##### Table of Contents



UNITED STATES
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, 2008
 o
    
    TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission file number: 000-52619
 AmREIT MONTHLY INCOME & GROWTH FUND III, LTD.
 (Name of Small Business Issuer in its charter)
 Texas
    
    20-2964630(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)8 Greenway Plaza, Suite 1000Houston, TX
    
    77046(address of principle executive offices)
    
    (Zip Code)
 Issuers telephone number
(713) 850-1400
 Securities registered under Section 12(b) of the Act: None
 Securities registered under Section 12(g) of the Act:
 Limited Partnership Interests
 
 o
 Yes þ No o
 þ
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 Yes o No þ
  Yes o No þ




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##### 



TABLE OF CONTENTS
 CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
    
    
    1PART I
    
    
    1ITEM 1.DESCRIPTION OF BUSINESS
    
    
    1ITEM 2.DESCRIPTION OF PROPERTY
    
    
    13ITEM 3.LEGAL PROCEEDINGS
    
    
    18ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    18PART II
    
    
    18ITEM 5.MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    18ITEM 6.MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    20ITEM 7.FINANCIAL STATEMENTS
    
    
    30ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    
    
    30ITEM 8A(T).CONTROLS AND PROCEDURES
    
    
    30ITEM 8B.OTHER INFORMATION
    
    
    31PART III
    
    
    31ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
    
    
    31ITEM 10.EXECUTIVE COMPENSATION
    
    
    32ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
    
    
    32ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
    
    
    33ITEM 13.EXHIBITS
    
    
    36ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    39EX-31.1EX-31.2EX-32.1EX-32.2
  - 2 -




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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
    
 PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 Background
    - 1 -




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Square
    
    
    Percent
    
    
    AnnualizedProperty
    
    Location
    
    Footage
    
    
    Owned
    
    
    Gross Base Rent(1)Market at Lake Houston (3)
    
    Houston
    
    
    101,799
    
    
    
    60.0
    %
    
    $
    1,557,000Lantern Lane
    
    Houston
    
    
    79,462
    
    
    
    100.0
    
    
    
    1,505,000Olmos Creek
    
    San Antonio
    
    
    102,178
    
    
    
    100.0
    
    
    
    1,046,000Westside Plaza
    
    Houston
    
    
    43,021
    
    
    
    100.0
    
    
    
    1,061,0005433 Westheimer (2)(4)
    
    Houston
    
    
    133,881
    
    
    
    57.5
    
    
    
    1,433,000Woodlake Pointe (4)
    
    Houston
    
    
    82,120
    
    
    
    30.0
    
    
    
    834,000Berkeley Square (4)
    
    Plano
    
    
    124,987
    
    
    
    20.0
    
    
    
    1,976,000Casa Linda Plaza (2)(4)
    
    Dallas
    
    
    324,638
    
    
    
    50.0
    
    
    
    3,410,000Preston Park Gold (4)
    
    Plano
    
    
    101,096
    
    
    
    20.0
    
    
    
    955,000Preston Towne Crossing (4)
    
    Plano
    
    
    169,844
    
    
    
    20.0
    
    
    
    3,078,000Woodlake Square (4)
    
    Houston
    
    
    205,522
    
    
    
    30.0
    
    
    
    1,947,000Total
    
    
    
    
    1,468,548
    
    
    
    
    
    
    $
    18,802,000
 
 (1)
    
    Annualized gross base rent represents base rents in place on leases with rent
having commenced as of December 31, 2008 and does not reflect straight-line rent or
other adjustments required under generally accepted accounting principles.(2)
    
    Property is under redevelopment.(3)
    
    Property is 60% owned through a joint venture and is consolidated in our
financial statements.(4)
    
    Property is owned through a joint venture that is not consolidated in our
financial statements. - 2 -




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Investment Objectives
  
    
    to preserve and protect our Limited Partners capital contributions;
    
    to provide cash distributions to our Partners through the operation of our properties;
and
    
    to realize appreciation in the value of our properties.
 Investment Strategy
 Equity Allocation
  Investments in Properties with Operating Histories
   Development and Redevelopment Properties
  - 3 -




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Location of Properties
   Investment Decisions
  - 4 -




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
    
    obtaining an independent appraisal of the property;
    
    obtaining an independent engineering report of the propertys mechanical, electrical
and structural integrity;
    
    conducting an investigation of title;
    
    evaluating both the current and potential alternative uses of the property; and
    
    obtaining an independent Phase I environmental site assessment.
  Real Estate Fundamentals
   Tenant Quality and Monitoring
  - 5 -




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Net Leases
   Ownership Structure
   - 6 -




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Joint Ventures
   
    
    our right either to approve significant decisions of the joint venture or to
control operations of the joint venture, subject to the right of the joint venture
partner to approve sales or refinancing;
    
    the total compensation paid by us and the joint venture to our General Partner and
its affiliates in connection with a joint venture will not exceed the compensation
which would be permissible under the Partnership Agreement if we owned 100% of the
joint venture;
    
    no duplication of joint venture costs and expenses and our costs and expenses
relating to the joint venture business, including organization and syndication
expenses, acquisition and development costs; and
    
    any purchase, sale or financing transactions between the joint venture partner and
our General Partner or its affiliates must be on terms which are commercially
reasonable and comparable to those relating to transactions between unrelated parties.
   - 7 -




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Disposition Policies
 Operating Period
   Liquidation Period
   AmREITs Purchase Rights
   - 8 -




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Marketing
  Leverage
    Other Investments
   Conflicts of Interest
  Limited Financial Resources
  - 9 -




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Interests in Other Real Estate Programs
 eit
   Competition for Management Services
  Leasing Agents
  - 10 -




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Properties
  Sale of Properties
  No Arms-Length Agreements
  AmREITs Interests in Other Programs
  Transactions with Affiliates
   Affiliated Property Manager and Construction Manager
  - 11 -




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Lack of Separate Representation
  Tax Matters Partner
  Employees
  Insurance
  Competition
  - 12 -




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Concentration of Credit Risk
   
 ITEM 2. DESCRIPTION OF PROPERTY
 Overview
   Percentage of totalSquare
    
    
    Percent
    
    
    Annualized
    
    
    annualized GrossProperty
    
    Location
    
    Footage
    
    
    Leased
    
    
    Gross Base Rent(1)
    
    
    Base RentMarket at Lake Houston (2)
    
    Houston
    
    
    101,799
    
    
    
    100.0
    %
    
    $
    1,557,000
    
    
    
    8.3
    %Lantern Lane
    
    Houston
    
    
    79,462
    
    
    
    94.3
    
    
    
    1,505,000
    
    
    
    8.0Olmos Creek
    
    San Antonio
    
    
    102,178
    
    
    
    94.1
    
    
    
    1,046,000
    
    
    
    5.6Westside Plaza
    
    Houston
    
    
    43,021
    
    
    
    99.8
    
    
    
    1,061,000
    
    
    
    5.65433 Westheimer (3)
    
    Houston
    
    
    133,881
    
    
    
    62.5
    
    
    
    1,433,000
    
    
    
    7.6Woodlake Pointe (3)
    
    Houston
    
    
    82,120
    
    
    
    50.0
    
    
    
