##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-Q


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended June 30, 2005                                                
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number: 000-50805


HINES REAL ESTATE INVESTMENT TRUST, INC.


(Exact Name of Registrant as Specified in its Charter)


|                                                                                                  |  |                                         
|------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Maryland                                                                                          |  | 20-0138854                              
|(State or Other Jurisdiction of
    Incorporation or Organization)                                |  | (I.R.S. Employer
    Identification No.)
|                                                                                                 
|2800 Post Oak Boulevard
    Suite 5000
    Houston, Texas(Address of principal executive offices) |  | 77056-6118(Zip code)                    

Registrants telephone number, including area code:


(888) 220-6121


þ o


o þ












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TABLE OF CONTENTS


|                                                                                                                 |  |                                                                                                                                                      |    |  |    | 
|---------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I  FINANCIAL
    INFORMATION                                                                              
|Item 1.                                                                                                          |  | Financial Statements (Unaudited)                                                                                                                     |    |  | 3  | 
|                                                                                                                 |  | Consolidated Balance Sheets as of
    June 30, 2005 and December 31, 2004                                                                            |    |  | 3  | 
|                                                                                                                 |  | Consolidated Statements of Operations for
    the Three and Six Months Ended June 30, 2005 and 2004                                                  |    |  | 4  | 
|                                                                                                                 |  | Consolidated Statement of
    Shareholders Equity (Deficit) for the Six Months Ended
    June 30, 2005 and for the Year Ended December 31,
    2004 |    |  | 5  | 
|                                                                                                                 |  | Consolidated Statements of Cash Flows for
    the Six Months Ended June 30, 2005 and 2004                                                            |    |  | 6  | 
|                                                                                                                 |  | Notes to Consolidated Financial Statements
    for the Six Months Ended June 30, 2005                                                                |    |  | 7  | 
|Item 2.                                                                                                          |  | Managements Discussion and
    Analysis of Financial Condition and Results of Operations                                                            |    |  | 20 | 
|Item 3.                                                                                                          |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                                       |    |  | 29 | 
|Item 4.                                                                                                          |  | Controls and Procedures                                                                                                                              |    |  | 30 | 
|                                                                                                                
|PART II  OTHER
    INFORMATION                                                                                 
|Item 2.                                                                                                          |  | Unregistered Sales of Equity Securities
    and Use of Proceeds                                                                                      |    |  | 30 | 
|Item 4.                                                                                                          |  | Submission of Matters to a Vote of
    Security Holders                                                                                              |    |  | 31 | 
|Item 6.                                                                                                          |  | Exhibits                                                                                                                                             |    |  | 31 | 
|SIGNATURES                                                                                                       |  |                                                                                                                                                      | 32 | 
|Agreement of Purchase and Sale - Hines REIT Properties, L.P. and OTR                                            
|Term Loan Agreement - Hines REIT Properties, L.P. and KeyBank National Association                              
|Ownership Interests Pledge and Security Agreement - Hines REIT Properties, L.P. and KeyBank National Association
|Agreement for Purchase and Sale of Real Property and Escrow Instructions                                        
|Certification of CEO pursuant to Section 302                                                                    
|Certification of CFO pursuant to Section 302                                                                    
|Certification of CEO and CFO pursuant to Section 906                                                            



2



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##### Table of Contents






PART I FINANCIAL INFORMATION







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

HINES REAL ESTATE INVESTMENT TRUST, INC.





CONSOLIDATED BALANCE SHEETS


As of June 30, 2005 and December 31, 2004


(Unaudited)


|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              |  |           |             |            |  
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | --------- | ----------- | ------------ |  | --------- | ----------- | ---------- | -
|                                               |                                                                                                                                                                                                                                                    | June 30,                                             |           |             | December 31, | 
|                                               |                                                                                                                                                                                                                                                    | 2005                                                 |           |             | 2004         | 
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 
|ASSETS                                        
|                                               | Investment property, at cost:                                                                                                                                                                                                                      |                                                      |           |             |              |  |           |             |           
|                                               | Building and improvements, net                                                                                                                                                                                                                     |                                                      | $         | 22,995,826  |              |  | $         |            |           
|                                               | In-place leases, net                                                                                                                                                                                                                               |                                                      |           | 4,780,856   |              |  |           |            |           
|                                               | Land                                                                                                                                                                                                                                               |                                                      |           | 18,939,072  |              |  |           |            |           
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 
|                                               |                                                                                                                                                                                                                                                    | Total real estate assets                             |           |             | 46,715,754   |  |           |             |           |  
|                                               | Investment in Hines-Sumisei U.S. Core Office Fund,
    L.P.                                                                                                                                                                                        |                                                      |           | 88,921,647  |              |  |           | 28,181,662  |           
|                                               | Cash                                                                                                                                                                                                                                               |                                                      |           | 7,430,985   |              |  |           | 1,536,439   |           
|                                               | Escrowed investor proceeds                                                                                                                                                                                                                         |                                                      |           |            |              |  |           | 100,000     |           
|                                               | Distributions receivable                                                                                                                                                                                                                           |                                                      |           | 1,616,925   |              |  |           | 247,494     |           
|                                               | Acquired above-market leases, net                                                                                                                                                                                                                  |                                                      |           | 13,867,164  |              |  |           |            |           
|                                               | Prepaid insurance and other assets                                                                                                                                                                                                                 |                                                      |           | 169,576     |              |  |           | 46,688      |           
|                                               | Deferred financing costs, net                                                                                                                                                                                                                      |                                                      |           | 348,301     |              |  |           |            |           
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 
|                                               |                                                                                                                                                                                                                                                    | TOTAL ASSETS                                         |           | $           | 159,070,352  |  |           | $           | 30,112,283 |  
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 
|                                              
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)
|Liabilities:                                   |                                                                                                                                                                                                                                                    |                                                      |           |             |              |  |           |            
|                                               | Accounts payable and accrued expenses                                                                                                                                                                                                              |                                                      | $         | 1,472,607   |              |  | $         | 114,759     |           
|                                               | Escrowed investor proceeds liability                                                                                                                                                                                                               |                                                      |           |            |              |  |           | 100,000     |           
|                                               | Unaccepted subscriptions for common shares                                                                                                                                                                                                         |                                                      |           | 796,262     |              |  |           | 562,200     |           
|                                               | Due to affiliates                                                                                                                                                                                                                                  |                                                      |           | 27,361,570  |              |  |           | 25,477,859  |           
|                                               | Acquired below-market leases, net                                                                                                                                                                                                                  |                                                      |           | 829,878     |              |  |           |            |           
|                                               | Other liabilities                                                                                                                                                                                                                                  |                                                      |           | 283,147     |              |  |           |            |           
|                                               | Participation interest liability                                                                                                                                                                                                                   |                                                      |           | 1,544,527   |              |  |           | 409,160     |           
|                                               | Dividends payable                                                                                                                                                                                                                                  |                                                      |           | 1,091,813   |              |  |           | 99,149      |           
|                                               | Distributions payable to minority interests                                                                                                                                                                                                        |                                                      |           | 181,141     |              |  |           | 73,231      |           
|                                               | Note payable                                                                                                                                                                                                                                       |                                                      |           | 60,000,000  |              |  |           |            |           
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 
|                                               |                                                                                                                                                                                                                                                    | Total liabilities                                    |           |             | 93,560,945   |  |           |             | 26,836,358 |  
|Minority interest                              |                                                                                                                                                                                                                                                    |                                                      | 2,261,217 |             |              |  | 3,586,629 |            
|Commitments and Contingencies                  |                                                                                                                                                                                                                                                    |                                                      |           |             |              |  |           |            
|Shareholders equity (deficit):                |                                                                                                                                                                                                                                                    |                                                      |           |             |              |  |           |            
|                                               | Preferred shares, $.001 par value; 500,000,000 preferred
    shares authorized, none issued or outstanding as of
    June 30, 2005 and December 31, 2004                                                                                           |                                                      |           |            |              |  |           |            |           
|                                               | Common shares, $.001 par value; 1,500,000,000 common shares
    authorized as of June 30, 2005 and December 31, 2004;
    9,749,175 and 2,073,116 common shares issued and outstanding as
    of June 30, 2005 and December 31, 2004, respectively |                                                      |           | 9,749       |              |  |           | 2,073       |           
|                                               | Additional paid-in capital                                                                                                                                                                                                                         |                                                      |           | 77,398,991  |              |  |           | 9,715,539   |           
|                                               | Retained deficit                                                                                                                                                                                                                                   |                                                      |           | (14,160,550 | )            |  |           | (10,028,316 | )         
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 
|                                               |                                                                                                                                                                                                                                                    | Total shareholders equity (deficit)                 |           |             | 63,248,190   |  |           |             | (310,704   | )
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 
|                                               |                                                                                                                                                                                                                                                    | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |           | $           | 159,070,352  |  |           | $           | 30,112,283 |  
|                                               |                                                                                                                                                                                                                                                    |                                                      |           |             |              | 



