balance outstanding throughout all periods presented. Our revolving
credit facility is a variable-rate debt instrument, and the outstanding balance tends to fluctuate
throughout the year based on our liquidity needs.**
    
    Subsequent to December 31, 2005, we paid the 5.46% dissenter notes in full.***
    
    Secured debt as shown above is $1.1 million less than total secured debt as reported due to the
premium recorded on above-market debt assumed in conjunction with certain of our property
acquisitions.  33




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##### Table of Contents



Class A
    
    Class B
    
    Class C
    
    Class D2005Fourth Quarter
    
    $
    802
    
    
    $
    398
    
    
    $
    716
    
    
    $
    1,783Third Quarter
    
    $
    797
    
    
    $
    400
    
    
    $
    713
    
    
    $
    1,556Second Quarter
    
    $
    550
    
    
    $
    404
    
    
    $
    713
    
    
    $
    931First Quarter
    
    $
    430
    
    
    $
    410
    
    
    $
    698
    
    
    $
    5232004Fourth Quarter
    
    $
    419
    
    
    $
    416
    
    
    $
    727
    
    
    $
    223Third Quarter
    
    $
    410
    
    
    $
    425
    
    
    $
    710
    
    
    $
    33Second Quarter
    
    $
    383
    
    
    $
    429
    
    
    $
    677
    
    
    
    N/AFirst Quarter
    
    $
    345
    
    
    $
    434
    
    
    $
    379
    
    
    
    N/A
   Results of Operations
 Comparison of the year ended December 31, 2005 to the year ended December 31, 2004
    34




---



##### Table of Contents



Expenses
    Revenues,
 Revenues
   Other
   35




---



##### Table of Contents



Results of Operations
 Comparison of the year ended December 31, 2004 to the year ended December 31, 2003
 Revenues
   Expenses
   Revenues
   Other
  36




---



##### Table of Contents



Funds From Operations
   2005
    
    
    2004
    
    
    2003Income (loss)  before discontinued operations
    
    $
    3,547
    
    
    
    ($410
    )
    
    
    ($1,213
    )Income  from discontinued operations
    
    
    6,579
    
    
    
    998
    
    
    
    3,212Plus depreciation of real estate assets  from operations
    
    
    5,952
    
    
    
    1,674
    
    
    
    515Plus depreciation of real estate assets  from
discontinued operations
    
    
    111
    
    
    
    297
    
    
    
    344Adjustments for nonconsolidated affiliates
    
    
    100
    
    
    
    29
    
    
    
    4Less gain on sale of real estate assets acquired
for investment
    
    
    (3,400
    )
    
    
    (137
    )
    
    
    (312
    )Less class B, C & D distributions
    
    
    (9,245
    )
    
    
    (4,454
    )
    
    
    (1,943
    )Total Funds From Operations available to class A
shareholders
    
    $
    3,644
    
    
    
    ($2,003
    )
    
    $
    607
  37




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    38




---



##### Table of Contents



Item 8. Consolidated Financial Statements and Supplementary Data
 (a)
    
    
    (1
    )
    
    Financial StatementsReport of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2005 and 2004Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003Consolidated Statements of Shareholders Equity for the Years Ended December 31, 2005,
2004 and 2003Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003Notes to Consolidated Financial Statements(2
    )
    
    Financial Statement ScheduleSchedule III  Consolidated Real Estate Owned and Accumulated Depreciation
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
     
 Item 9B. Other Information
  39




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##### Table of Contents



PART III
 
 Item 10. Trust Managers and Executive Officers 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 securitiesremaining available forfuture issuances underequity compensationNumber of securities
    
    Weighted average
    
    plans (excludingPlan
    
    to be issued upon exercise of
    
    exercise price of
    
    securities reflected inCategory
    
    outstanding options
    
    outstanding options
    
    column (a))Equity compensation
plans approved by
security holders.
    
    
    
    
    
    
    
    
    
    
    1,422,335Equity compensation
plans not approved
by security
holders.
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    
    
    
    
    
    
    
    
    
    1,422,335
 
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  40




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statements and Schedules
 (a)
    
    
    (1
    )
    
    Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2005 and 2004

Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003Consolidated Statements of Shareholders Equity for the Years Ended December 31, 2005,
2004 and
2003Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and
2003Notes to Consolidated Financial Statements(2
    )
    
    Financial Statement ScheduleSchedule III  Consolidated Real Estate Owned and Accumulated Depreciation(b)
    
    
    
    
    
    Exhibits3.1
    
    
    
    
    
    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, 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).10.2
    
    
    
    
    
    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).10.3*
    
    
    
    
    
    Eighth Modification Agreement, effective November 4, 2005 by and between AmREIT and Wells
Fargo Bank, relating to a $40,000,000 loan and modifying the September 4, 2003 Revolving
Credit Agreement10.4
    
    
    
    
    
    Purchase and Sale Agreement between Midland Real Estate Company, L.P. and AmREIT Realty
Investment Corporation with related amendments for the acquisition of The South Bank property
(included as Exhibit 10.1 to the Companys Report on Form 8-K/A filed with the Commission on
December 13, 2005)21.1 *
    
    
    
    
    
    Subsidiaries of the Company31.1 *
    
    
    
    
    
    Certification pursuant to Rule 13a-14(a) of Chief Executive Officer dated December 31, 2005.
 41




---



##### Table of Contents



31.2 *
    
    
    
    
    
    Certification pursuant to Rule 13a-14(a) of Chief Financial Officer dated December 31, 2005.32.1 **
    
    
    
    
    
    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.
 
    42




---



##### Table of Contents



AmREIT/s/ H. Kerr TaylorH. Kerr Taylor, President and Chief Executive Officer
  /s/ H. Kerr Taylor
    
    March 31, 2006H. KERR TAYLORPresident, Chairman of the Board, Chief Executive
Officer and Director (Principal Executive Officer)/s/ Robert S. Cartwright, Jr.
    
    March 31, 2006ROBERT S. CARTWRIGHT, JR., Trust Manager/s/ G. Steven Dawson
    
    March 31, 2006G. STEVEN DAWSON, Trust Manager/s/ Philip W. Taggart
    
    March 31, 2006PHILIP W. TAGGART, Trust Manager/s/ Brett P. Treadwell
    
    March 31, 2006BRETT P. TREADWELL, Vice President  Finance(Principal Accounting Officer)
 43




---



##### Table of Contents



AmREIT AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
 PageFINANCIAL STATEMENTS:Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    F-3Consolidated Statements of Operations for the years ended
December 31, 2005, 2004 and 2003
    
    
    F-4Consolidated Statements of Shareholders Equity
for the years ended December 31, 2005, 2004 and 2003
    
    
    F-5Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2004 and 2003
    
    
    F-6Notes to Consolidated Financial Statements

    F-7 to F-32FINANCIAL STATEMENT SCHEDULE:Schedule III Consolidated Real Estate Owned and Accumulated
Depreciation for the year ended December 31, 2005
    
    
    F-33
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   .
   