    834,000
    
    
    
    4.4Berkeley Square (3)
    
    Plano
    
    
    124,987
    
    
    
    92.9
    
    
    
    1,976,000
    
    
    
    10.5Casa Linda Plaza (3)
    
    Dallas
    
    
    324,638
    
    
    
    84.0
    
    
    
    3,410,000
    
    
    
    18.1Preston Park Gold (3)
    
    Plano
    
    
    101,096
    
    
    
    76.6
    
    
    
    955,000
    
    
    
    5.1Preston Towne Crossing (3)
    
    Plano
    
    
    169,844
    
    
    
    94.4
    
    
    
    3,078,000
    
    
    
    16.4Woodlake Square (3)
    
    Houston
    
    
    205,522
    
    
    
    71.7
    
    
    
    1,947,000
    
    
    
    10.4Total
    
    
    
    
    1,468,548
    
    
    
    
    
    
    $
    18,802,000
 
 (1)
    
    Annualized gross base rent represents base rents in place on leases with rent
having commenced as of December 31, 2008 and does not reflect straight-line rent or
other adjustments under generally accepted accounting principles.(2)
    
    Property is 60% owned through a joint venture which is consolidated in our
financial statements.(3)
    
    Property is owned through a joint venture that is not consolidated in our
financial statements. - 13 -




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Description of Our Real Estate Investments
 Westside Plaza
   The Market at Lake Houston
   5433 Westheimer
  - 14 -




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Olmos Creek
   Lantern Lane
   Properties in Plano, Texas Owned Through a Joint Venture with an Affiliate of JPMorgan
  Preston Park Gold.
  Preston Towne Crossing and Berkeley Square.
  - 15 -




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Casa Linda Plaza
   Woodlake Square
   Woodlake Pointe
    - 16 -




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Portfolio Information
  Total
    
    Annualized
    
    Percentage of TotalNumber of
    
    Gross Base
    
    AnnualizedIndustry
    
    Tenants
    
    Rent
    
    Gross Base RentDining
    
    
    49
    
    
    $
    3,817,000
    
    
    
    20.4
    %Specialty Retail
    
    
    47
    
    
    
    3,423,000
    
    
    
    18.3Grocery
    
    
    9
    
    
    
    2,692,000
    
    
    
    14.4Banking
    
    
    16
    
    
    
    1,328,000
    
    
    
    7.1Gym
    
    
    12
    
    
    
    1,243,000
    
    
    
    6.7
  Percentage ofRentable
    
    Total Rentable
    
    Year ofSquare
    
    Square Feet for
    
    LeaseProperty
    
    Industry
    
    Feet
    
    Property
    
    ExpirationWestside PlazaDesigner Shoe Warehouse
    
    Shoe Retail
    
    
    24,500
    
    
    
    57
    %
    
    
    2010Fadis Mediterranean Delight
    
    Dining
    
    
    5,125
    
    
    
    12
    
    
    
    2012Market at Lake HoustonH-E-B Grocery
    
    Grocery
    
    
    80,641
    
    
    
    79
    
    
    
    2017Olmos CreekH-E-B Grocery
    
    Grocery
    
    
    55,513
    
    
    
    53
    
    
    
    2020Casa Linda PlazaAlbertsons
    
    Grocery
    
    
    59,561
    
    
    
    18
    
    
    
    2016Lantern LaneRice Food Markets, Inc.
    
    Grocery
    
    
    21,450
    
    
    
    27
    
    
    
    2013Fidelity Investments
    
    Banking
    
    
    9,578
    
    
    
    12
    
    
    
    2010Preston Towne CrossingRecreational Equipment Inc.
    
    Sporting Goods
    
    
    27,000
    
    
    
    16
    
    
    
    2015Park Plaza Salon
    
    Beauty Salons
    
    
    20,000
    
    
    
    12
    
    
    
    2012Berkeley SquareMovie Grill Concepts, Ltd
    
    Entertainment
    
    
    30,977
    
    
    
    25
    
    
    
    20105433 WestheimerProsperity Bank
    
    Banking
    
    
    17,185
    
    
    
    13
    
    
    
    2011Preston GoldGolds Gym
    
    Gym
    
    
    49,427
    
    
    
    49
    
    
    
    2024Chair King
    
    Specialty Retail
    
    
    27,438
    
    
    
    27
    
    
    
    2017Woodlake SquareRandalls Food & Drug
    
    Grocery
    
    
    56,430
    
    
    
    27
    
    
    
    2013Woodlake PointeBorders
    
    Book Retail
    
    
    41,060
    
    
    
    50
    
    
    
    2010
 - 17 -




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Total
    
    
    
    
    
    
    Annualized
    
    
    Percentage ofNumber of
    
    
    Rentable
    
    
    Gross Base
    
    
    Total AnnualizedYear of Lease Expiration
    
    Leases
    
    
    Square Feet
    
    
    Rent
    
    
    Gross Base Rent2009
    
    
    11
    
    
    
    24,288
    
    
    $
    498,000
    
    
    
    9.6
    %2010
    
    
    7
    
    
    
    48,594
    
    
    
    1,064,000
    
    
    
    20.62011
    
    
    5
    
    
    
    6,484
    
    
    
    205,000
    
    
    
    4.02012
    
    
    13
    
    
    
    41,206
    
    
    
    860,000
    
    
    
    16.62013
    
    
    6
    
    
    
    35,714
    
    
    
    646,000
    
    
    
    12.52014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2015
    
    
    2
    
    
    
    3,317
    
    
    
    67,000
    
    
    
    1.3Thereafter
    
    
    9
    
    
    
    157,843
    
    
    
    1,828,000
    
    
    
    35.453
    
    
    
    317,446
    
    
    $
    5,168,000
    
    
    
    100.0
    %
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES
OF EQUITY SECURITIES
    - 18 -




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Total Amount of
    
    
    DistributionPeriod Declared
    
    Distributions Paid
    
    
    Per UnitJanuary 2007
    
    
    435,231
    
    
    
    156.25February 2007
    
    
    444,314
    
    
    
    156.25March 2007
    
    
    444,314
    
    
    
    156.25April 2007
    
    
    444,270
    
    
    
    156.25May 2007
    
    
    444,270
    
    
    
    156.25June 2007
    
    
    444,270
    
    
    
    156.25July 2007
    
    
    444,314
    
    
    
    156.25August 2007
    
    
    444,314
    
    
    
    156.25September 2007
    
    
    444,314
    
    
    
    156.25October 2007
    
    
    444,158
    
    
    
    156.25November 2007
    
    
    444,158
    
    
    
    156.25December 2007
    
    
    444,158
    
    
    
    156.25January 2008
    
    
    444,158
    
    
    
    156.25February 2008
    
    
    444,158
    
    
    
    156.25March 2008
    
    
    444,158
    
    
    
    156.25April 2008
    
    
    444,158
    
    
    
    156.25May 2008
    
    
    444,158
    
    
    
    156.25June 2008
    
    
    444,158
    
    
    
    156.25July 2008
    
    
    444,158
    
    
    
    156.25August 2008
    
    
    444,158
    
    
    
    156.25September 2008
    
    
    444,002
    
    
    