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HINES REAL ESTATE INVESTMENT TRUST, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


For the Three and Six Months Ended June 30, 2005 and
June 30, 2004


(Unaudited)


|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |           |           |   |          |         |         | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | -------------- | ---------- | --------- | ------------- | - | -------- | ------------- | ------- | - | ------------- | --------- | --------- | - | -------- | ------- | ------- | 
|                                                                                              |                                                                     | Three Months   |            |           | Three Months  |   |          | Six Months    |         |   | Six Months    |          
|                                                                                              |                                                                     | Ended          |            |           | Ended         |   |          | Ended         |         |   | Ended         |          
|                                                                                              |                                                                     | June 30, 2005  |            |           | June 30, 2004 |   |          | June 30, 2005 |         |   | June 30, 2004 |          
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|Revenues:                                                                                     |                                                                     |                |            |           |               |   |          |               |         |   |               |           |           |   |          |        
|                                                                                              | Rental revenue                                                      |                | $          | 47,609    |               |   | $        |              |         |   | $             | 47,609    |           |   | $        |        |        
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|                                                                                              |                                                                     | Total revenues |            |           | 47,609        |   |          |               |        |   |               |           | 47,609    |   |          |         |        | 
|Expenses:                                                                                     |                                                                     |                |            |           |               |   |          |               |         |   |               |           |           |   |          |        
|                                                                                              | Organizational and offering expenses                                |                |            |          |               |   |          |              |         |   |               | 1,479,923 |           |   |          |        |        
|                                                                                              | Other start-up costs                                                |                |            |          |               |   |          | 218,725       |         |   |               |          |           |   |          | 370,091 |        
|                                                                                              | Asset management and acquisition fees                               |                |            | 1,616,616 |               |   |          |              |         |   |               | 2,270,734 |           |   |          |        |        
|                                                                                              | General and administrative expenses                                 |                |            | 569,238   |               |   |          | 51,188        |         |   |               | 1,349,341 |           |   |          | 55,687  |        
|                                                                                              | Depreciation and amortization                                       |                |            | 12,701    |               |   |          |              |         |   |               | 12,701    |           |   |          |        |        
|                                                                                              | Property operating expenses                                         |                |            | 20,600    |               |   |          |              |         |   |               | 20,600    |           |   |          |        |        
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|                                                                                              |                                                                     | Total expenses |            |           | 2,219,155     |   |          |               | 269,913 |   |               |           | 5,133,299 |   |          |         | 425,778 | 
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|Loss before equity in earnings, interest expense and loss
    allocated to minority interests |                                                                     |                | (2,171,546 | )         |               |   | (269,913 | )             |         |   | (5,085,690    | )         |           |   | (425,778 | )      
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|                                                                                              | Equity in earnings of Hines-Sumisei U.S. Core Office Fund,
    L.P. |                |            | 44,549    |               |   |          |              |         |   |               | 15,605    |           |   |          |        |        
|                                                                                              | Interest expense                                                    |                |            | (39,100   | )             |   |          |              |         |   |               | (39,100   | )         |   |          |        |        
|                                                                                              | Interest income                                                     |                |            | 3,515     |               |   |          |              |         |   |               | 5,079     |           |   |          |        |        
|                                                                                              | Loss allocated to minority interests                                |                |            | 266,928   |               |   |          |              |         |   |               | 971,872   |           |   |          |        |        
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|Net loss                                                                                      |                                                                     | $              | (1,895,654 | )         |               | $ | (269,913 | )             |         | $ | (4,132,234    | )         |           | $ | (425,778 | )      
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|                                                                                              | Loss per common share                                               |                | $          | (0.24     | )             |   | $        | (269.91       | )       |   | $             | (0.76     | )         |   | $        | (425.78 | )      
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          
|                                                                                              | Weighted average number common shares outstanding                   |                |            | 7,928,701 |               |   |          | 1,000         |         |   |               | 5,466,449 |           |   |          | 1,000   |        
|                                                                                              |                                                                     |                |            |           |               |   |          |               |         |   |               |          



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HINES REAL ESTATE INVESTMENT TRUST, INC.





CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(DEFICIT)


For the Six Months Ended June 30, 2005 and the Year
Ended December 31, 2004


(Unaudited)


|                           |                                             |           |   |   |        |   |        |   |  |            |           |           |         |   |          |         |  |               |                  |            |   |   |             |             |   |   |            |             |  
|-------------------------- | ------------------------------------------- | --------- | - | - | ------ | - | ------ | - |  | ---------- | --------- | --------- | ------- | - | -------- | ------- |  | ------------- | ---------------- | ---------- | - | - | ----------- | ----------- | - | - | ---------- | ----------- | -
|                           |                                             |           |   |   |        |   |        |   |  | Additional |           |           |         |   |         
|                           |                                             | Preferred |   |   |        |   | Common |   |  |            |           | Paid-In   |         |   | Retained |         |  | Shareholders |                 
|                           |                                             | Shares    |   |   | Amount |   | Shares |   |  | Amount     |           |           | Capital |   |          | Deficit |  |               | Equity (Deficit) |           
|                           |                                             |           |   |   |        |   |        |   |  |            |           |           |         |   |          |         |  |               |                  |           
|BALANCE, January 1, 2004   |                                             |           |  |   |        | $ |       |   |  |            | 1,000     |           |         | $ | 1        |         |  | $             | 9,999            |            |   | $ | (20,427     | )           |   | $ | (10,427    | )          
|                           |                                             |           |   |   |        |   |        |   |  |            |           |           |         |   |          |         |  |               |                  |            |  
|                           | Issuance of common shares                   |           |   |  |        |   |        |  |  |            |           | 2,072,116 |         |   |          | 2,072   |  |               |                  | 20,582,905 |   |   |             |            |   |   |            | 20,584,977  |  
|                           | Dividends declared                          |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  | (99,149    | ) |   |             |            |   |   |            | (99,149     | )
|                           | Selling commissions and dealer manager fees |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  | (1,582,527 | ) |   |             |            |   |   |            | (1,582,527  | )
|                           | Other offering costs                        |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  | (9,195,689 | ) |   |             |            |   |   |            | (9,195,689  | )
|                           | Net loss                                    |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  |           |   |   |             | (10,007,889 | ) |   |            | (10,007,889 | )
|                           |                                             |           |   |   |        |   |        |   |  |            |           |           |         |   |          |         |  |               |                  |            |  
|BALANCE, December 31, 2004 |                                             |           |  |   |        |   |       |   |  |            | 2,073,116 |           |         |   | 2,073    |         |  |               | 9,715,539        |            |   |   | (10,028,316 | )           |   |   | (310,704   | )          
|                           |                                             |           |   |   |        |   |        |   |  |            |           |           |         |   |          |         |  |               |                  |            |  
|                           | Issuance of common shares                   |           |   |  |        |   |        |  |  |            |           | 7,676,059 |         |   |          | 7,676   |  |               |                  | 76,292,227 |   |   |             |            |   |   |            | 76,299,903  |  
|                           | Dividends declared                          |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  | (1,626,465 | ) |   |             |            |   |   |            | (1,626,465  | )
|                           | Selling commissions and dealer manager fees |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  | (5,841,743 | ) |   |             |            |   |   |            | (5,841,743  | )
|                           | Other offering costs                        |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  | (1,140,567 | ) |   |             |            |   |   |            | (1,140,567  | )
|                           | Net loss                                    |           |   |  |        |   |        |  |  |            |           |          |         |   |          |        |  |               |                  |           |   |   |             | (4,132,234  | ) |   |            | (4,132,234  | )
|                           |                                             |           |   |   |        |   |        |   |  |            |           |           |         |   |          |         |  |               |                  |            |  
|BALANCE, June 30, 2005     |                                             |           |  |   |        | $ |       |   |  |            | 9,749,175 |           |         | $ | 9,749    |         |  | $             | 77,398,991       |            |   | $ | (14,160,550 | )           |   | $ | 63,248,190 |            
|                           |                                             |           |   |   |        |   |        |   |  |            |           |           |         |   |          |         |  |               |                  |            |  



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HINES REAL ESTATE INVESTMENT TRUST, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Six Months Ended June 30, 2005 and June 30,
2004


(Unaudited)


|                                                                         |                                                                                                           |                                                   |                                           |             |                    |              |         |          |          |          |  
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------------------------- | ----------- | ------------------ | ------------ | ------- | -------- | -------- | -------- | -
|                                                                         |                                                                                                           | For the Six Months                                |                                           |             | For the Six Months |             
|                                                                         |                                                                                                           | Ended                                             |                                           |             | Ended              |             
|                                                                         |                                                                                                           | June 30, 2005                                     |                                           |             | June 30, 2004      |             
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                           |                                                   |                                           |             |                    |              |         |         
|                                                                         | Net loss                                                                                                  |                                                   | $                                         | (4,132,234  | )                  |              | $       | (425,778 | )       
|                                                                         | Adjustments to reconcile net loss to net cash used in operating
    activities:                           |                                                   |                                           |             |                    |              |         |          |         
|                                                                         | Depreciation and amortization                                                                             |                                                   |                                           | 34,853      |                    |              |         |         |         
|                                                                         | Non-cash compensation expense                                                                             |                                                   |                                           | 23,676      |                    |              |         |         |         
|                                                                         | Equity in earnings of Hines-Sumisei U.S. Core Office Fund,
    L.P.                                       |                                                   |                                           | (15,605     | )                  |              |         |         |         
|                                                                         | Distributions received from Hines-Sumisei U.S. Core Office Fund,
    L.P.                                 |                                                   |                                           | 84,066      |                    |              |         |         |         
|                                                                         | Loss allocated to minority interests                                                                      |                                                   |                                           | (971,872    | )                  |              |         |         |         
|                                                                         | Accrual of organizational and offering expenses                                                           |                                                   |                                           | 1,479,923   |                    |              |         |         |         
|                                                                         | Changes in assets and liabilities:                                                                        |                                                   |                                           |             |                    |              |         |          |         
|                                                                         |                                                                                                           | Increase in prepaid insurance and other assets    |                                           |             | (90,548            | )            |         |          | (149,063 | )       
|                                                                         |                                                                                                           | Increase in accounts payable and accrued expenses |                                           |             | 319,599            |              |         |          | 123,479  |         
|                                                                         |                                                                                                           | Increase in participation interest liability      |                                           |             | 1,135,367          |              |         |          |         |         
|                                                                         |                                                                                                           | Increase in due to affiliates                     |                                           |             | 225,545            |              |         |          |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         |                                                                                                           |                                                   | Net cash used in operating activities     |             |                    | (1,907,230   | )       |          |          | (451,362 | )
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                           |                                                   |                                           |             |                    |              |         |         
|                                                                         | Investment in Hines-Sumisei U.S. Core Office Fund,
    L.P.                                               |                                                   |                                           | (63,258,787 | )                  |              |         |         |         
|                                                                         | Distributions received from Hines-Sumisei U.S. Core Office
    Fund, L.P. in excess of equity in earnings |                                                   |                                           | 1,080,910   |                    |              |         |         |         
|                                                                         | Investment in property                                                                                    |                                                   |                                           | (45,497,700 | )                  |              |         |         |         
|                                                                         | Acquisition of out-of-market leases, net                                                                  |                                                   |                                           | (13,049,438 | )                  |              |         |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         |                                                                                                           |                                                   | Net cash used in investing activities     |             |                    | (120,725,015 | )       |          |          |         |  
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                           |                                                   |                                           |             |                    |              |         |         
|                                                                         | Decrease in escrowed investor proceeds                                                                    |                                                   |                                           | 100,000     |                    |              |         |         |         
|                                                                         | Decrease in escrowed investor proceeds liability                                                          |                                                   |                                           | (100,000    | )                  |              |         |         |         
|                                                                         | Increase in unaccepted subscriptions for common shares                                                    |                                                   |                                           | 234,062     |                    |              |         |         |         
|                                                                         | Proceeds from issuance of common stock                                                                    |                                                   |                                           | 75,942,901  |                    |              |         |         |         
|                                                                         | Payments of selling commissions and dealer manager fees                                                   |                                                   |                                           | (5,445,867  | )                  |              |         |         |         
|                                                                         | Payments of organizational and offering expenses                                                          |                                                   |                                           | (2,500,000  | )                  |              |         |         |         
|                                                                         | Proceeds from advances from affiliate                                                                     |                                                   |                                           | 1,141,800   |                    |              |         | 456,362  |         
|                                                                         | Dividends paid to shareholders                                                                            |                                                   |                                           | (300,476    | )                  |              |         |         |         
|                                                                         | Dividends paid to minority interests                                                                      |                                                   |                                           | (245,629    | )                  |              |         |         |         
|                                                                         | Proceeds from note payable                                                                                |                                                   |                                           | 60,000,000  |                    |              |         |         |         
|                                                                         | Additions to deferred financing costs                                                                     |                                                   |                                           | (300,000    | )                  |              |         |         |         
|                                                                         | Additions to deferred offering costs                                                                      |                                                   |                                           |            |                    |              |         | (5,000   | )       
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         |                                                                                                           |                                                   | Net cash provided by financing activities |             |                    | 128,526,791  |         |          |          | 451,362  |  
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|Net change in cash                                                       |                                                                                                           |                                                   | 5,894,546                                 |             |                    |              |        |         
|Cash, beginning of period                                                |                                                                                                           |                                                   | 1,536,439                                 |             |                    |              | 211,000 |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|Cash, end of period                                                      |                                                                                                           | $                                                 | 7,430,985                                 |             |                    | $            | 211,000 |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|Supplemental Disclosure of Cash Flow Information                         |                                                                                                           |                                                   |                                           |             |                    |              |         |         
|                                                                         | Cash paid for interest                                                                                    |                                                   | $                                         |            |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|Supplemental Schedule of Non-Cash Investing and Financing
    Activities |                                                                                                           |                                                   |                                           |             |                    |              |         |         
|                                                                         | Unpaid selling commissions and dealer manager fees                                                        |                                                   | $                                         | 732,633     |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         | Deferred offering costs offset against additional paid-in capital                                         |                                                   | $                                         | 1,140,567   |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         | Dividends declared and unpaid                                                                             |                                                   | $                                         | 1,091,813   |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         | Distributions receivable                                                                                  |                                                   | $                                         | 1,616,925   |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         | Distributions declared and unpaid to minority interests                                                   |                                                   | $                                         | 181,141     |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         | Dividends reinvested                                                                                      |                                                   | $                                         | 333,325     |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         | Non-cash net assets acquired upon acquisition of property                                                 |                                                   | $                                         | 1,236,456   |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             
|                                                                         | Accrual of deferred financing costs                                                                       |                                                   | $                                         | 58,301      |                    |              | $       |         |         
|                                                                         |                                                                                                           |                                                   |                                           |             |                    |             