 F-2




---



##### Table of Contents



Item 1. Financial Statements
 AmREIT AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
December 31, 2005 and December 31, 2004
(in thousands, except share data)
 December 31,
    
    
    December 31,2005
    
    
    2004ASSETSReal estate investments at cost:Land
    
    $
    112,784
    
    
    $
    68,138Buildings
    
    
    127,094
    
    
    
    88,211Tenant improvements
    
    
    7,366
    
    
    
    4,243247,244
    
    
    
    160,592Less accumulated depreciation and amortization
    
    
    (5,943
    )
    
    
    (3,561
    )241,301
    
    
    
    157,031Real estate held for sale, net
    
    
    3,569
    
    
    
    6,326Net investment in direct financing leases held for investment
    
    
    19,212
    
    
    
    19,219Intangible lease cost, net
    
    
    17,761
    
    
    
    10,628Investment in merchant development funds and other affiliates
    
    
    2,311
    
    
    
    1,979Net real estate investments
    
    
    284,154
    
    
    
    195,183Cash and cash equivalents
    
    
    5,915
    
    
    
    2,960Tenant receivables, net
    
    
    3,132
    
    
    
    1,338Accounts receivable, net
    
    
    1,807
    
    
    
    37Accounts receivable  related party
    
    
    4,158
    
    
    
    910Notes receivable  related party
    
    
    11,232
    
    
    
    Deferred costs
    
    
    1,487
    
    
    
    1,040Other assets
    
    
    3,086
    
    
    
    1,683TOTAL ASSETS
    
    $
    314,971
    
    
    $
    203,151LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Notes payable
    
    $
    114,687
    
    
    $
    105,964Accounts payable and other liabilities
    
    
    8,232
    
    
    
    4,830Below market leases, net
    
    
    2,940
    
    
    
    2,504Security deposits
    
    
    651
    
    
    
    368TOTAL LIABILITIES
    
    
    126,510
    
    
    
    113,666Minority interest
    
    
    1,176
    
    
    
    1,115Shareholders 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,
6,479,278 and 3,462,767 shares issued, respectively
    
    
    65
    
    
    
    35Class B Common shares, $.01 par value, 3,000,000 shares authorized,
2,148,649 and 2,246,283 shares issued, respectively
    
    
    22
    
    
    
    22Class C Common shares, $.01 par value, 4,400,000 shares authorized,
4,119,923 and 4,079,174 shares issued, respectively
    
    
    41
    
    
    
    41Class D Common shares, $.01 par value, 17,000,000 shares authorized,
11,035,482 and 2,090,765 shares issued, respectively
    
    
    110
    
    
    
    21Capital in excess of par value
    
    
    205,859
    
    
    
    104,114Accumulated distributions in excess of earnings
    
    
    (16,736
    )
    
    
    (15,038
    )Deferred compensation
    
    
    (1,528
    )
    
    
    (770
    )Cost of treasury shares, 77,741 and 9,116 Class A shares, respectively
    
    
    (548
    )
    
    
    (55
    )TOTAL SHAREHOLDERS EQUITY
    
    
    187,285
    
    
    
    88,370TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    314,971
    
    
    $
    203,151
  F-3




---



##### Table of Contents



AmREIT AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 Years ended December 31,2005
    
    
    2004
    
    
    2003Revenues:Rental income from operating leases
    
    $
    20,484
    
    
    $
    8,200
    
    
    $
    2,609Earned income from direct financing leases
    
    
    2,030
    
    
    
    2,029
    
    
    
    2,016Real estate fee income
    
    
    485
    
    
    
    409
    
    
    
    576Real estate fee income  related party
    
    
    4,588
    
    
    
    1,443
    
    
    
    455Construction revenues
    
    
    2,302
    
    
    
    
    
    
    
    Construction revenues  related party
    
    
    2,434
    
    
    
    
    
    
    
    Securities commission income  related party
    
    
    1,163
    
    
    
    2,742
    
    
    
    1,497Asset management fee income  related party
    
    
    495
    
    
    
    361
    
    
    
    240Interest and other income  related party
    
    
    705
    
    
    
    82
    
    
    
    9Total revenues
    
    
    34,686
    
    
    
    15,266
    
    
    
    7,402Expenses:General and administrative
    
    
    6,356
    
    
    
    4,661
    
    
    
    3,117Property expense
    
    
    4,860
    
    
    
    1,418
    
    
    
    388Construction costs
    
    
    4,283
    
    
    
    
    
    
    
    Legal and professional
    
    
    1,859
    
    
    
    1,646
    
    
    
    871Securities commissions
    
    
    864
    
    
    
    2,081
    
    
    
    1,130Depreciation and amortization
    
    
    6,046
    
    
    
    1,817
    
    
    
    502Deferred merger costs
    
    
    
    
    
    
    1,682
    
    
    
    915Total expenses
    
    
    24,268
    
    
    
    13,305
    
    
    
    6,923Operating income
    
    
    10,418
    
    
    
    1,961
    
    
    
    479Other income (expense):Income from merchant development funds and other affiliates
    
    
    161
    
    
    
    1,121
    
    
    
    312Federal income tax expense for taxable REIT subsidiary
    
    
    (379
    )
    
    
    (16
    )
    
    
    254Interest expense
    
    
    (6,412
    )
    
    
    (3,290
    )
    
    
    (2,080
    )Minority interest in income of consolidated joint ventures
    
    
    (241
    )
    
    
    (186
    )
    
    
    (178
    )Income (loss) before discontinued operations
    
    
    3,547
    
    
    
    (410
    )
    
    
    (1,213
    )Income
(loss) from discontinued operations
    
    
    3,356
    
    
    
    (829
    )
    
    
    2,425Gain on sales of real estate acquired for resale
    
    
    3,223
    
    
    
    1,827
    
    
    
    787Income from discontinued operations
    
    
    6,579
    
    
    
    998
    
    
    
    3,212Net income
    
    
    10,126
    
    
    
    588
    
    
    
    1,999Distributions paid to class B, C and D shareholders
    
    
    (9,245
    )
    
    
    (4,454
    )
    
    
    (1,943
    )Net income (loss) available to class A shareholders
    
    $
    881
    
    
    $
    (3,866
    )
    
    $
    56Net income (loss) per class A common share  basic and dilutedLoss before discontinued operations
    
    $
    (1.09
    )
    
    $
    (1.50
    )
    
    $
    (1.13
    )Income from discontinued operations
    
    
    1.26
    
    
    
    0.31
    
    
    
    1.15Net income (loss)
    
    $
    0.17
    
    
    $
    (1.19
    )
    
    $
    0.02Weighted average class A common shares used to
compute net income (loss) per share, basic and diluted
    
    
    5,205
    
    
    
    3,251
    
    
    
    2,792
  F-4




---



##### Table of Contents



AmREIT AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the three years in the period ended December 31, 2005
(in thousands, except share data)
 AccumulatedCapital in
    
    
    distributions
    
    
    
    
    
    
    Cost ofCommon Shares
    
    
    excess of
    
    
    in excess of
    
    
    Deferred
    
    
    treasuryAmount
    
    
    par value
    
    
    earnings
    
    
    compensation
    
    
    shares
    
    
    TotalBalance at December 31, 2002
    
    $
    53
    
    
    $
    47,183
    
    
    $
    (8,427
    )
    