    156.25October 2008
    
    
    444,002
    
    
    
    156.25November 2008
    
    
    444,002
    
    
    
    156.25December 2008
    
    
    443,377
    
    
    
    156.25Total
    
    $
    10,650,732
  
    
    our operating and interest expenses;
    
    the ability of tenants to meet their obligations under the leases associated with our
properties;
    
    our ability to keep our properties occupied;
    
    our ability to maintain or increase rental rates when renewing or replacing current
leases;
    
    capital expenditures and reserves for such expenditures;
    
    the issuance of additional shares; and
    
    financings and refinancings.
  - 19 -




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Offering and Use of Proceeds
    
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
  Overview
    - 20 -




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Summary of Critical Accounting Policies
  Revenue Recognition
   - 21 -




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Valuation of Real Estate Assets
  Investment in Real Estate Assets
   Investment in Non- consolidated Entities
 Business Combinations
 Valuation of Receivables
  - 22 -




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Real Estate Acquisitions
     Recently Issued Accounting Pronouncements
  - 23 -




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The Fair Value Option for Financial Assets and
Financial Liabilities .
 Business Combinations .
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities (SFAS No. 161)
 Factors Which May Influence Results of Operations
 Rental Income
  Scheduled Lease Expirations
  - 24 -




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##### Table of Contents



Results of Operations
  Comparison of the year ended December 31, 2008 to the year ended December 31, 2007
 Revenue.
 General and Administrative.
 General and Administrative  Related Party.
 Property Expenses.
 Legal and Professional Fees.
 Depreciation and Amortization Expense.
 Interest Income  Related Party.
 - 25 -




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Interest and Other Income.
 Interest Expense.
 Loss From Non-Consolidated Entities.
 Minority Interest in Loss of Consolidated Subsidiaries.
 Comparison of the year ended December 31, 2007 to the year ended December 31, 2006
 Revenue.
 General and Administrative.
 General and Administrative  Related Party.
 Asset Management Fees  Related Party.
 - 26 -




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Property Expenses.
 Property Management Fees  Related Party.
 Legal and Professional Fees.
 Depreciation and Amortization Expense.
 Interest Income  Related Party.
 Interest and Other Income.
 Interest Expense.
 Loss From Non-Consolidated Entities.
 Minority Interest in Loss of Consolidated Subsidiaries.
 - 27 -




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Income Tax Expense. Accounting for Income Taxes,
 Loss From Discontinued Operations.
 Liquidity and Capital Resources
    2008
    
    2007Operating activities
    
    $
    971
    
    
    $
    387Investing activities
    
    
    894
    
    
    
    (11,393
    )Financing activities
    
    
    (6,192
    )
    
    
    (6,877
    )
  - 28 -




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Contractual Obligations
  2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    TotalSecured debt
    
    
    156
    
    
    
    165
    
    
    
    24,790
    
    
    
    183
    
    
    
    196
    
    
    
    25,202
    
    
    
    50,692Interest
    
    
    3,028
    
    
    
    3,019
    
    
    
    2,818
    
    
    
    1,524
    
    
    
    1,508
    
    
    
    2,774
    
    
    
    14,671Total obligations
    
    $
    3,184
    
    
    $
    3,184
    
    
    $
    27,608
    
    
    $
    1,707
    
    
    $
    1,704
    
    
    $
    27,976
    
    
    $
    65,363
   Indemnification of General Partner
  Conflicts of Interest
  - 29 -




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Off Balance Sheet Arrangements
  
 ITEM 7. FINANCIAL STATEMENTS
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
  
 ITEM 8A(T). CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
  Managements Report on Internal Control over Financial Reporting
       - 30 -




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Changes in Internal Controls
  
 ITEM 8B. OTHER INFORMATION
  
 PART III
 
 ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
   Name
    
    Age
    
    PositionH. Kerr Taylor
    
    
    58
    
    
    President, Chief Executive Officer and DirectorChad C. Braun
    
    
    36
    
    
    Executive Vice President, Chief Financial
Officer, Treasurer and SecretaryBrett P. Treadwell
    
    
    39
    
    
    Vice President  Finance
 H. Kerr Taylor
 Chad C. Braun
 - 31 -




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Brett P. Treadwell
 Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  
 ITEM 10. EXECUTIVE COMPENSATION
   
 ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 Securities Authorized for Issuance Under Equity Compensation Plans
  Security Ownership of Certain Beneficial Owners and Management
    - 32 -




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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Compensation Arrangements
  For the fiscal yearendedType and Recipient
    
    Determination of Amount
    
    December 31, 2008Organization StageOrganizational and Offering
Cost Reimbursements
    
    Reimbursement of the
Partnerships
organizational and
offering costs,
including legal and
accounting fees,
printing costs, filing
fees and distribution
costs.
    
    No amount to reportOperating StageAsset Management Fee  General
Partner
    
    A monthly fee of
one-twelfth of 1.0% of
net invested capital
under management for
accounting related
services, investor
relations,
facilitating the
deployment of capital,
and other services
provided by our
General Partner to us.
    
    $
    617,753Development and Acquisition
Fees  General Partner
    
    Between 4.0% and 6.0%
of project costs
depending on the size
and the scope of the
development.
    
    No amount to reportProperty Management and Leasing
Fees  AmREIT Realty Investment
Corporation
    
    Property management
fees not to exceed
4.0% of the gross
rentals for providing
management, operating,
maintenance and other
services. Leasing
fees not to exceed
2.0% of base rent on a
lease renewal and 6.0%
of base rent on an
initial lease for
procuring tenants and
negotiating the terms
of the tenant leases.
    
    $
    359,436Reimbursement of Operating
Expenses  General Partner
    
    We reimburse the
actual expenses
incurred by our
General Partner in
connection with its
provision of
administrative
services, including
related personnel
costs.
    
    $
    301,822Financing Fees  General Partner
    
    1.0% of the loan
proceeds for procuring
debt financing for us.
    
    No amount to reportDistributions During Operating
Stage  General Partner
    
    Our General Partner is
entitled to monthly
distributions during
our operating period,
in an amount equal to
1.0% of the each
distribution made to
the Partners.
    
    $
    54,000
 - 33 -




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##### Table of Contents



For the fiscal yearendedType and Recipient
    
    Determination of Amount
    
    December 31, 2008Real Estate Brokerage
Commissions  General Partner
or its affiliate(1)
    
    Up to 6.0% of the
sales price on
co-brokered
transactions and not
to exceed 4.0% of the
sales price on
individually brokered
transactions.
Additionally, our
General Partner and
its affiliates will
not be paid real
estate brokerage
commissions on the
sale of a property if
the property being
sold has not generated
an annual return of at
least 10.0% per annum
on the equity
contributed to such
property and if, in
the aggregate, all of
our properties that we
have sold have not
generated a property
level return of at
least 10.0% per annum
on the equity
contributed. No
brokerage commission
will be payable on
sales of properties to
AmREIT or its
affiliates.
    