6



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Six Months Ended June 30, 2005


(UNAUDITED)




|   |             
|-- | ------------
|1. | Organization

The accompanying interim unaudited consolidated financial
information has been prepared according to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
(GAAP) have been condensed or omitted according to
such rules and regulations. For further information, refer to
the financial statements and footnotes for the year ended
December 31, 2004 included in Hines Real Estate Investment
Trust, Inc.s Annual Report on Form 10-K. In the
opinion of management, all adjustments and eliminations,
consisting only of normal recurring adjustments, necessary to
present fairly and in conformity with GAAP the financial
position of Hines Real Estate Investment Trust, Inc. as of
June 30, 2005 and December 31, 2004, the results of
operations for the three and six months ended June 30, 2005
and 2004, and the cash flows for the six months ended
June 30, 2005 and 2004 have been included. The results of
operations for such interim periods are not necessarily
indicative of the results for the full year.






| |                
| | ---------------
| | Public Offering







7



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                   
| | ------------------
| | Minority Interests





| |                    
| | -------------------
| | Investment Property





| |                                                            
| | -----------------------------------------------------------
| | Investment in Hines-Sumisei U.S. Core Office Fund,
    L.P.





|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation







| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments







| |                    
| | -------------------
| | Revenue recognition



8



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |         
| | --------
| | Property













9



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |  |          |         |  |               |   |           | 
|-------------------------------- |  | -------- | ------- |  | ------------- | - | --------- | 
|                                 |  | In-Place |         |  | Out-of-Market |  
|                                 |  | Leases   |         |  | Leases, Net   |  
|                                 |  |          |         |  |               |  
|July 1 through December 31, 2005 |  | $        | 485,677 |  |               | $ | 740,255   | 
|2006                             |  |          | 587,164 |  |               |   | 737,737   | 
|2007                             |  |          | 500,352 |  |               |   | 842,294   | 
|2008                             |  |          | 422,371 |  |               |   | 928,663   | 
|2009                             |  |          | 331,143 |  |               |   | 1,018,602 | 





|                                    |  |               |            |   |          |          |           |              |          |   |              |   |  |   |         |  
|----------------------------------- |  | ------------- | ---------- | - | -------- | -------- | --------- | ------------ | -------- | - | ------------ | - |  | - | ------- | -
|                                    |  |               |            |   |          | Acquired |           |              | Acquired |  
|                                    |  | Buildings and |            |   | In-Place |          |           | Above-Market |          |   | Below-Market |  
|                                    |  | Improvements  |            |   | Leases   |          |           | Leases       |          |   | Leases       |  
|                                    |  |               |            |   |          |          |           |              |          |   |              |  
|Cost                                |  | $             | 23,000,552 |   |          | $        | 4,788,831 |              |          | $ | 13,881,882   |   |  | $ | 832,444 |  
|Less: depreciation and amortization |  |               | (4,726     | ) |          |          | (7,975    | )            |          |   | (14,718      | ) |  |   | (2,566  | )
|                                    |  |               |            |   |          |          |           |              |          |   |              |  
|Net                                 |  | $             | 22,995,826 |   |          | $        | 4,780,856 |              |          | $ | 13,867,164   |   |  | $ | 829,878 |  
|                                    |  |               |            |   |          |          |           |              |          |   |              |  



| |                         
| | ------------------------
| | Deferred Financing Costs





| |                                   
| | ----------------------------------
| | Prepaid Insurance and Other Assets



|                              |       |          |         |         |              |   |        |        | 
|----------------------------- | ----- | -------- | ------- | ------- | ------------ | - | ------ | ------ | 
|                              |       | June 30, |         |         | December 31, |  
|                              |       | 2005     |         |         | 2004         |  
|                              |       |          |         |         |              |  
|Straight-line rent receivable |       | $        | 3,559   |         |              | $ |       |       
|Deferred leasing costs        |       |          | 14,616  |         |              |   |       |       
|Prepaid insurance             |       |          | 133,662 |         |              |   | 46,688 |       
|Other                         |       |          | 17,739  |         |              |   |       |       
|                              |       |          |         |         |              |  
|                              | Total |          | $       | 169,576 |              |   | $      | 46,688 | 
|                              |       |          |         |         |              |  