    $
    (205
    )
    
    $
    (397
    )
    
    $
    38,207Net income
    
    
    
    
    
    
    
    
    
    
    1,999
    
    
    
    
    
    
    
    
    
    
    
    1,999Issuance of common shares, Class A
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Conversion of common shares, Class B
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Issuance of restricted shares, Class A
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    (153
    )
    
    
    138
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    214Repurchase of common shares, Class A
(92,700 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (603
    )
    
    
    (603
    )Issuance of common shares, Class C
    
    
    14
    
    
    
    12,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,167Distributions
    
    
    
    
    
    
    
    
    
    
    (3,188
    )
    
    
    
    
    
    
    
    
    
    
    (3,188
    )Balance at December 31, 2003
    
    $
    67
    
    
    $
    59,351
    
    
    $
    (9,616
    )
    
    $
    (144
    )
    
    $
    (862
    )
    
    $
    48,796Net income
    
    
    
    
    
    
    
    
    
    
    588
    
    
    
    
    
    
    
    
    
    
    
    588Issuance of common shares, Class A
    
    
    5
    
    
    
    2,740
    
    
    
    
    
    
    
    27
    
    
    
    65
    
    
    
    2,837Conversion of common shares, Class B
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Issuance of restricted shares, Class A
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    (918
    )
    
    
    742
    
    
    
    (169
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    265
    
    
    
    
    
    
    
    265Issuance of common shares, Class C
    
    
    27
    
    
    
    24,242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,269Retirement of common shares, Class C
    
    
    
    
    
    
    (464
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (464
    )Issuance of common shares, Class D
    
    
    21
    
    
    
    18,238
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,259Distributions
    
    
    
    
    
    
    
    
    
    
    (6,010
    )
    
    
    
    
    
    
    
    
    
    
    (6,010
    )Balance at December 31, 2004
    
    $
    119
    
    
    $
    104,114
    
    
    $
    (15,038
    )
    
    $
    (770
    )
    
    $
    (55
    )
    
    $
    88,370Net income
    
    
    
    
    
    
    
    
    
    
    10,126
    
    
    
    
    
    
    
    
    
    
    
    10,126Issuance of common shares, Class A
    
    
    30
    
    
    
    21,630
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    21,717Issuance of restricted shares, Class A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,333
    )
    
    
    117
    
    
    
    (1,216
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    490
    
    
    
    
    
    
    
    490Repurchase of common shares, Class A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85
    
    
    
    (667
    )
    
    
    (582
    )Issuance of common shares, Class C
    
    
    
    
    
    
    1,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,646Retirement of common shares, Class C
    
    
    
    
    
    
    (1,377
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,377
    )Issuance of common shares, Class D
    
    
    89
    
    
    
    80,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,339Retirement of common shares, Class D
    
    
    
    
    
    
    (404
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (404
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (11,824
    )
    
    
    
    
    
    
    
    
    
    
    (11,824
    )Balance at December 31, 2005
    
    $
    238
    
    
    $
    205,859
    
    
    $
    (16,736
    )
    
    $
    (1,528
    )
    
    $
    (548
    )
    
    $
    187,285
 F-5




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##### Table of Contents



AmREIT AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)
 Year to date ended December 31,2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income
    
    $
    10,126
    
    
    $
    588
    
    
    $
    1,999Adjustments to reconcile net income to net cash
provided by operating activities:Investment in real estate acquired for resale
    
    
    (3,399
    )
    
    
    (5,053
    )
    
    
    (7,808
    )Proceeds from sales of real estate acquired for resale
    
    
    11,497
    
    
    
    6,673
    
    
    
    6,179Gain on sales of real estate acquired for resale
    
    
    (3,223
    )
    
    
    (1,827
    )
    
    
    (787
    )Gain on sales of real estate acquired for investment
    
    
    (3,400
    )
    
    
    (137
    )
    
    
    (312
    )Debt prepayment penalty
    
    
    109
    
    
    
    
    
    
    
    Impairment charges
    
    
    
    
    
    
    2,403
    
    
    
    Income from merchant development funds and other affiliates
    
    
    (161
    )
    
    
    (1,121
    )
    
    
    (312
    )Depreciation and amortization
    
    
    5,777
    
    
    
    2,134
    
    
    
    942Amortization of deferred compensation
    
    
    490
    
    
    
    265
    
    
    
    214Minority interest in income of consolidated joint ventures
    
    
    838
    
    
    
    368
    
    
    
    178Deferred merger costs
    
    
    
    
    
    
    1,682
    
    
    
    915Increase in tenant receivables
    
    
    (1,844
    )
    
    
    (325
    )
    
    
    (1,146
    )Increase in accounts receivable
    
    
    (1,770
    )
    
    
    
    
    
    
    519Increase in accounts receivable  related party
    
    
    (3,073
    )
    
    
    (708
    )
    
    
    (133
    )Cash receipts from direct financing leases
more (less) than income recognized
    
    
    7
    
    
    
    (5
    )
    
    
    25Increase in deferred costs
    
    
    (219
    )
    
    
    (142
    )
    
    
    (234
    )Increase in other assets
    
    
    (1,368
    )
    
    
    (492
    )
    
    
    (206
    )Increase in accounts payable and other liabilities
    
    
    3,402
    
    
    
    2,676
    
    
    
    828Increase in security deposits
    
    
    280
    
    
    
    271
    
    
    
    63Net cash provided by operating activities
    
    
    14,069
    
    
    
    7,250
    
    
    
    924Cash flows from investing activities:Improvements to real estate
    
    
    (1,784
    )
    
    
    (1,511
    )
    
    
    (535
    )Acquisition of investment properties
    
    
    (110,640
    )
    
    
    (104,347
    )
    
    
    (23,922
    )Notes receivable (advances) collections
    
    
    (20
    )
    
    
    1,000
    
    
    
    (1,000
    )Loans made to affiliates
    
    
    (11,232
    )
    
    
    
    
    
    
    Additions to furniture, fixtures and equipment
    
    
    (162
    )
    
    
    (463
    )
    
    
    (65
    )Investment in merchant development funds and other affiliates
    
    
    (929
    )
    
    
    (1,534
    )
    
    
    (201
    )Distributions from merchant development funds and other affiliates
    
    
    660
    
    
    
    1,221
    
    
    
    518Proceeds from sale of investment property
    
    
    16,603
    
    
    
    5,852
    
    
    
    3,497Increase in preacquisition costs
    
    
    (15
    )
    
    
    (19
    )
    
    
    (11
    )Net cash used in investing activities
    
    
    (107,519
    )
    
    
    (99,801
    )
    
    
    (21,719
    )Cash flows from financing activities:Proceeds from notes payable
    
    
    52,386
    
    
    
    103,820
    
    
    
    36,203Payments of notes payable
    
    
    (43,436
    )
    
    
    (46,293
    )
    
    
    (24,119
    )Purchase of treasury shares
    
    
    (582
    )
    
    
    
    
    
    
    (602
    )Issuance of common shares
    
    
    108,976
    
    
    