    No amount to reportLiquidating StageDistributions of Net Cash Flow
- General Partner
    
    Our General Partner is
entitled to
distributions after
our operating period.
Distributions of net
cash after our
operating period will
be distributed 1% to
our General Partner
and 99% to our Limited
Partners until our
Limited Partners have
received cumulative
distributions equal to
100% of their invested
capital plus an amount
equal to 10% per annum
uncompounded on their
adjusted capital. At
such time, our General
Partner will receive
100% of distributions
made until our General
Partner has received
cumulative
distributions in an
amount equal to 40% of
net cash flow paid to
date of our Limited
Partners in excess of
their invested
capital. Thereafter,
our General Partner
will receive 40% of
distributions and our
Limited Partners will
receive 60% of
distributions.
    
    No amount to report
 
 (1)
    
    Although we are most likely to pay real estate brokerage commissions in the
event of our liquidation, these fees may also be earned during our operational stage. Joint Ventures with Affiliates
    - 34 -




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##### Table of Contents



Directors
  Loan to an Affiliate
  AmREIT Realty Investment Corporation
   AmREIT Securities Company
  - 35 -




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##### Table of Contents



ITEM 13. EXHIBITS
 INDEX TO EXHIBITS
   Incorporated by ReferenceExhibit
    
    
    
    
    
    File
    
    
    
    
    
    Filing
    
    FiledNumber
    
    Description
    
    Form
    
    Number
    
    Exhibit
    
    Date
    
    Herewith3.1
    
    Certificate of
Limited Partnership
of AmREIT Monthly
Income & Growth
Fund III, Ltd.,
dated April 19,
2005.
    
    10-SB
    
    000-52619
    
    
    3.1
    
    
    4/30/20073.2
    
    Agreement of
Limited Partnership
of AmREIT Monthly &
Income Growth Fund
III, Ltd., dated
April 19, 2005,
between AmREIT
Income & Growth III
Corporation and the
limited partners
thereto.
    
    10-SB
    
    000-52619
    
    
    3.1
    
    
    4/30/200710.1
    
    Fixed Rate Note (A
Loan), dated May 2,
2005, between
Shafer Plaza I, Ltd
and JPMorgan Chase
Bank, N.A.
    
    10-SB
    
    000-52619
    
    
    10.1
    
    
    4/30/200710.2
    
    Fixed Rate Note (B
Loan), dated May 2,
2005, between
Shafer Plaza I, Ltd
and JPMorgan Chase
Bank, N.A.
    
    10-SB
    
    000-52619
    
    
    10.2
    
    
    4/30/2007
 - 36 -




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    File
    
    
    
    
    
    Filing
    
    FiledNumber
    
    Description
    
    Form
    
    Number
    
    Exhibit
    
    Date
    
    Herewith10.3
    
    Loan and Assumption
Agreement, dated
September 30, 2005,
among AmREIT
Westside Plaza, LP,
AmREIT Monthly
Income & Growth
Fund III, Ltd.,
AmREIT, Shafer
Plaza I, Ltd.,
Steven G. Shafer,
Wells Fargo Bank,
N.A., and
CBA-Mezzanine
Capital Finance,
LLC.
    
    10-SB
    
    000-52619
    
    
    10.3
    
    
    4/30/200710.4
    
    Second Amended and
Restated Property
Management and
Leasing Agreement,
dated December 28,
2005, between
AmREIT Westside
Plaza, LP and
AmREIT Realty
Investment
Corporation.
    
    10-SB
    
    000-52619
    
    
    10.4
    
    
    4/30/200710.5
    
    Management and
Leasing Agreement,
dated November 22,
2005, between
AmREIT Lake
Houston, LP and
AmREIT Realty
Investment
Corporation.
    
    10-SB
    
    000-52619
    
    
    10.5
    
    
    4/30/200710.6
    
    Promissory Note,
dated December 12,
2005, between
AmREIT Lake
Houston, LP and
Morgan Stanley
Mortgage Capital,
Inc.
    
    10-SB
    
    000-52619
    
    
    10.6
    
    
    4/30/200710.7
    
    Commercial Property
Management and
Leasing Agreement,
dated March 30,
2006, between 5433
Westheimer, LP and
Songy Partners
Limited.
    
    10-SB
    
    000-52619
    
    
    10.7
    
    
    4/30/200710.8
    
    Promissory Note,
dated September 28,
2006, between
AmREIT Lantern
Lane, LP and
Differential
Development  1994,
Ltd.
    
    10-SB
    
    000-52619
    
    
    10.8
    
    
    4/30/200710.9
    
    Management and
Leasing Agreement,
dated September 28,
2006, between
AmREIT Lantern
Lane, LP and AmREIT
Realty Investment
Corporation.
    
    10-SB
    
    000-52619
    
    
    10.9
    
    
    4/30/200710.10
    
    Promissory Note,
dated December 8,
2006, between
AmREIT Casa Linda,
LP and Morgan
Stanley Mortgage
Capital, Inc.
    
    10-SB
    
    000-52619
    
    
    10.10
    
    
    4/30/200710.11
    
    Secured Promissory
Note, dated
September 29, 2006,
between AmREIT
Olmos Creek, LP and
NLI Commercial
Mortgage Fund, LLC.
    
    10-SB
    
    000-52619
    
    
    10.11
    
    
    4/30/2007
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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    File
    
    
    
    
    
    Filing
    
    FiledNumber
    
    Description
    
    Form
    
    Number
    
    Exhibit
    
    Date
    
    Herewith10.12
    
    Management and
Leasing Agreement,
dated January 26,
2007, between
AmREIT Olmos Creek,
LP and AmREIT
Realty Investment
Corporation.
    
    10-SB
    
    000-52619
    
    
    10.12
    
    
    4/30/200710.13
    
    Management and
Leasing Agreement,
dated December 7,
2006, between
AmREIT SSPF Preston
Towne Crossing, LP
and AmREIT Realty
Investment
Corporation.
    
    10-SB
    
    000-52619
    
    
    10.13
    
    
    4/30/200710.14
    
    Management and
Leasing Agreement,
dated December 7,
2006, between
AmREIT SSPF
Berkeley, LP and
AmREIT Realty
Investment
Corporation.
    
    10-SB
    
    000-52619
    
    
    10.14
    
    
    4/30/200710.15
    
    Loan Assumption
Agreement, dated
December 7, 2006,
among Berkeley
Center, Ltd.,
William Hutchinson,
AmREIT SSPF
Berkeley, LP,
AmREIT Monthly
Income & Growth
Fund III, Ltd. and
LaSalle Bank
National
Association.
    
    10-SB
    
    000-52619
    
    
    10.15
    
    
    4/30/200710.16
    
    Loan Assumption
Agreement, dated
December 7, 2006,
among PTC Dunhill
Holdings, Ltd.,
William Hutchinson,
AmREIT SSPF Preston
Towne Crossing, LP,
AmREIT Monthly
Income & Growth
Fund III, Ltd. and
LaSalle Bank
National
Association.
    
    10-SB
    
    000-52619
    
    
    10.16
    
    
    4/30/200731.1
    
    Certification of H.
Kerr Taylor
pursuant to 18
U.S.C. Section 1350
as adopted pursuant
to Section 302 of
the Sarbanes-Oxley
Act of 2002.
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of
Chad C. Braun
pursuant to 18
U.S.C. Section 1350
as adopted pursuant
to Section 302 of
the Sarbanes-Oxley
Act of 2002.
    