10



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                           
| | --------------------------
| | Escrowed Investor Proceeds





| |                                           
| | ------------------------------------------
| | Unaccepted Subscriptions for Common Shares





| |                  
| | -----------------
| | Due to affiliates



|                                            |       |          |            |            |              |   |            |            | 
|------------------------------------------- | ----- | -------- | ---------- | ---------- | ------------ | - | ---------- | ---------- | 
|                                            |       | June 30, |            |            | December 31, |  
|                                            |       | 2005     |            |            | 2004         |  
|                                            |       |          |            |            |              |  
|Organizational and Offering Costs           |       | $        | 24,087,275 |            |              | $ | 23,966,785 |           
|Dealer Manager Fees and Selling Commissions |       |          | 732,633    |            |              |   | 336,757    |           
|Other                                       |       |          | 2,541,662  |            |              |   | 1,174,317  |           
|                                            |       |          |            |            |              |  
|                                            | Total |          | $          | 27,361,570 |              |   | $          | 25,477,859 | 
|                                            |       |          |            |            |              |  



| |                                  
| | ---------------------------------
| | Organizational and Offering Costs





11



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                     
| | --------------------
| | Other Start-up Costs





| |               
| | --------------
| | Per Share Data





| |             
| | ------------
| | Income Taxes





| |                         
| | ------------------------
| | Stock-based Compensation

Accounting for Stock-Based
Compensation


Share-Based Payment, Accounting for
Stock Issued to Employees,


12



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                        
|-- | -----------------------
|3. | Real Estate Investments



| |                    
| | -------------------
| | Investment Property







|                                 |       |                 |            |            | 
|-------------------------------- | ----- | --------------- | ---------- | ---------- | 
|                                 |       | Fixed Future    |           
|                                 |       | Minimum Rentals |           
|                                 |       |                 |           
|July 1 through December 31, 2005 |       | $               | 3,507,832  |           
|2006                             |       |                 | 5,050,097  |           
|2007                             |       |                 | 4,981,109  |           
|2008                             |       |                 | 4,763,088  |           
|2009                             |       |                 | 4,497,459  |           
|Thereafter                       |       |                 | 38,110,073 |           
|                                 |       |                 |           
|                                 | Total |                 | $          | 60,909,658 | 
|                                 |       |                 |           





| |                                                            
| | -----------------------------------------------------------
| | Investment in Hines-Sumisei U.S. Core Office Fund,
    L.P.



13



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










Consolidated Condensed Balance Sheet of the Core Fund


as of June 30, 2005


(unaudited)


|                                  |                                         |   |               |               | 
|--------------------------------- | --------------------------------------- | - | ------------- | ------------- | 
|ASSETS                           
|Cash                              |                                         | $ | 43,758,295    |              
|Property, net                     |                                         |   | 1,292,572,442 |              
|Other assets                      |                                         |   | 250,931,915   |              
|                                  |                                         |   |              
|                                  | Total Assets                            |   | $             | 1,587,262,652 | 
|                                  |                                         |   |              
|LIABILITIES AND PARTNERS CAPITAL
|Debt                              |                                         | $ | 868,920,000   |              
|Other liabilities                 |                                         |   | 73,546,322    |              
|Minority interest                 |                                         |   | 271,697,400   |              
|Partners capital                 |                                         |   | 373,098,930   |              
|                                  |                                         |   |              
|                                  | Total Liabilities and Partners Capital |   | $             | 1,587,262,652 | 
|                                  |                                         |   |              

14



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Consolidated Condensed Statement of Operations of the Core
Fund


For the Six Months Ended June 30, 2005


(unaudited)


|                              |            |   |             |       | 
|----------------------------- | ---------- | - | ----------- | ----- | 
|Revenues and interest income  |            | $ | 93,412,871  |      
|Operating expenses            |            |   | (41,344,390 | )    
|Interest expense              |            |   | (22,028,008 | )    
|Depreciation and amortization |            |   | (26,107,486 | )    
|Minority interest             |            |   | (3,929,302  | )    
|                              |            |   |            
|                              | Net Income |   | $           | 3,685 | 
|                              |            |   |            





| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 15% was earned from two tenants in the oil and gas industry,
    whose leases expire on December 31, 2015; and                                      
|
| |  | 39% was earned from several tenants in the legal services
    industry, whose leases expire at various times during the years
    2007 through 2027.



|   |             
|-- | ------------
|4. | Note payable



15



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |          
|-- | ---------
|5. | Dividends



|                                 |  |             |      |  |           |  |              |    
|-------------------------------- |  | ----------- | ---- |  | --------- |  | ------------ | ---
|                                 |  | Annualized  |      |  |          
|                                 |  | Rate        |      |  |          
|Period                           |  | Declared(1) |      |  | Date Paid | 
|                                 |  |             |      |  |           | 
|January, February and March 2005 |  |             | 6.0% |  |           |  | April 2005   |    
|April, May and June 2005         |  |             | 6.0% |  |           |  | July 2005    |    
|July and August 2005             |  |             | 6.0% |  |           |  | October 2005 | (2)






|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Dividends were declared in the amount of $0.00164384 per
    share per day, representing an annualized rate of 6.0% based on
    a price of $10.00 per share.
|   
|(2) | Anticipated payment date.                                                                                                                                    



|   |                           
|-- | --------------------------
|6. | Related Party Transactions



| |                   
| | ------------------
| | Advisory Agreement



Acquisition Fees


Asset Management Fees


Expense Reimbursements


Reimbursement to the Company


16



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                         
| | ------------------------
| | Dealer Manager Agreement





| |                                          
| | -----------------------------------------
| | Property Management and Leasing Agreement





| |                           
| | --------------------------
| | The Participation Interest



17



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                  
|-- | -----------------
|7. | Subsequent Events



| |                                           
| | ------------------------------------------
| | Entry into a Material Definitive Agreement











| |                                   
| | ----------------------------------
| | Asset Acquisition by the Core Fund





| |                                         
| | ----------------------------------------
| | Acquisition of Interest in the Core Fund



18



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##### Table of Contents



HINES REAL ESTATE INVESTMENT TRUST, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                   
| | ----------------------------------
| | Principal Payments on Note Payable