    46,414
    
    
    
    13,912Retirement of common shares
    
    
    (1,781
    )
    
    
    (464
    )
    
    
    Issuance costs
    
    
    (11,424
    )
    
    
    (5,609
    )
    
    
    (1,845
    )Common dividends paid
    
    
    (6,961
    )
    
    
    (4,287
    )
    
    
    (3,088
    )Distributions to minority interests
    
    
    (773
    )
    
    
    (101
    )
    
    
    (142
    )Net cash provided by financing activities
    
    
    96,405
    
    
    
    93,480
    
    
    
    20,319Net increase
(decrease) in cash and cash equivalents
    
    
    2,955
    
    
    
    929
    
    
    
    (476
    )Cash and cash equivalents, beginning of year
    
    
    2,960
    
    
    
    2,031
    
    
    
    2,507Cash and cash equivalents, end of year
    
    $
    5,915
    
    
    $
    2,960
    
    
    $
    2,031Supplemental schedule of cash flow information:Cash paid during the year for:Interest
    
    $
    6,506
    
    
    $
    3,056
    
    
    $
    2,169Income taxes
    
    
    707
    
    
    
    165
    
    
    
    47
        F-6




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##### Table of Contents



AmREIT AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
     F-7




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##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        F-8




---



##### Table of Contents



Development Properties
 Acquired Properties and Acquired Lease Intangibles Business
Combinations
 F-9




---



##### Table of Contents



Depreciation
 Properties Held for Sale
  Impairment
  Tenant receivables ,
 F-10




---



##### Table of Contents



Accounts receivable
 Notes receivable  related party
      F-11




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,
 F-12




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##### Table of Contents



For the Years Ended December 31,2005
    
    2004
    
    2003(Loss) earnings to class A common
shareholders (in thousands) *
    
    $
    881
    
    
    
    ($3,866
    )
    
    $
    56Weighted average class A common shares
outstanding (in thousands)
    
    
    5,205
    
    
    
    3,251
    
    
    
    2,792Basic and
diluted earnings/(loss) per Class A common share *
    
    $
    0.17
    
    
    
    ($1.19
    )
    
    $
    0.02
 
 *
    
    The operating results for 2004 and 2003 include a charge to earnings of $1.7 million and
$915 thousand, 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 us 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 certain of our affiliated
investment funds during 2002 and the issuance of common C stock in 2003 and in 2004.
Additionally, the operating results for 2004 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 2004 and another of which was sold in December 2005.      F-13




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##### Table of Contents



Consolidation of
Variable Interest Entities,
   Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain Rights
 Share-Based Payment
 F-14




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Exchanges of Nonmonetary Assets
 Accounting for
Conditional Asset Retirement Obligations conditional asset retirement
obligation Accounting for Asset Retirement Obligations,
 F-15




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##### Table of Contents



For
the Years Ended December 31,2005
    
    2004
    
    2003Rental
revenue and earned income from direct financing leases
    
    $
    1,805
    
    
    $
    2,095
    
    
    $
    3,265Interest and other income
    
    
    146
    
    
    
    936
    
    
    
    129Gain on sale of real estate held for resale
    
    
    3,223
    
    
    
    1,827
    
    
    
    787Gain on sale of real estate held for investment
    
    
    3,400
    
    
    
    137
    
    
    
    312Total revenues
    
    
    8,574
    
    
    
    4,995
    
    
    
    4,493Property expense
    
    
    (382
    )
    
    
    (355
    )
    
    
    (142
    )General and administrative
    
    
    (272
    )
    
    
    (76
    )
    
    
    Legal and professional
    
    
    (2
    )
    
    
    (2
    )
    
    
    (10
    )Depreciation and amortization
    
    
    (111
    )
    
    
    (297
    )
    
    
    (364
    )Income tax
    
    
    (340
    )
    
    
    (521
    )
    
    
    (491
    )Interest expense
    
    
    (182
    )
    
    
    (161
    )
    
    
    (274
    )Minority interest
    
    
    (597
    )
    
    
    (182
    )
    
    
    Debt prepayment penalty
    
    
    (109
    )
    
    
    
    
    
    
    Impairment charge
    
    
    
    
    
    
    (2,403
    )
    
    
    Total expenses
    
    
    (1,995
    )
    
    
    (3,997
    )
    
    
    (1,281
    )Income from discontinued operations
    
    
    6,579
    
    
    
    998
    
    
    
    3,212Basic and diluted income from discontinued
operations per class A common share
    
    $
    1.26
    
    
    $
    0.31
    
    
    $
    1.15
       F-16




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##### Table of Contents



3. OPERATING LEASES
  2006
    
    $
    18,9112007
    
    
    18,2002008
    
    
    16,6712009
    
    
    15,2872010
    
    
    11,6492011-thereafter
    
    
    56,886$
    137,604
 4. NET INVESTMENT IN DIRECT FINANCING LEASES
  2005
    
    
    2004Minimum lease payments receivable
    
    $
    46,835
    
    
    $
    48,871Unguaranteed residual value
    
    
    1,763
    
    
    
    1,763Less: Unearned income
    
    
    (29,386
    )
    
    
    (31,415
    )$
    19,212
    
    
    $
    19,219
  2006
    
    $
    2,0382007
    
    
    2,1372008
    
    
    2,2172009
    
    
    2,2292010
    
    
    2,2402011 - thereafter
    
    
    35,974Total
    
    $
    46,835
 F-17




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##### Table of Contents



5. INVESTMENTS IN MERCHANT DEVELOPMENT FUNDS AND OTHER AFFILIATES
 Merchant Development Funds
  AmREIT Opportunity Fund (AOF)
 AmREIT Income & Growth Fund, Ltd. (AIG)
 AmREIT Monthly Income & Growth Fund (MIG)
 AmREIT Monthly Income & Growth Fund II (MIG II)
 AmREIT Monthly Income & Growth Fund III (MIG III)
 F-18




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##### Table of Contents



Merchant
    
    CapitalDevelopment
    
    under
    
    LP
    
    GP
    
    Scheduled
    
    Sharing Ratios*
    
    LPFund
    
    Mgmt.
    