    
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification of H.
Kerr Taylor
pursuant to 18
U.S.C. Section 1350
as adopted pursuant
to Section 906 of
the Sarbanes-Oxley
Act of 2002.
    
    
    
    
    
    
    
    
    
    
    
    X32.2
    
    Certification of
Chad C. Braun
pursuant to 18
U.S.C. Section 1350
as adopted pursuant
to Section 906 of
the Sarbanes-Oxley
Act of 2002.
    
    
    
    
    
    
    
    
    
    
    
    X
 - 38 -




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Audit Fees
  Audit-Related Fees, Tax Fees and All Other Fees
  Audit Committees Pre-Approval Policies and Procedures
 .
 - 39 -




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##### Table of Contents



PART F/S
 AmREIT MONTHLY INCOME AND GROWTH FUND III, LTD. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
 PageFINANCIAL STATEMENTS:Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    F-4Consolidated Statements of Partners Capital for the years ended December 31, 2008, 2007
and 2006
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7FINANCIAL STATEMENT SCHEDULES:Schedule III  Consolidated Real Estate Owned and Accumulated
Depreciation for the year ended December 31, 2008
    
    
    S-1
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
 F-2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31, 2008 and December 31, 2007
 (in thousands)
 December 31,
    
    
    December 31,2008
    
    
    2007ASSETSReal estate investments at cost:Land
    
    $
    18,446
    
    
    $
    18,446Buildings
    
    
    47,265
    
    
    
    47,105Tenant improvements
    
    
    1,020
    
    
    
    88466,731
    
    
    
    66,435Less accumulated depreciation and amortization
    
    
    (4,917
    )
    
    
    (3,115
    )61,814
    
    
    
    63,320Investment in non-consolidated entities
    
    
    26,495
    
    
    
    22,449Acquired lease intangibles, net
    
    
    2,488
    
    
    
    3,246Net real estate investments
    
    
    90,797
    
    
    
    89,015Cash and cash equivalents
    
    
    918
    
    
    
    5,245Tenant receivables, net
    
    
    892
    
    
    
    630Accounts receivable
    
    
    8
    
    
    
    7Accounts receivable  related party
    
    
    1,368
    
    
    
    1,307Notes receivable
    
    
    334
    
    
    
    Notes receivable  related party
    
    
    
    
    
    
    8,710Deferred costs, net
    
    
    591
    
    
    
    594Other assets
    
    
    830
    
    
    
    621TOTAL ASSETS
    
    $
    95,738
    
    
    $
    106,129LIABILITIES AND PARTNERS CAPITALLiabilities:Notes payable
    
    $
    50,693
    
    
    $
    50,838Accounts payable and other liabilities
    
    
    1,055
    
    
    
    1,278Accounts payable  related party
    
    
    106
    
    
    
    77Below market leases, net
    
    
    517
    
    
    
    706Security deposits
    
    
    133
    
    
    
    123TOTAL LIABILITIES
    
    
    52,504
    
    
    
    53,022Minority interest in consolidated subsidiary
    
    
    1,630
    
    
    
    2,146Partners capital:General partner
    
    
    
    
    
    
    Limited partners, 2,834 units outstanding
    
    
    41,604
    
    
    
    50,961TOTAL PARTNERS CAPITAL
    
    
    41,604
    
    
    
    50,961TOTAL LIABILITIES AND PARTNERS CAPITAL
    
    $
    95,738
    
    
    $
    106,129
  F-3




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##### Table of Contents



AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years ended December 31, 2008, 2007, and 2006
 (in thousands)
 2008
    
    
    2007
    
    
    2006Revenues:Rental income from operating leases
    
    $
    7,252
    
    
    $
    6,746
    
    
    $
    4,709Total revenues
    
    
    7,252
    
    
    
    6,746
    
    
    
    4,709Expenses:General and administrative
    
    
    164
    
    
    
    127
    
    
    
    64General and administrative  related party
    
    
    302
    
    
    
    228
    
    
    
    Asset management fees  related party
    
    
    618
    
    
    
    618
    
    
    
    353Property expense
    
    
    1,946
    
    
    
    1,639
    
    
    
    1,120Property management fees  related party
    
    
    250
    
    
    
    245
    
    
    
    160Legal and professional
    
    
    363
    
    
    
    540
    
    
    
    370Depreciation and amortization
    
    
    2,598
    
    
    
    2,865
    
    
    
    1,840Total expenses
    
    
    6,241
    
    
    
    6,262
    
    
    
    3,907Operating income
    
    
    1,011
    
    
    
    484
    
    
    
    802Other income (expense):Interest income  related party
    
    
    29
    
    
    
    521
    
    
    
    393Interest and other income
    
    
    389
    
    
    
    867
    
    
    
    538Interest expense
    
    
    (3,114
    )
    
    
    (3,187
    )
    
    
    (1,993
    )Loss from non-consolidated entities
    
    
    (1,836
    )
    
    
    (1,997
    )
    
    
    (344
    )Minority interest in loss of
consolidated subsidiaries
    
    
    59
    
    
    
    88
    
    
    
    125Margin tax expense
    
    
    (52
    )
    
    
    (59
    )
    
    
    Total other income (expense)
    
    
    (4,525
    )
    
    
    (3,767
    )
    
    
    (1,281
    )Loss before discontinued operations
    
    
    (3,514
    )
    
    
    (3,283
    )
    
    
    (479
    )Loss from discontinued operations:Loss from real estate operations
    
    
    
    
    
    
    
    
    
    
    (19
    )Gain on sale of real estate
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (19
    )Net loss
    
    $
    (3,514
    )
    
    $
    (3,283
    )
    
    $
    (498
    )
  F-4




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##### Table of Contents



AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL
 For the years ended December 31, 2008, 2007 and 2006
 (in thousands)
 General
    
    
    Limited
    
    
    Accumulated otherPartner
    
    
    Partners
    
    
    comprehensive loss
    
    
    TotalBalance at December 31, 2005
    
    $
    
    
    
    $
    9,693
    
    
    $
    
    
    
    $
    9,693Contributions, net of offering costs
    
    
    
    
    
    
    53,055
    
    
    
    
    
    
    
    53,055Net loss
    
    
    25
    
    
    
    (523
    )
    
    
    
    
    
    
    (498
    )Distributions
    
    
    (25
    )
    
    
    (2,483
    )
    
    
    
    
    
    
    (2,508
    )Balance at December 31, 2006
    
    $
    
    
    
    $
    59,742
    
    
    $
    
    
    
    $
    59,742Contributions, net of offering costs
    
    
    
    
    
    
    (97
    )
    
    
    
    
    
    
    (97
    )Net loss
    
    
    53
    
    
    
    (3,336
    )
    
    
    
    
    
    
    (3,283
    )Distributions
    
    
    (53
    )
    
    
    (5,348
    )
    
    
    
    
    
    
    (5,401
    )Balance at December 31, 2007
    
    $
    
    
    
    $
    50,961
    
    
    $
    
    
    
    $
    50,961Redemptions
    
    
    
    
    
    
    (207
    )
    
    
    
    
    