19



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##### Table of Contents








|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

Explanatory Note




Cautionary Note Regarding Forward-Looking Statements










| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our ability to invest offering and dividend reinvestment plan
    proceeds to acquire properties or other investments in a timely
    manner and at appropriate amounts that provide acceptable
    returns;                                                                                                                                      
|
| |  | The potential need to fund tenant improvements, lease-up costs
    or other capital expenditures, as well as increases in property
    operating expenses and costs of compliance with environmental
    matters or discovery of previously undetected environmentally
    hazardous or other undetected adverse conditions at our
    properties;
|
| |  | Risks associated with debt;                                                                                                                                                                                                                                                                                                                       
|
| |  | Competition for tenants and real estate investment
    opportunities, including competition with affiliates of Hines
    Interests Limited Partnership (Hines);                                                                                                                                                                                 
|
| |  | Risks associated with adverse changes in general economic or
    local market conditions, including, terrorist attacks and other
    acts of violence may affect the markets in which we and our
    tenants operate;                                                                                                                             
|
| |  | Our ability to secure adequate insurance at reasonable and
    appropriate rates against catastrophic events, such as
    earthquakes and terrorist attacks;                                                                                                                                                                                      
|
| |  | Changes in governmental, tax, real estate and zoning laws and
    regulations and the related costs of compliance and increases in
    our administrative operating expenses, including expenses
    associated with operating as a public company;                                                                                               

20



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Risks relating to our investment in Hines-Sumisei U.S. Core
    Office Fund, L.P. (the Core Fund), such as its
    reliance on Hines for its operations and investments, and our
    potential liability for Core Fund obligations;                                                                                    
|
| |  | The lack of liquidity associated with our assets;                                                                                                                                                                                                                                                                        
|
| |  | Our reliance on Hines Advisors Limited Partnership (our
    Advisor), Hines and affiliates of Hines for our
    day-to-day operations and the selection of real estate
    investments, and our Advisors ability to attract and
    retain high quality personnel who can provide acceptable service
    levels to us;
|
| |  | Risks associated with conflicts of interests that result from
    our relationship with our Advisor and Hines, as well as
    conflicts of interests certain of our officers and directors
    face relating to the positions they hold with other
    entities; and                                                     
|
| |  | Our ability to qualify as a REIT for federal income tax purposes.                                                                                                                                                                                                                                                        



Overview






21



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##### Table of Contents





|                |  |                                     |  |          |      |                  |         |  |         | 
|--------------- |  | ----------------------------------- |  | -------- | ---- | ---------------- | ------- |  | ------- | 
|                |  |                                     |  |          |      | Effective        |        
|                |  |                                     |  |          |      | Ownership by the |        
|Market          |  | Property                            |  | % Leased |      |                  | Company | 
|                |  |                                     |  |          |      |                  |         | 
|New York City   |  | 425 Lexington Avenue                |  |          | 100% |                  |         |  | 8.97%   | 
|New York City   |  | 499 Park Avenue                     |  |          | 100% |                  |         |  | 8.97%   | 
|Washington D.C. |  | 1200
    19thStreet                 |  |          | 100% |                  |         |  | 8.97%   | 
|New York City   |  | 600 Lexington Avenue                |  |          | 94%  |                  |         |  | 8.97%   | 
|Houston         |  | One Shell Plaza                     |  |          | 96%  |                  |         |  | 10.05%  | 
|Houston         |  | Two Shell Plaza                     |  |          | 92%  |                  |         |  | 10.05%  | 
|San Francisco   |  | 55 Second Street                    |  |          | 89%  |                  |         |  | 20.10%  | 
|San Francisco   |  | 101 Second Street                   |  |          | 90%  |                  |         |  | 20.10%  | 
|Chicago         |  | Three First National Plaza          |  |          | 87%  |                  |         |  | 16.08%  | 
|San Mateo       |  | 1900 and 2000 Alameda de las Pulgas |  |          | 87%  |                  |         |  | 100.00% | 







| |                  
| | -----------------
| | Subsequent Events



| |                                           
| | ------------------------------------------
| | Entry into a Material Definitive Agreement









22



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##### Table of Contents





| |                                   
| | ----------------------------------
| | Asset Acquisition by the Core Fund





| |                                         
| | ----------------------------------------
| | Acquisition of Interest in the Core Fund







| |                                   
| | ----------------------------------
| | Principal Payments on Note Payable



Critical Accounting Policies






| |                      
| | ---------------------
| | Basis of Presentation





23



---



##### Table of Contents







| |                    
| | -------------------
| | Revenue recognition





| |         
| | --------
| | Property









24



---



##### Table of Contents









Financial Condition, Liquidity and Capital Resources






| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | Proceeds from our current or potential follow-on offerings;                  
|
| |  | Proceeds from debt financings, including secured or unsecured
    facilities;
|
| |  | Cash flows generated by our real estate investments and
    operations; and  
|
| |  | Advances from our affiliates.                                                



| |                 
| | ----------------
| | Sources of Funds



| |                    
| | -------------------
| | Our Public Offering







| |                
| | ---------------
| | Debt financings



25



---



##### Table of Contents









| |                                                  
| | -------------------------------------------------
| | Cash flows from real estate assets and operations





| |                         
| | ------------------------
| | Advances from affiliates







| |              
| | -------------
| | Uses of Funds



| |                        
| | -----------------------
| | Real estate investments



26



---



##### Table of Contents





| |                                                
| | -----------------------------------------------
| | 1900 and 2000 Alameda de las Pulgas Acquisition









| |                                                 
| | ------------------------------------------------
| | Payment of offering and other costs and expenses





27



---



##### Table of Contents





| |          
| | ---------
| | Dividends







Results of Operations








28



---



##### Table of Contents
















|        |                                                                
|------- | ---------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market
    Risk.









29



---



##### Table of Contents








|        |                         
|------- | ------------------------
|Item 4. | Controls and Procedures.








PART II  OTHER INFORMATION







|        |                                                                 
|------- | ----------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and Use of
    Proceeds.







|                                       |  |        |           | 
|-------------------------------------- |  | ------ | --------- | 
|Type of Expense                        |  | Amount |          
|                                       |  |        |          
|Underwriting discounts and commissions |  | $      | 5,005,165 | 
|Finders fees                          |  |        |          | 
|Expenses paid to or for underwriters   |  |        |          | 
|Other expenses paid to affiliates      |  |        | 4,186,470 | 
|Other expenses paid to non-affiliates  |  |        |          | 
|                                       |  |        |          
|Total expenses                         |  | $      | 9,191,635 | 
|                                       |  |        |          



30



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##### Table of Contents





|                                               |  |        |            | 
|---------------------------------------------- |  | ------ | ---------- | 
|Type of Expense                                |  | Amount |           
|                                               |  |        |           
|Construction of plant, building and facilities |  | $      |           | 
|Purchase of real estate interests              |  |        | 82,542,177 | 
|Acquisition of other businesses                |  |        |           | 
|Repayment of indebtedness                      |  |        |           | 
|Working capital (as of June 30, 2005)          |  | $      | 5,131,043  | 
|Temporary investments                          |  |        |           | 
|Other uses                                     |  |        |           | 
|                                               |  |        |           
|Total uses                                     |  | $      | 87,673,220 | 
|                                               |  |        |           








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








|        |          
|------- | ---------
|Item 6. | Exhibits.