    Interest
    
    Interest
    
    Liquidation
    
    LP
    
    GP
    
    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 Up60
    %
    
    
    40
    %
    
    ThereafterMIG
    
    $15 million
    
    
    1.4
    %
    
    
    1.0
    %
    
    
    2010
    
    
    
    99
    %
    
    
    1
    %
    
    
    8
    %90
    %
    
    
    10
    %
    
    
    10
    %80
    %
    
    
    20
    %
    
    
    12
    %0
    %
    
    
    100
    %
    
    40% Catch Up60
    %
    
    
    40
    %
    
    ThereafterMIG II
    
    $25 million
    
    
    1.6
    %
    
    
    1.0
    %
    
    
    2011
    
    
    
    99
    %
    
    
    1
    %
    
    
    8
    %85
    %
    
    
    15
    %
    
    
    12
    %0
    %
    
    
    100
    %
    
    40% Catch Up60
    %
    
    
    40
    %
    
    ThereafterMIG III**
    
    $11 million
    
    
    7.1
    %
    
    
    1.0
    %
    
    
    2012
    
    
    
    99
    %
    
    
    1
    %
    
    
    10
    %0
    %
    
    
    100
    %
    
    40% Catch Up60
    %
    
    
    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.**
    
    MIG III is a best efforts $50 million offering with an additional $50 million that can be
added at the General Partners sole discretion. The initial third party limited partner
investment was received June 22, 2005. Other affiliate
  F-19




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##### Table of Contents



Combined Balance Sheets
 2005
    
    
    2004AssetsProperty, net
    
    $
    101,461
    
    
    $
    35,847Cash
    
    
    4,048
    
    
    
    18,697Other assets
    
    
    19,839
    
    
    
    11,103Total Assets
    
    
    125,348
    
    
    
    65,647Liabilities and partners capital:Notes payable
    
    
    56,258
    
    
    
    19,017Other liabilities
    
    
    13,499
    
    
    
    1,536Partners capital
    
    
    55,591
    
    
    
    45,094Total Liabilities and Partners Capital
    
    $
    125,348
    
    
    $
    65,647AmREITs share of Partners Capital
    
    $
    2,311
    
    
    $
    1,979
 Combined
Statements of Operations
 For
the Year Ended December 31,2005
    
    
    2004
    
    
    2003Total Revenue
    
    $
    7,835
    
    
    $
    4,788
    
    
    $
    3,501ExpenseInterest
    
    
    1,849
    
    
    
    715
    
    
    
    113Depreciation and amortization
    
    
    996
    
    
    
    304
    
    
    
    168Other
    
    
    2,306
    
    
    
    1,135
    
    
    
    405Total Expense
    
    
    5,151
    
    
    
    2,154
    
    
    
    686Net Income
    
    $
    2,684
    
    
    $
    2,634
    
    
    $
    2,815AmREITS share of Net Income
    
    $
    161
    
    
    $
    1,121
    
    
    $
    312
 6. ACQUIRED LEASE INTANGIBLES
  F-20




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##### Table of Contents



Amortization
    
    
    Rental IncomeYear Ending
    
    Expense (in-place
    
    
    (out-of-marketDecember 31,
    
    lease value)
    
    
    leases)2006
    
    $
    2,634
    
    
    $
    442007
    
    
    2,227
    
    
    
    132008
    
    
    2,043
    
    
    
    (12
    )2009
    
    
    1,890
    
    
    
    (16
    )2010
    
    
    1,395
    
    
    
    (150
    )$
    10,189
    
    
    $
    (121
    )
 7. NOTES PAYABLE
  2005
    
    2004Notes Payable:Fixed rate mortgage loans
    
    
    113,927
    
    
    
    67,190Fixed-rate unsecured loans*
    
    
    760
    
    
    
    760Total notes payable
    
    
    114,687
    
    
    
    67,950Variable-rate unsecured line of credit
    
    
    
    
    
    
    38,014Total
    
    
    114,687
    
    
    
    105,964
 
 *
    
    The fixed-rate unsecured loans were paid off subsequent to December 31, 2005   F-21




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##### Table of Contents



Scheduled Principal
    
    
    Term-LoanScheduled Payments by Year
    
    Payments
    
    
    Maturities
    
    
    Total Payments2006
    
    $
    1,931
    
    
    $
    
    
    
    $
    1,9312007
    
    
    1,257
    
    
    
    
    
    
    
    1,2572008
    
    
    1,349
    
    
    
    13,410
    
    
    
    14,7592009
    
    
    1,448
    
    
    
    
    
    
    
    1,4482010
    
    
    1,560
    
    
    
    
    
    
    
    1,560Beyond five years
    
    
    27,738
    
    
    
    64,888
    
    
    
    92,626Unamortized debt premiums
    
    
    
    
    
    
    1,106
    
    
    
    1,106Total
    
    $
    35,283
    
    
    $
    79,404
    
    
    $
    114,687
 8. CONCENTRATIONS
  F-22




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##### Table of Contents



Tenant
    
    2005
    
    
    2004
    
    
    2003Kroger Company
    
    $
    2,899
    
    
    $
    804
    
    
    $
    IHOP Corporation
    
    
    2,249
    
    
    
    2,499
    
    
    
    2,731CVS/pharmacy
    
    
    1,060
    
    
    
    935
    
    
    
    Linens N Things
    
    
    716
    
    
    
    
    
    
    
    Barnes & Noble Inc.
    
    
    466
    
    
    
    
    
    
    
    Landrys Restaurants Inc.
    
    
    445
    
    
    
    436
    
    
    
    $
    7,835
    
    
    $
    4,674
    
    
    $
    2,731
 9. FEDERAL INCOME TAXES
   2005
    
    
    2004
    
    
    2003Current
    
    $
    1,006
    
    
    $
    522
    
    
    $
    237Deferred
    
    
    (287
    )
    
    
    15
    
    
    
    Total income tax expense
    
    $
    719
    
    
    $
    537
    
    
    $
    237
  F-23




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##### Table of Contents



2005
    
    2004
    
    2003(estimated)Ordinary income
    
    
    60.4
    %
    
    
    48.8
    %
    
    
    52.8
    %Qualified
    
    
    1.4
    %
    
    
    19.6
    %
    
    
    Return of capital
    
    
    19.5
    %
    
    
    31.0
    %
    
    
    31.8
    %Capital gain
    
    
    18.7
    %
    
    
    0.6
    %
    
    
    15.4
    %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-24




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##### Table of Contents



Class D Common Shares
 Minority Interest
 11. RELATED PARTY TRANSACTIONS
    F-25




---



##### Table of Contents



12. REAL ESTATE ACQUISITIONS AND DISPOSITIONS
    F-26




---



##### Table of Contents



13. COMMITMENTS
   2006
    
    $
    2952007
    
    
    3052008
    
    
    2992009
    
    
    1932010
    
    
    2011 & thereafter
    
    
    Total
    
    $
    1,092
 14. SEGMENT REPORTING
   F-27




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##### Table of Contents



F-28




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##### Table of Contents



Asset Advisory GroupReal EstateDevelopment &
    
    
    
    
    
    
    MerchantOperating
    
    
    Securities
    
    
    Development2005
    
    Portfolio
    
    
    Company
    
    
    Operations
    
    
    Funds
    
    
    Eliminations
    
    
    TotalRental income
    
    $
    22,514
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,514Securities commission income
    
    
    
    
    
    
    
    
    
    
    10,350
    
    
    
    
    
    
    
    (9,187
    )
    
    
    1,163Real estate fee income
    
    
    
    
    
    
    5,073
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,073Construction revenues
    
    
    
    
    
    
    4,736
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,736Interest and other income
    
    
    465
    
    
    
    240
    
    
    
    
    
    
    
    495
    
    
    
    
    
    
    
    1,200Total revenue
    
    
    22,979
    
    
    
    10,049
    
    
    
    10,350
    
    
    
    495
    
    
    
    (9,187
    )
    
    
    34,686Securities commissions
    
    
    
    
    
    
    
    
    
    
    7,928
    
    
    
    
    
    
    
    (7,064
    )
    