    
    (207
    )Offering costs
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Net loss (1)
    
    
    54
    
    
    
    (3,568
    )
    
    
    
    
    
    
    (3,514
    )Loss from derivative
    
    
    
    
    
    
    
    
    
    
    (253
    )
    
    
    (253
    )Distributions
    
    
    (54
    )
    
    
    (5,328
    )
    
    
    
    
    
    
    (5,382
    )Balance at December 31, 2008
    
    $
    
    
    
    $
    41,857
    
    
    $
    (253
    )
    
    $
    41,604
 
 (1)
    
    The allocation of net loss includes a curative allocation to increase
the GP capital account by $89. The cumulative curative allocation
since inception of the partnership is $207. The partnership agreement
provides that no partner shall be required to fund a deficit balance
in their capital account.  F-5




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##### Table of Contents



AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the years ended December 31, 2008, 2007, and 2006
 (in thousands)
 2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (3,514
    )
    
    $
    (3,283
    )
    
    $
    (498
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Loss from non-consolidated entities
    
    
    1,836
    
    
    
    1,997
    
    
    
    344Depreciation and amortization
    
    
    2,554
    
    
    
    2,850
    
    
    
    1,630Minority interest in loss of consolidated subsidiaries
    
    
    (59
    )
    
    
    (88
    )
    
    
    (125
    )Increase in tenant receivables
    
    
    (262
    )
    
    
    (105
    )
    
    
    (230
    )Decrease (increase) in accounts receivable
    
    
    7
    
    
    
    (1
    )
    
    
    161Decrease (increase) in accounts receivable  related party
    
    
    1,025
    
    
    
    (665
    )
    
    
    (307
    )Increase in deferred costs
    
    
    (128
    )
    
    
    (136
    )
    
    
    (22
    )Decrease (increase) in other assets
    
    
    (209
    )
    
    
    265
    
    
    
    (484
    )Increase (decrease) in accounts payable and other liabilities
    
    
    (223
    )
    
    
    (369
    )
    
    
    1,358Decrease in accounts payable  related party
    
    
    (66
    )
    
    
    (83
    )
    
    
    (305
    )Increase in security deposits
    
    
    10
    
    
    
    5
    
    
    
    98Net cash provided by operating activities
    
    
    971
    
    
    
    387
    
    
    
    1,620Cash flows from investing activities:Improvements to real estate
    
    
    (348
    )
    
    
    (753
    )
    
    
    (528
    )Acquisition of investment properties
    
    
    
    
    
    
    
    
    
    
    (21,298
    )Payments received on notes receivable
    
    
    2,375
    
    
    
    
    
    
    
    Decrease (increase) in notes receivable  related party
    
    
    537
    
    
    
    (1,675
    )
    
    
    (7,035
    )Investment in non-consolidated entities
    
    
    (2,775
    )
    
    
    (9,164
    )
    
    
    (14,981
    )Distributions from non-consolidated entities
    
    
    1,105
    
    
    
    199
    
    
    
    Net proceeds from sale of investment property
    
    
    
    
    
    
    
    
    
    
    740Decrease in preacquisition costs
    
    
    
    
    
    
    
    
    
    
    3Net cash provided by (used in) investing activities
    
    
    894
    
    
    
    (11,393
    )
    
    
    (43,099
    )Cash flows from financing activities:Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    11,175Payments on notes payable
    
    
    (145
    )
    
    
    (139
    )
    
    
    (131
    )Proceeds from notes payable  related party
    
    
    
    
    
    
    
    
    
    
    2,448Payments on notes payable  related party
    
    
    
    
    
    
    (1,144
    )
    
    
    (2,049
    )Contributions
    
    
    
    
    
    
    
    
    
    
    59,789Redemptions
    
    
    (207
    )
    
    
    (23
    )
    
    
    Issuance costs
    
    
    (1
    )
    
    
    (97
    )
    
    
    (6,734
    )Loan acquisition costs
    
    
    
    
    
    
    (96
    )
    
    
    (211
    )Distributions
    
    
    (5,382
    )
    
    
    (5,378
    )
    
    
    (2,508
    )Distributions to minority interests
    
    
    (457
    )
    
    
    
    
    
    
    (120
    )Net cash provided by (used in) financing activities
    
    
    (6,192
    )
    
    
    (6,877
    )
    
    
    61,659Net increase (decrease) in cash and cash equivalents
    
    
    (4,327
    )
    
    
    (17,883
    )
    
    
    20,180Cash and cash equivalents, beginning of period
    
    
    5,245
    
    
    
    23,128
    
    
    
    2,948Cash and cash equivalents, end of period
    
    $
    918
    
    
    $
    5,245
    
    
    $
    23,128Supplemental schedule of cash flow information:Cash paid during the year for interest
    
    $
    3,041
    
    
    $
    3,179
    
    
    $
    1,660Cash paid during the year for taxes
    
    $
    65
    
    
    $
    
    
    
    $
    
 Supplemental schedule of noncash investing and financing activities:
   F-6




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##### Table of Contents



AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2008 and 2007
 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PRESENTATION
  REVENUE RECOGNITION
  F-7




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##### Table of Contents



REAL ESTATE INVESTMENTS
 Development Properties -
 Acquired Properties and Acquired Lease Intangibles Business Combinations
 Depreciation -
 Properties Held for Sale -
  F-8




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##### Table of Contents



Impairment -
 ENVIRONMENTAL EXPOSURES
  RECEIVABLES AND ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
 Tenant Receivables -
 Accounts Receivable Related Party
 Notes Receivable and Notes Receivable  Related Party
 DEFERRED COSTS
  F-9




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##### Table of Contents



INCOME TAXES
 Federal -
 State Accounting
for Income Taxes
 USE OF ESTIMATES
  FAIR VALUE OF FINANCIAL INSTRUMENTS
  CONSOLIDATION OF VARIABLE INTEREST ENTITIES
 Consolidation of Variable Interest Entities ,
 NEWACCOUNTING STANDARDS
  F-10




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##### Table of Contents



The Fair Value Option for Financial Assets and
Financial Liabilities .
 Business Combinations .
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities (SFAS No. 161)
 DISCONTINUED OPERATIONS
  2008
    
    
    2007
    
    
    2006Rental income from operating leases
    
    $
    
    
    
    $
    
    
    
    $
    13Gain on sale of real estate
    
    
    
    
    
    
    
    
    
    
    Total expenses
    
    
    
    
    
    
    
    
    
    
    13General and administrative
    
    
    
    
    
    
    
    
    
    
    (2
    )Property expense
    
    
    
    
    
    
    
    
    
    
    (1
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (29
    )Total expenses
    
    
    
    
    
    
    
    
    
    
    (32
    )Loss from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    (19
    )
 F-11




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##### Table of Contents



OFFERING COSTS
  CASH AND CASH EQUIVALENTS
  INTEREST
  SEGMENT REPORTING
 Disclosures about Segments of an Enterprise and Related
Information,
 RECLASSIFICATIONS
  3. OPERATING LEASES
  2009
    
    $
    5,0762010
    
    
    4,3842011
    
    
    3,5412012
    
    
    2,8462013
    
    
    2,161Thereafter
    
    
    7,507$
    25,515
  F-12




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##### Table of Contents



4. INVESTMENTS IN NON-CONSOLIDATED ENTITIES
  
    
    In March 2006, we acquired a 50% interest in 5433 Westheimer, LP which
owns an office building in Houston, Texas with a gross leasable area of 134,000
square feet. As noted below, we have since acquired an additional 7.5% interest.
The remaining 42.5% is owned by a third party.
    