31



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##### Table of Contents






SIGNATURES






| |                             
| | ----------------------------
| | HINES REAL ESTATE INVESTMENT
| | TRUST, INC.                 

|                |  |                                                                    
|--------------- |  | -------------------------------------------------------------------
|August 12, 2005 |  | By: Charles M. BaughnCharles
    M. BaughnChief Executive Officer  
|               
|August 12, 2005 |  | By: Sherri W. SchugartSherri
    W. SchugartChief Financial Officer

32



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##### Table of Contents



EXHIBIT INDEX


|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 3  | .1          |  | Amended and Restated Articles of Incorporation of Hines Real
    Estate Investment Trust, Inc. (filed as Exhibit 3.1 to
    Amendment No. 5 to the Form S-11 Registration
    Statement of Hines Real Estate Investment Trust, Inc. (File
    No. 333-108780 as amended to date, the Registration
    Statement) on May 25, 2004 and incorporated herein by
    reference).                                                                                                        
|       
|        | 3  | .2          |  | Amended and Restated Bylaws of Hines Real Estate Investment
    Trust, Inc. (filed as Exhibit 3.2 to Amendment No. 4
    to the Registration Statement on May 4, 2004 and
    incorporated herein by reference).                                                                                                                                                                                                                                                                     
|       
|        | 4  | .1          |  | Form of Subscription Agreement (filed as Appendix B to the
    Prospectus included in the Registration Statement on
    June 24, 2004, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .1          |  | Second Amended and Restated Agreement of Limited Partnership of
    Hines REIT Properties, L.P. (filed as Exhibit 10.1 to
    Amendment No. 5 to the Registration Statement on
    May 24, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                               
|       
|        | 10 | .2          |  | Form of Property Management and Leasing Agreement between Hines
    REIT Properties, L.P. and Hines Interests Limited Partnership
    (filed as Exhibit 10.2 to Amendment No. 2 to the
    Registration Statement on March 2, 2004 and incorporated
    herein by reference).                                                                                                                                                                                                        
|       
|        | 10 | .3          |  | Advisory Agreement among Hines REIT Properties, L.P., Hines
    Advisors Limited Partnership and Hines Real Estate Investment
    Trust, Inc. (filed as Exhibit 10.3 to Amendment No. 5
    to the Registration Statement on May 25, 2004 and
    incorporated herein by reference).                                                                                                                                                                                                 
|       
|        | 10 | .4          |  | Employee and Director Incentive Share Plan of Hines Real Estate
    Investment Trust, Inc. (filed as Exhibit 10.4 to Amendment
    No. 2 to the Registration Statement on March 2, 2004
    and incorporated herein by reference).                                                                                                                                                                                                                                                   
|       
|        | 10 | .5          |  | Hines Real Estate Investment Trust, Inc. Dividend Reinvestment
    Plan (filed as Appendix C to the Prospectus included in the
    Registration Statement on June 24, 2004, and incorporated
    herein by reference).                                                                                                                                                                                                                                                               
|       
|        | 10 | .6          |  | Sixth Amended and Restated Agreement of Limited Partnership of
    Hines-Sumisei U.S. Core Office Fund, L. P. (filed as
    Exhibit 10.6 to the registrants Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2005, filed
    on May 16, 2005, and incorporated herein by reference).                                                                                                                                                                               
|       
|        | 10 | .7          |  | Second Amended and Restated Declaration of Trust of
    Hines-Sumisei NY Core Office Trust. (filed as Exhibit 10.7
    to Amendment No. 2 to the Registration Statement on
    March 2, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                                  
|       
|        | 10 | .8          |  | Amended and Restated Bylaws of Hines-Sumisei NY Core Office
    Trust. (filed as Exhibit 10.8 to Amendment No. 2 to
    the Registration Statement on March 2, 2004 and
    incorporated herein by reference).                                                                                                                                                                                                                                                                       
|       
|        | 10 | .9          |  | Amended and Restated Master Agreement dated as of March 31,
    2003, among Hines Interests Limited Partnership, Hines US Core
    Office Properties L. P. and Sumitomo Life Realty (N.Y.), Inc.,
    as amended (filed as Exhibit 10.9 to Amendment No. 2
    to the Registration Statement on March 2, 2004 and
    incorporated herein by reference).                                                                                                                             
|       
|        | 10 | .10         |  | Amended and Restated Shareholder Agreement dated as of
    December 23, 2003, by and among General Motors Investment
    Management Corporation, Hines-Sumisei U.S. Core Office
    Fund, L.P., Hines-Sumisei NY Core Office Trust and various
    shareholders to Hines-Sumisei NY Core Office Trust (filed as
    Exhibit 10.10 to Amendment No. 2 to the Registration
    Statement on March 2, 2004 and incorporated herein by
    reference).                                   
|       
|        | 10 | .11         |  | Amended and Restated Investor Rights Agreement dated as of
    December 23, 2003, among Hines Interests Limited
    Partnership, Hines-Sumisei U.S. Core Office Fund, L.P.,
    Hines-Sumisei NY Core Office Trust, General Motors Investment
    Management Corporation, and various shareholders to
    Hines-Sumisei NY Core Office Trust (filed as Exhibit 10.11
    to Amendment No. 2 to the Registration Statement on
    March 2, 2004 and incorporated herein by reference).