    
    864Depreciation and amortization
    
    
    6,046
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,046Property expense
    
    
    4,803
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,860Construction costs
    
    
    
    
    
    
    4,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,283Legal and professional
    
    
    1,214
    
    
    
    532
    
    
    
    112
    
    
    
    1
    
    
    
    
    
    
    
    1,859General and administrative
    
    
    1,657
    
    
    
    3,595
    
    
    
    2,967
    
    
    
    260
    
    
    
    (2,123
    )
    
    
    6,356Total expenses
    
    
    13,720
    
    
    
    8,467
    
    
    
    11,007
    
    
    
    261
    
    
    
    (9,187
    )
    
    
    24,268Interest expense
    
    
    (5,816
    )
    
    
    (572
    )
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    (6,412
    )Other income (expense)
    
    
    (196
    )
    
    
    (259
    )
    
    
    (60
    )
    
    
    56
    
    
    
    
    
    
    
    (459
    )Income (loss) from discontinued operations
    
    
    4,584
    
    
    
    1,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,579Net income (loss)
    
    $
    7,831
    
    
    $
    2,746
    
    
    $
    (741
    )
    
    $
    290
    
    
    $
    
    
    
    $
    10,126
 F-29




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##### Table of Contents



Asset Advisory GroupReal EstateDevelopment
    
    
    
    
    
    
    Merchant& Operating
    
    
    Securities
    
    
    Development2004
    
    Portfolio
    
    
    Company
    
    
    Operations
    
    
    Funds
    
    
    Eliminations
    
    
    TotalRental income
    
    $
    10,229
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10,229Securities commission income
    
    
    
    
    
    
    
    
    
    
    7,656
    
    
    
    
    
    
    
    (4,914
    )
    
    
    2,742Real estate fee income
    
    
    
    
    
    
    1,852
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,852Construction revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest and other income
    
    
    46
    
    
    
    36
    
    
    
    
    
    
    
    361
    
    
    
    
    
    
    
    443Total revenue
    
    
    10,275
    
    
    
    1,888
    
    
    
    7,656
    
    
    
    361
    
    
    
    (4,914
    )
    
    
    15,266Deferred merger expense
    
    
    1,682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,682Securities commissions
    
    
    
    
    
    
    
    
    
    
    5,943
    
    
    
    
    
    
    
    (3,862
    )
    
    
    2,081Depreciation and amortization
    
    
    1,817
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,817Property expense
    
    
    1,413
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,418Construction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Legal and professional
    
    
    917
    
    
    
    649
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    1,646General and administrative
    
    
    929
    
    
    
    1,951
    
    
    
    2,732
    
    
    
    101
    
    
    
    (1,052
    )
    
    
    4,661Total expenses
    
    
    6,758
    
    
    
    2,605
    
    
    
    8,755
    
    
    
    101
    
    
    
    (4,914
    )
    
    
    13,305Interest expense
    
    
    (3,234
    )
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,290
    )Other income (expense)
    
    
    (187
    )
    
    
    594
    
    
    
    (79
    )
    
    
    591
    
    
    
    
    
    
    
    919Income (loss) from discontinued operations
    
    
    (203
    )
    
    
    1,201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    998Net income (loss)
    
    $
    (107
    )
    
    $
    1,022
    
    
    $
    (1,178
    )
    
    $
    851
    
    
    $
    
    
    
    $
    588
 F-30




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##### Table of Contents



Asset Advisory GroupReal EstateDevelopment &
    
    
    
    
    
    
    MerchantOperating
    
    
    Securities
    
    
    Development2003
    
    Portfolio
    
    
    Company
    
    
    Operations
    
    
    Funds
    
    
    Eliminations
    
    
    TotalRental income
    
    $
    4,625
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,625Securities commission income
    
    
    
    
    
    
    
    
    
    
    2,958
    
    
    
    
    
    
    
    (1,461
    )
    
    
    1,497Real estate fee income
    
    
    
    
    
    
    1,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,031Construction revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest and other income
    
    
    1
    
    
    
    7
    
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    249Total revenue
    
    
    4,626
    
    
    
    1,038
    
    
    
    2,958
    
    
    
    241
    
    
    
    (1,461
    )
    
    
    7,402Deferred merger expense
    
    
    915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915Securities commissions
    
    
    
    
    
    
    
    
    
    
    2,289
    
    
    
    
    
    
    
    (1,159
    )
    
    
    1,130Depreciation and amortization
    
    
    502
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    502Property expense
    
    
    388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388Construction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Legal and professional
    
    
    452
    
    
    
    367
    
    
    
    50
    
    
    
    2
    
    
    
    
    
    
    
    871General and administrative expense
    
    
    1,024
    
    
    
    1,049
    
    
    
    1,283
    
    
    
    63
    
    
    
    (302
    )
    
    
    3,117Total expenses
    
    
    3,281
    
    
    
    1,416
    
    
    
    3,622
    
    
    
    65
    
    
    
    (1,461
    )
    
    
    6,923Interest expense
    
    
    (2,080
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,080
    )Other income (expense)
    
    
    (346
    )
    
    
    585
    
    
    
    (35
    )
    
    
    184
    
    
    
    
    
    
    
    388Income (loss) from discontinued operations
    
    
    2,512
    
    
    
    700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,212Net income (loss)
    
    $
    1,431
    
    
    $
    907
    
    
    $
    (699
    )
    
    $
    360
    
    
    $
    
    
    
    $
    1,999
 F-31




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##### Table of Contents



15. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
  1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th Quarter2005:Revenues as originally reported
    
    $
    8,242
    
    
    $
    10,434
    
    
    $
    13,078
    
    
    $
    12,636Reclassified to discontinued operations
    
    
    (491
    )
    
    
    (19
    )
    
    
    (8
    )
    
    
    Reclassification of securities commissions (1)
    
    
    (2,123
    )
    
    
    (3,403
    )
    
    
    (3,660
    )
    
    
    Adjusted Revenues
    
    
    5,628
    
    
    
    7,012
    
    
    
    9,410
    
    
    
    12,636Net (loss) income for class A common shareholders
    
    
    (274
    )
    
    
    (310
    )
    
    
    (635
    )
    
    
    2,101Net loss per class A share: basic and diluted
    
    
    (0.08
    )
    
    
    (0.07
    )
    
    
    (0.10
    )
    
    
    0.322004:Revenues as originally reported
    
    $
    4,552
    
    
    $
    4,713
    
    
    $
    5,797
    
    
    $
    7,031Reclassified to discontinued operations
    
    
    (462
    )
    
    
    (675
    )
    
    
    (319
    )
    
    
    (458
    )Reclassification of securities commissions (1)
    
    
    (1,677
    )
    
    
    (1,083
    )
    
    
    (518
    )
    
    
    (1,635
    )Adjusted Revenues
    
    
    2,413
    
    
    
    2,955
    
    
    
    4,960
    
    
    
    4,938Net loss for class A common shareholders
    
    
    (1,178
    )
    
    
    (1,009
    )
    
    
    (48
    )
    
    
    (1,630
    )Net loss per class A share: basic and diluted
    
    
    (0.40
    )
    