    In December 2006, we acquired a 20% interest in PTC/BSQ Holding Company,
LLC which owns three multi-tenant retail properties located in Plano, Texas with a
combined gross leasable area of 395,000 square feet. The remaining 80% is owned
by a third party.
    
    Also in December 2006, we acquired a 50% interest in AmREIT Casa Linda, LP
which owns a multi-tenant retail property located in Dallas, Texas with a combined
gross leasable area of 325,000 square feet. The remaining 50% is owned by AmREIT
Monthly Income and Growth Fund IV, Ltd., an affiliated merchant development fund.
  
    
    In August 2007, we acquired a 30% interest in AmREIT Woodlake Square, LP
which owns a multi-tenant retail property located in Houston, Texas with a
combined gross leasable area of 206,000 square feet. The remaining 70% is owned by
affiliated AmREIT entites, AmREIT Monthly Income and Growth Fund IV, Ltd., and
AmREIT Realty Investment Company.
    
    In November 2007, we acquired a 30% interest in AmREIT Westheimer Gessner,
LP which owns Woodlake Pointe, a multi-tenant retail property located in Houston,
Texas with a combined gross leasable area of 82,120 square feet. The remaining 70%
is owned by affiliated AmREIT entites, AmREIT Monthly Income and Growth Fund IV,
Ltd., and AmREIT Realty Investment Company.
  
    
    In May 2008, we acquired a 30% interest in a land tract adjacent to
Woodlake Pointe for $1.3 million. The acquisition is reported as a part of AmREIT
Westheimer Gessner, LP (which owns Woodlake Pointe). The remaining 70% is owned by
affiliated AmREIT entities, AmREIT Monthly Income & Growth Fund IV, L.P. and
AmREIT Realty Investment Company.
    
    In November 2008, we acquired an additional 7.5% interest in 5433 Westheimer,
LP from our third party, joint-venture partner for $800,000. The remaining 42.5% is
owned by that same party. The property is not consolidated into our financial
statements as it does not meet all conditions for consolidation outlined in FASB
Interpretation 46R, Consolidation of Variable Interest Entities (as amended) or EITF
04-5, 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.
  F-13




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##### Table of Contents



As of
    
    
    As ofDecember 31,
    
    
    December 31,Combined Balance Sheets
    
    2008
    
    
    2007(In thousands)
    
    
    (In thousands)AssetsProperty, net
    
    $
    185,336
    
    
    $
    177,647Cash
    
    
    2,478
    
    
    
    1,806Other assets
    
    
    31,488
    
    
    
    25,233Total Assets
    
    $
    219,302
    
    
    $
    204,686Liabilities and partners capital:Notes payable*
    
    
    112,105
    
    
    
    108,086Other liabilities
    
    
    21,018
    
    
    
    18,735Partners capital
    
    
    86,179
    
    
    
    77,865Total Liabilities and Partners Capital
    
    $
    219,302
    
    
    $
    204,686MIG III share of net assets
    
    $
    26,495
    
    
    $
    22,449
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,Combined Statement of Operations
    
    2008
    
    
    2007(In thousands)
    
    
    (In thousands)RevenueTotal Revenue
    
    $
    19,164
    
    
    $
    16,211ExpenseInterest
    
    
    5,910
    
    
    
    5,592Depreciation and amortization
    
    
    9,817
    
    
    
    8,693Other
    
    
    7,897
    
    
    
    6,173Total expense
    
    
    23,624
    
    
    
    20,458Net loss
    
    $
    (4,460
    )
    
    $
    (4,247
    )MIG III share of net loss
    
    $
    (1,836
    )
    
    $
    (1,997
    )
 
 *
    
    Includes notes payable to the Partnership of $0 and $7.0 million at December 31, 2008 and
2007, respectively. DERIVATIVE FINANCIAL INSTRUMENTS
 Accounting for
Derivative Instruments and Hedging Activities Amendment of
Statement 133 on Derivative Instruments and Hedging Activities,
 F-14




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##### Table of Contents



5. ACQUIRED LEASE INTANGIBLES
   December 31, 2008
    
    
    December 31, 2007Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationIn-place leases
    
    $
    4,585
    
    
    $
    (2,232
    )
    
    $
    4,635
    
    
    $
    (1,595
    )Above-market leases
    
    $
    278
    
    
    $
    (143
    )
    
    $
    293
    
    
    $
    (87
    )Below-market leases
    
    
    (1,161
    )
    
    
    644
    
    
    
    (1,161
    )
    
    
    455Intangible
lease cost, net
    
    $
    3,702
    
    
    $
    (1,731
    )
    
    $
    3,767
    
    
    $
    (1,227
    )
  Rental IncomeAmortization Expense
    
    
    (Above and belowYear Ending December 31,
    
    (In-Place Lease Value)
    
    
    market Leases)2009
    
    $
    609
    
    
    $
    (131
    )2010
    
    
    448
    
    
    
    (90
    )2011
    
    
    323
    
    
    
    (65
    )2012
    
    
    271
    
    
    
    (53
    )2013
    
    
    174
    
    
    
    (10
    )$
    1,825
    
    
    $
    (349
    )
 6. NOTES PAYABLE
   F-15




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##### Table of Contents



ScheduledPrincipal
    
    
    Term-Loan
    
    
    TotalScheduled Payments by Year
    
    Payments
    
    
    Maturities
    
    
    Payments2009
    
    
    156
    
    
    
    
    
    
    
    1562010
    
    
    165
    
    
    
    
    
    
    
    1652011
    
    
    335
    
    
    
    24,455
    
    
    
    24,7902012
    
    
    183
    
    
    
    
    
    
    
    1832013
    
    
    196
    
    
    
    
    
    
    
    196Thereafter
    
    
    299
    
    
    
    24,903
    
    
    
    25,202Total
    
    $
    1,334
    
    
    $
    49,358
    
    
    $
    50,692
  7. CONCENTRATIONS
   Tenant
    
    2008
    
    
    2007
    
    
    2006H-E-B Grocery
    
    $
    1,425
    
    
    $
    1,425
    
    
    $
    1,268Designer Shoe Warehouse
    
    
    550
    
    
    
    550
    
    
    
    550Rice Food Markets, Inc.
    
    
    292
    
    
    
    292
    
    
    
    75Blockbuster Video
    
    
    224
    
    
    
    223
    
    
    
    81Fidelity Investments
    
    
    211
    
    
    
    211
    
    
    
    54$
    2,702
    
    
    $
    2,701
    
    
    $
    2,028
 8. PARTNERS CAPITAL AND MINORITY INTEREST
  Limited Optional Redemption
 F-16




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##### Table of Contents



Distributions
 
    
    First  99% to the limited partners and 1% to the General Partner until such time
as the limited partners have received cumulative distributions from all sources
(including monthly cash distributions during the operating stage of the Partnership)
equal to 100% of their unreturned invested capital plus an amount equal to 10% per
annum uncompounded on their invested capital.
    