33



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .12         |  | Amended and Restated Organization Agreement for Hines-Sumisei NY
    Core Office Trust dated as of December 23, 2003, by and
    among General Motors Investment Management Corporation, Hines
    Interests Limited Partnership, Hines-Sumisei U.S. Core
    Office Fund, L.P., Hines Sumisei NY Core Office Trust and
    various shareholders to Hines-Sumisei NY Core Office Trust
    (filed as Exhibit 10.12 to Amendment No. 2 to the
    Registration Statement on March 2, 2004 and incorporated
    herein by reference).                                                                                                             
|       
|        | 10 | .13         |  | Amended Declaration of Trust of Hines-Sumisei NY Core Office
    Trust II (filed as Exhibit 10.13 to Amendment
    No. 2 to the Registration Statement on March 2, 2004
    and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 10 | .14         |  | Amended Bylaws of Hines-Sumisei NY Core Office Trust II
    (filed as Exhibit 10.14 to Amendment No. 2 to the
    Registration Statement on March 2, 2004 and incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10 | .15         |  | Shareholder Agreement for Hines-Sumisei NY Core Office
    Trust II dated as of February 2, 2004, by and among
    General Motors Investment Management Corporation, Hines-Sumisei
    U.S. Core Office Fund, L.P., Hines-Sumisei NY Core Office
    Trust II and certain shareholders of Hines-Sumisei NY Core
    Office Trust II (filed as Exhibit 10.15 to Amendment
    No. 2 to the Registration Statement on March 2, 2004
    and incorporated herein by reference).                                                                                                                                                                    
|       
|        | 10 | .16         |  | Subscription Agreement for Hines-Sumisei NY Core Office Trust
    and Hines-Sumisei NY Core Office Trust II dated as of
    February 2, 2004, by and among General Motors Investment
    Management Corporation, Hines Interests Limited Partnership,
    Hines-Sumisei U.S. Core Office Fund, L.P., Hines-Sumisei NY
    Core Office Trust, Hines-Sumisei NY Core Office Trust II
    and various shareholders of Hines-Sumisei NY Core Office Trust
    and Hines-Sumisei NY Core Office Trust II (filed as
    Exhibit 10.16 to Amendment No. 2 to the Registration
    Statement on March 2, 2004 and incorporated herein by
    reference).
|       
|        | 10 | .17         |  | Subscription Agreement dated as of September 11, 2003,
    between Hines REIT Properties, L.P. and Hines Real Estate
    Holdings Limited Partnership (filed as Exhibit 10.17 to
    Amendment No. 2 to the Registration Statement on
    March 2, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .18         |  | Agreement dated as of June 10, 2004, among Hines REIT
    Properties, L.P., Hines U.S. Core Office Capital
    Associates II Limited Partnership and Hines-Sumisei
    U.S. Core Office Fund, L.P. (filed as Exhibit 10.18 to
    Amendment No. 6 to the Registration Statement on
    June 10, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .19         |  | Amended and Restated Escrow Agreement between Hines Real Estate
    Investment Trust, Inc. and Wells Fargo Bank, National
    Association (filed as Exhibit 10.19 to Amendment No. 2
    to the Registration Statement on March 2, 2004 and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 10 | .20         |  | Articles of Amendment dated May 4, 2004 to the Declaration
    of Trust of Hines-Sumisei NY Core Office Trust (filed as
    Exhibit 10.20 to Amendment No. 5 to the Registration
    Statement on May 25, 2004 and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10 | .21         |  | Articles of Amendment dated May 4, 2004 to the Declaration
    of Trust of Hines-Sumisei NY Core Office Trust II (filed as
    Exhibit 10.21 to Amendment No. 5 to the Registration
    Statement on May 25, 2004 and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10 | .22         |  | Articles of Amendment dated December 27, 2004 to the
    Declaration of Trust of Hines-Sumisei NY Core Office Trust
    (filed as Exhibit 10.22 to the registrants Annual
    Report on Form 10-K for the year ended December 31,
    2004 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 10 | .23         |  | Articles of Amendment dated December 27, 2004 to the
    Declaration of Trust of Hines-Sumisei NY Core Office
    Trust II (filed as Exhibit 10.23 to the
    registrants Annual Report on Form 10-K for the year
    ended December 31, 2004, filed on March 31, 2005, and
    incorporated herein by reference).                                                                                                                                                                                                                                                                                                                             
|       
|        | 10 | .24         |  | Purchase and Sale Agreement dated November 23, 2004, among
    Hines U.S. Core Office Capital Associates II Limited
    Partnership, Hines REIT Properties, L.P. and Hines
    U.S. Core Office Capital LLC (filed as Exhibit 10.24
    to the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                                                                                                                                                                                                            

34



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .25         |  | Purchase and Sale Agreement dated February 1, 2005, among
    Hines US Core LLC, Hines REIT Properties, L.P. and Hines
    U.S. Core Office Capital LLC (filed as Exhibit 10.25
    to the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).
|       
|        | 10 | .26         |  | Second Amended and Restated Agreement of Limited Partnership of
    Hines-Sumisei US Core Office Properties L.P. (filed as
    Exhibit 10.26 to the registrants Annual Report on
    Form 10-K for the year ended December 31, 2004, filed
    on March 31, 2005, and incorporated herein by reference).                                       
|       
|        | 10 | .27         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and Jeffrey C. Hines (filed as Exhibit 10.27 to
    the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                    
|       
|        | 10 | .28         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and C. Hastings Johnson (filed as Exhibit 10.28
    to the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                 
|       
|        | 10 | .29         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and George A. Davis (filed as Exhibit 10.29 to
    the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                     
|       
|        | 10 | .30         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and Thomas A. Hassard (filed as Exhibit 10.30
    to the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                   
|       
|        | 10 | .31         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and Stanley D. Levy (filed as Exhibit 10.31 to
    the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                     
|       
|        | 10 | .32         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and Charles M. Baughn (filed as Exhibit 10.32
    to the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                   
|       
|        | 10 | .33         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and Charles N. Hazen (filed as Exhibit 10.33 to
    the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                    
|       
|        | 10 | .34         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and Sherri W. Schugart (filed as Exhibit 10.34
    to the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                  
|       
|        | 10 | .35         |  | Indemnification Agreement between Hines Real Estate Investment
    Trust, Inc. and Frank R. Apollo (filed as Exhibit 10.35 to
    the registrants Annual Report on Form 10-K for the
    year ended December 31, 2004, filed on March 31, 2005,
    and incorporated herein by reference).                                                     
|       
|        | 10 | .36         |  | Purchase and Sale Agreement dated as of April 1, 2005,
    among Hines US Core LLC, Hines REIT Properties L.P. and Hines
    U.S. Core Office Capital LLC (filed as Exhibit 99.1 to
    the registrants Current Report on Form 8-K dated
    April 1, 2005 and incorporated herein by reference).                                              
|       
|        | 10 | .37         |  | Agreement of Sale by and between Madison Two Associates and
    Hines 70 West Madison L.P. (filed as Exhibit 10.37 to
    the registrants Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2005, filed on May 16, 2005,
    and incorporated herein by reference).                                                            
|       
|        | 10 | .38*        |  | Agreement of Purchase and Sale dated May 19, 2005, by and
    between Hines REIT Properties, L.P. and OTR, an Ohio general
    partnership acting as the duly authorized nominee of the Board
    of the State Teachers Retirement System of Ohio.                                                                                              
|       
|        | 10 | .39*        |  | Term Loan Agreement dated June 28, 2005, by and between
    Hines REIT Properties, L.P. and KeyBank National Association.                                                                                                                                                                                                                       
|       
|        | 10 | .40*        |  | Ownership Interests Pledge and Security Agreement dated
    June 28, 2005, by and between Hines REIT Properties, L.P.
    and KeyBank National Association, in its capacity as
    administrative agent.                                                                                                                                        

35



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .41*        |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated June 27, 2005, between GREIT 
    525 and 600 B Street, LP and Hines-Sumisei US Core Office
    Properties, L.P., as amended.                                                                                               
|       
|        | 10 | .42         |  | Purchase and Sale Agreement as of July 25, 2005, by and
    among Hines US Core LLC, Hines REIT Properties, L.P. and Hines
    U.S. Core Office Capital LLC (filed as Exhibit 99.1 to
    the registrants Current Report on Form 8-K dated
    July 25, 2005 and incorporated herein by reference).            
|       
|        | 31 | .1*         |  | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                         
|       
|        | 31 | .2*         |  | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                         
|       
|        | 32 | .1*         |  | Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to 18 U.S.C., Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002. Pursuant to SEC Release 34-47551 this Exhibit is
    furnished to the SEC and shall not be deemed to be
    filed.






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

36