    
    (0.31
    )
    
    
    (0.01
    )
    
    
    (0.48
    )
 (1)
    
    Revenues for 2004 and 2003 have been reduced to reflect as issuance costs the
capital-raising activities of our securities operations related to our class C and class D
common shares. Expenses incurred in conjunction with these capital raising activities during
2004 and 2003 were reduced by a corresponding amount, and these reclassifications therefore had
no effect on our net income for either of these periods. F-32




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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, 2005
 Investment inBuilding and
    
    
    
    
    
    Real Estate
    
    Direct Finance
    
    Total
    
    Accumulated
    
    DateProperty Description
    
    Improvements
    
    Land
    
    Held for Sale
    
    Lease
    
    Cost
    
    Depreciation
    
    Acquired
    
    EncumbrancesSHOPPING CENTERSLake Woodlands Plaza, Texas
    
    
    3,444,404
    
    
    
    1,369,064
    
    
    
    
    
    
    
    
    
    
    
    4,813,468
    
    
    
    679,945
    
    
    
    06-03-98
    
    
    
    Sugar Land Plaza, Texas
    
    
    3,016,816
    
    
    
    1,280,043
    
    
    
    
    
    
    
    
    
    
    
    4,296,859
    
    
    
    587,841
    
    
    
    07-01-98
    
    
    
    2,312,666Uptown Plaza, Texas
    
    
    5,068,984
    
    
    
    7,796,383
    
    
    
    
    
    
    
    
    
    
    
    12,865,367
    
    
    
    276,879
    
    
    
    12-10-03
    
    
    
    Terrace Shops, Texas
    
    
    2,623,791
    
    
    
    2,212,278
    
    
    
    
    
    
    
    
    
    
    
    4,836,069
    
    
    
    142,308
    
    
    
    12-15-03
    
    
    
    2,761,150Courtyard Square, Texas
    
    
    1,784,450
    
    
    
    4,150,752
    
    
    
    
    
    
    
    
    
    
    
    5,935,202
    
    
    
    96,574
    
    
    
    06-15-04
    
    
    
    Plaza in the Park, Texas
    
    
    17,475,939
    
    
    
    13,261,792
    
    
    
    
    
    
    
    
    
    
    
    30,737,731
    
    
    
    870,010
    
    
    
    07-01-04
    
    
    
    17,816,782Cinco Ranch, Texas
    
    
    11,567,200
    
    
    
    2,668,226
    
    
    
    
    
    
    
    
    
    
    
    14,235,426
    
    
    
    565,985
    
    
    
    07-01-04
    
    
    
    8,429,861Bakery Square, Texas
    
    
    4,817,694
    
    
    
    4,335,486
    
    
    
    
    
    
    
    
    
    
    
    9,153,180
    
    
    
    228,888
    
    
    
    07-21-04
    
    
    
    4,874,087McArthur Park, Texas
    
    
    26,482,198
    
    
    
    8,655,849
    
    
    
    
    
    
    
    
    
    
    
    35,138,047
    
    
    
    1,012,825
    
    
    
    12-27-04
    
    
    
    13,852,328Uptown Park, Texas
    
    
    27,552,538
    
    
    
    37,043,772
    
    
    
    
    
    
    
    
    
    
    
    64,596,310
    
    
    
    678,816
    
    
    
    06-01-05
    
    
    
    49,000,000Riverwalk, Texas
    
    
    17,148,688
    
    
    
    7,979,779
    
    
    
    
    
    
    
    
    
    
    
    25,128,467
    
    
    
    129,050
    
    
    
    09-30-05
    
    
    
    McArthur Park Pads, Texas
    
    
    5,839,723
    
    
    
    6,927,965
    
    
    
    
    
    
    
    
    
    
    
    12,767,688
    
    
    
    22,891
    
    
    
    12-15-05
    
    
    
    Total Shopping Centers
    
    
    126,822,425
    
    
    
    97,681,389
    
    
    
    
    
    
    
    
    
    
    
    224,503,814
    
    
    
    5,292,012
    
    
    
    
    
    
    
    99,046,874SINGLE TENANTWashington Mutual, Texas
    
    
    
    
    
    
    562,846
    
    
    
    
    
    
    
    
    
    
    
    562,846
    
    
    
    n/a
    
    
    
    09-23-96
    
    
    
    Washington Mutual, Texas
    
    
    
    
    
    
    851,974
    
    
    
    
    
    
    
    
    
    
    
    851,974
    
    
    
    n/a
    
    
    
    12-11-96
    
    
    
    Smokey Bones, Georgia
    
    
    
    
    
    
    713,386
    
    
    
    
    
    
    
    
    
    
    
    713,386
    
    
    
    n/a
    
    
    
    12-18-98
    
    
    
    IHOP, Texas
    
    
    
    
    
    
    740,882
    
    
    
    
    
    
    
    1,022,271
    
    
    
    1,763,153
    
    
    
    n/a
    
    
    
    09-22-99
    
    
    
    1,195,610IHOP, Kansas
    
    
    
    
    
    
    450,984
    
    
    
    
    
    
    
    1,016,451
    
    
    
    1,467,435
    
    
    
    n/a
    
    
    
    09-30-99
    
    
    
    IHOP, Oregon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,055,086
    
    
    
    1,055,086
    
    
    
    Note A
    
    
    
    04-16-02
    
    
    
    810,571IHOP, Texas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    908,836
    
    
    
    908,836
    
    
    
    Note A
    
    
    
    04-16-02
    
    
    
    695,189IHOP, New York
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,150,617
    
    
    
    1,150,617
    
    
    
    Note A
    
    
    
    04-16-02
    
    
    
    868,986IHOP, Kansas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    895,104
    
    
    
    895,104
    
    
    
    Note A
    
    
    
    04-16-02
    
    
    
    686,116IHOP, New Mexico
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    856,678
    
    
    
    856,678
    
    
    
    Note A
    
    
    
    04-23-02
    
    
    
    691,671IHOP, Louisiana
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,383,244
    
    
    
    1,383,244
    
    
    
    Note A
    
    
    
    04-23-02
    
    
    
    1,142,992IHOP, Virginia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    753,996
    
    
    
    753,996
    
    
    
    Note A
    
    
    
    04-23-02
    
    
    
    575,926IHOP, Oregon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    701,470
    
    
    
    701,470
    
    
    
    Note A
    
    
    
    05-17-02
    
    
    
    568,752IHOP, Missouri
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,170,366
    
    
    
    1,170,366
    
    
    
    Note A
    
    
    
    05-17-02
    
    
    
    944,143IHOP, Virginia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    850,387
    
    
    
    850,387
    
    
    
    Note A
    
    
    
    06-21-02
    
    
    
    654,302IHOP, Virginia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    859,353
    
    
    
    859,353
    
    
    
    Note A
    
    
    
    07-18-02
    
    
    
    660,165Baptist Memorial Health, Tennessee
    
    
    1,495,871
    
    
    
    624,006
    
    
    
    
    
    
    
    
    
    
    
    2,119,877
    
    
    
    127,680
    
    
    
    07-23-02
    
    
    