    Second  100% to the General Partner until it has received cumulative distributions
from all sources (other than with respect to its limited partner units it purchased) in
an amount equal to 40% of the net cash flow paid to date to the limited partners in
excess of their adjusted capital.
    
    Thereafter  60% to the limited partners and 40% to the General Partner.
 Minority Interest -
 9. RELATED PARTY TRANSACTIONS
  Type of Service
    
    Service Description & Compensation
    

    2008
    
    2007
    
    
    2006Securities
Commissions, Due
Diligence and
Marketing
Reimbursements
    
    Sales commissions (7.25%) and
dealer manager fees (2.5%) paid
for placement of the limited
partnership units through
unaffiliated broker/dealers and
reimbursement of bona fide due
diligence efforts (0.5%)
    

    $       
    
    $
    
    
    
    $
    6,520,669Organizational and
Offering Cost
Reimbursements
    
    Reimbursement of the
Partnerships organizational and
offering costs, including legal
and accounting fees, printing
costs, filing fees and
distribution costs.
    


    
    
    97,460
    
    
    
    212,720Total
    

    $       
    
    $
    97,460
    
    
    $
    6,733,389
  F-17




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##### Table of Contents



Type of Service
    
    Service Description & Compensation
    
    2008
    
    2007
    
    2006Asset Management
    
    1% of the net invested capital
under management for
accounting-related services,
investor relations, facilitating
the deployment of capital and
other services provided by the
General Partner in operating the
Partnership
    
    $
    617,753
    
    
    $
    617,753
    
    
    $
    353,251Development and
Acquisitions
    
    Between 3% and 6% of project
costs for services provided by
the affiliate in identifying,
evaluating, procuring and, if
applicable, developing properties
(capitalized as part of real
estate assets)
    
    
    
    
    
    
    90,000
    
    
    
    1,042,268Property Management
and Leasing
    
    Property management fees are not
to exceed 4% of gross rentals for
providing property management,
operating, maintenance and other
services required to maintain a
quality property. Leasing fees
are not to exceed 2% of base rent
on a lease renewal and 6% of
based rent on an initial lease or
procuring tenants and negotiating
the terms of the tenant leases
($136,000 in leasing costs
capitalized to deferred costs)
    
    
    359,436
    
    
    
    381,076
    
    
    
    226,237Additional Services
    
    Financing coordination fee equal
to 1% of the loan proceeds for
procuring debt financing for
Partnership
    
    
    
    
    
    
    
    
    
    
    123,075Brokerage
    
    Brokerage fees are not to exceed
6% of the sales price for the
sale of the property to an
unaffiliated thirty party
    
    
    
    
    
    
    
    
    
    
    23,250Administration
Costs 
Reimbursements
    
    These costs represent actual
expenses incurred by the General
Partner in connection with its
provision of administrative
services, including personnel
costs
    
    
    301,822
    
    
    
    227,674
    
    
    
    Total
    
    $
    1,279,011
    
    
    $
    1,316,503
    
    
    $
    1,768,081
  10. REAL ESTATE ACQUISITIONS AND DISPOSITIONS
    11. COMMITMENTS AND CONTINGENCIES
 Litigation
 Environmental matters
 F-18




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F-19




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##### Table of Contents



AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
 
 SCHEDULE III  Consolidated Real Estate Owned and Accumulated Depreciation
 For the year ended December 31, 2008
 Initial Cost
    
    Cost Capitalized
    
    Total CostBuilding and
    
    
    
    
    
    Subsequent to
    
    Building and
    
    
    
    
    
    
    
    
    
    Accumulated
    
    DateProperty Description
    
    Improvements
    
    Land
    
    Acquisition (Note A)
    
    Improvements
    
    Land
    
    Total
    
    Depreciation
    
    Acquired
    
    EncumbrancesWestside Plaza
    
    
    8,631,610
    
    
    
    4,750,000
    
    
    
    1,270,042
    
    
    
    9,892,048
    
    
    
    4,759,603
    
    
    
    14,651,652
    
    
    
    (936,992
    )
    
    
    9/30/2005
    
    
    
    10,402,598Olmos Creek
    
    
    9,829,663
    
    
    
    4,261,553
    
    
    
    (512,066
    )
    
    
    10,030,556
    
    
    
    3,548,594
    
    
    
    13,579,150
    
    
    
    (999,302
    )
    
    
    6/30/2006
    
    
    
    11,175,000Lantern Lane
    
    
    11,386,338
    
    
    
    6,308,354
    
    
    
    806,787
    
    
    
    12,172,133
    
    
    
    6,329,346
    
    
    
    18,501,479
    
    
    
    (1,356,118
    )
    
    
    9/29/2006
    
    
    
    13,440,000Lake Houston
    
    
    15,968,495
    
    
    
    3,800,000
    
    
    
    230,446
    
    
    
    16,190,428
    
    
    
    3,808,513
    
    
    
    19,998,941
    
    
    
    (1,625,270
    )
    
    
    12/12/2005
    
    
    
    15,675,000Total
    
    $
    45,816,106
    
    
    $
    19,119,907
    
    
    $
    1,795,209
    
    
    $
    48,285,166
    
    
    $
    18,446,056
    
    
    $
    66,731,222
    
    
    $
    (4,917,681
    )
    
    
    
    
    
    $
    50,692,598
   AccumulatedCost
    
    DepreciationBalance at December 31, 2004
    
    
    
    
    
    $
    Acquisitions / additions
    
    
    33,437,701
    
    
    
    Disposals
    
    
    
    
    
    
    Depreciation expense
    
    
    
    
    
    
    92,275Balance at December 31, 2005
    
    
    33,437,701
    
    
    $
    92,275Acquisitions / additions
    
    
    33,001,921
    
    
    
    Disposals
    
    
    (757,140
    )
    
    
    (3,251
    )Depreciation expense
    
    
    
    
    
    
    1,094,529Balance at December 31, 2006
    
    $
    65,682,482
    
    
    $
    1,183,554Acquisitions / additions
    
    
    1,035,377
    
    
    
    Disposals
    
    
    (282,520
    )
    
    
    (9,844
    )Depreciation expense
    
    
    
    
    
    
    1,941,330Balance at December 31, 2007
    
    $
    66,435,339
    
    
    $
    3,115,040Acquisitions / additions
    
    
    347,962Disposals
    
    
    (52,079
    )
    
    
    (14,576
    )Depreciation expense
    
    
    
    
    
    
    1,817,217Balance at December 31, 2008
    
    $
    66,731,222
    
    
    $
    4,917,681
 S-1




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##### Table of Contents



SIGNATURES
  AmREIT Monthly Income & Growth Fund III, Ltd.By:
    
    AmREIT Monthly Income & Growth III
Corporation, its General PartnerDate: March 31, 2009By:
    
    /s/ H. Kerr TaylorH. Kerr TaylorPresident, Chief Executive Officer, and DirectorBy:
    
    /s/ Chad C. BraunChad C. BraunExecutive Vice President, Chief
Financial Officer, Treasurer and Secretary