    Golden Corral, Texas
    
    
    1,099,817
    
    
    
    722,949
    
    
    
    
    
    
    
    
    
    
    
    1,822,766
    
    
    
    97,527
    
    
    
    07-23-02
    
    
    
    Golden Corral, Texas
    
    
    1,297,850
    
    
    
    556,222
    
    
    
    
    
    
    
    
    
    
    
    1,854,072
    
    
    
    115,087
    
    
    
    07-23-02
    
    
    
    TGI Fridays, Texas
    
    
    1,453,769
    
    
    
    623,043
    
    
    
    
    
    
    
    
    
    
    
    2,076,812
    
    
    
    128,913
    
    
    
    07-23-02
    
    
    
    Popeyes, Georgia
    
    
    778,772
    
    
    
    333,758
    
    
    
    
    
    
    
    
    
    
    
    1,112,530
    
    
    
    69,057
    
    
    
    07-23-02
    
    
    
    Energy Wellness Center, Texas
    
    
    1,276,836
    
    
    
    547,214
    
    
    
    
    
    
    
    
    
    
    
    1,824,050
    
    
    
    113,223
    
    
    
    07-23-02
    
    
    
    IHOP, Utah
    
    
    
    
    
    
    457,493
    
    
    
    
    
    
    
    1,102,941
    
    
    
    1,560,434
    
    
    
    n/a
    
    
    
    07-25-02
    
    
    
    1,144,335IHOP, Tennessee
    
    
    
    
    
    
    469,502
    
    
    
    
    
    
    
    1,137,080
    
    
    
    1,606,582
    
    
    
    n/a
    
    
    
    07-26-02
    
    
    
    1,236,720IHOP, California
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,012,065
    
    
    
    1,012,065
    
    
    
    Note A
    
    
    
    08-23-02
    
    
    
    688,411IHOP, Texas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,173,203
    
    
    
    1,173,203
    
    
    
    Note A
    
    
    
    08-23-02
    
    
    
    826,274IHOP, Tennessee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,076,379
    
    
    
    1,076,379
    
    
    
    Note A
    
    
    
    08-23-02
    
    
    
    717,398IHOP, Colorado
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,086,182
    
    
    
    1,086,182
    
    
    
    Note A
    
    
    
    08-23-02
    
    
    
    772,114CVS Pharmacy, Texas
    
    
    
    
    
    
    2,688,996
    
    
    
    
    
    
    
    
    
    
    
    2,688,996
    
    
    
    n/a
    
    
    
    01-10-03
    
    
    
    TGI Fridays, Maryland
    
    
    
    
    
    
    1,474,473
    
    
    
    
    
    
    
    
    
    
    
    1,474,473
    
    
    
    n/a
    
    
    
    09-16-03
    
    
    
    San Felipe at Winrock, Texas
    
    
    
    
    
    
    
    
    
    
    2,437,410
    
    
    
    
    
    
    
    2,437,410
    
    
    
    n/a
    
    
    
    11-17-03
    
    
    
    Advance Auto, Missouri
    
    
    
    
    
    
    361,187
    
    
    
    
    
    
    
    
    
    
    
    361,187
    
    
    
    n/a
    
    
    
    02-13-04
    
    
    
    Research Forest, Texas
    
    
    72,682
    
    
    
    517,720
    
    
    
    
    
    
    
    
    
    
    
    590,402
    
    
    
    n/a
    
    
    
    04-30-04
    
    
    
    Advance Auto, Illinois
    
    
    37,955
    
    
    
    627,307
    
    
    
    
    
    
    
    
    
    
    
    665,262
    
    
    
    n/a
    
    
    
    06-03-04
    
    
    
    Advance Auto, Missouri
    
    
    76,869
    
    
    
    352,508
    
    
    
    
    
    
    
    
    
    
    
    429,377
    
    
    
    n/a
    
    
    
    09-24-04
    
    
    
    410 and Blanco, Texas
    
    
    46,743
    
    
    
    1,426,190
    
    
    
    
    
    
    
    
    
    
    
    1,472,933
    
    
    
    n/a
    
    
    
    12-17-04
    
    
    
    Advance Auto, Illinois
    
    
    
    
    
    
    
    
    
    
    1,131,542
    
    
    
    
    
    
    
    1,131,542
    
    
    
    n/a
    
    
    
    02-04-05
    
    
    
    Total Single Tenant
    
    
    7,637,164
    
    
    
    15,102,640
    
    
    
    3,568,952
    
    
    
    19,211,709
    
    
    
    45,520,465
    
    
    
    651,487
    
    
    
    
    
    
    
    14,879,675Total
    
    $
    134,459,589
    
    
    $
    112,784,029
    
    
    $
    3,568,952
    
    
    $
    19,211,709
    
    
    $
    270,024,279
    
    
    $
    5,943,499
    
    
    
    
    
    
    $
    113,926,549
    AccumulatedCost
    
    DepreciationBalance at December 31, 2002
    
    $
    47,792,423
    
    
    $
    2,022,152Acquisitions / additions
    
    
    29,435,427
    
    
    
    Disposals
    
    
    (4,984,583
    )
    
    
    (267,016
    )Depreciation expense
    
    
    
    
    
    
    765,497Balance at December 31, 2003
    
    $
    72,243,267
    
    
    $
    2,520,633Acquisitions / additions
    
    
    104,136,245
    
    
    
    Disposals
    
    
    (7,682,772
    )
    
    
    (478,806
    )Impairment
    
    
    (1,300,000
    )
    
    
    Transfer to held for sale
    
    
    (478,806
    )
    
    
    Depreciation expense
    
    
    
    
    
    
    1,519,667Balance at December 31, 2004
    
    $
    166,917,934
    
    
    $
    3,561,494Acquisitions / additions
    
    
    106,619,151
    
    
    
    Disposals
    
    
    (21,444,663
    )
    
    
    (1,352,195
    )Impairment
    
    
    
    
    
    
    Transfer to held for sale
    
    
    (1,279,852
    )
    
    
    Depreciation expense
    
    
    
    
    
    
    3,734,200Balance at December 31, 2005
    
    $
    250,812,570
    
    
    $
    5,943,499
 F-33




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##### Table of Contents



INDEX TO 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, 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).10.2
    
    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).10.3*
    
    Eighth Modification Agreement, effective November 4, 2005 by and between AmREIT and Wells
Fargo Bank, relating to a $40,000,000 loan and modifying the September 4, 2003 Revolving
Credit Agreement10.4
    
    Purchase and Sale Agreement between Midland Real Estate Company, L.P. and AmREIT Realty
Investment Corporation with related amendments for the acquisition of The South Bank property
(included as Exhibit 10.1 to the Companys Report on Form 8-K/A filed with the Commission on
December 13, 2005)21.1*
    
    Subsidiaries of the Company31.1**
    
    Certification pursuant to Rule 13a-14(a) of Chief Executive Officer dated December 31, 2005.




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##### Table of Contents



31.2**
    
    Certification pursuant to Rule 13a-14(a) of Chief Financial Officer dated December 31, 2005.32.1*
    
    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**
    
    Furnished herewith