##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the quarterly period ended March 31,
    2003                                           
|  
|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 0-49782

T REIT, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                                             |  |                                                                          
|------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------
|Virginia                                                                                                     |  | 52-2140299                                                               
|(State or other jurisdiction of
    incorporation or organization)                                           |  | (I.R.S. Employer
    Identification No.)                                 
|                                                                                                            
|1551 N. Tustin Avenue, Suite 650
    Santa Ana, California 92705(Address of principal executive
    offices) |  | (877)888-7348(Registrants telephone
    number,
    including area code)

N/A

(Former name)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).     Yes o          No þ

As of May 12, 2003, there were 4,696,300
shares of common stock of T REIT, Inc. outstanding.



---






---

TABLE OF CONTENTS



|                                                                                                                |                                                                                               |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                                                                                | PART I -- FINANCIAL INFORMATION                                                              
|                                                                                                                | Item 1. Financial Statements                                                                 
|T REIT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS                                                             
|T REIT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                   
|T REIT, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY For the Three Months Ended March 31, 2003
|T REIT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                   
|T REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (UNAUDITED)                   
|                                                                                                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                                                | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                                                                                | Item 4. Controls and Procedures                                                              
|                                                                                                                | Part II -- Other Information                                                                 
|                                                                                                                | Item 1. Legal Proceedings                                                                    
|                                                                                                                | Item 2. Changes in Securities and Use of Proceeds                                            
|                                                                                                                | Item 3. Defaults Upon Senior Securities                                                      
|                                                                                                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                                                                                | Item 5. Other Information                                                                    
|                                                                                                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                                     
|EXHIBIT 99.1                                                                                                   
|EXHIBIT 99.2                                                                                                   



---



##### Table of Contents



T REIT, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31,
2003


INDEX

|           |  |                                                                                                                               |    |      |    | 
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           |  |                                                                                                                               |    | Page
|           |  |                                                                                                                               |    |     
|           |  | PART I  FINANCIAL
    INFORMATION                                                                                             |    |      |    | 
|Item 1.    |  | Financial Statements                                                                                                          |    |      | 2  | 
|           |  | Condensed Consolidated Balance Sheets as of
    March 31, 2003 (Unaudited) and December 31, 2002                              |    |      | 3  | 
|           |  | Condensed Consolidated Statements of Operations
    for the three month periods ended March 31, 2003 and 2002
    (Unaudited) |    |      | 4  | 
|           |  | Condensed Consolidated Statement of
    Shareholders Equity for the three month period ended
    March 31, 2003 (Unaudited)  |    |      | 5  | 
|           |  | Condensed Consolidated Statements of Cash Flows
    for the three-month periods ended March 31, 2003 and 2002
    (Unaudited) |    |      | 6  | 
|           |  | Notes to Consolidated Financial Statements                                                                                    |    |      | 7  | 
|Item 2.    |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                     |    |      | 18 | 
|Item 3.    |  | Quantitative and Qualitative Disclosure about
    Market Risks                                                                |    |      | 26 | 
|Item 4.    |  | Controls and Procedures                                                                                                       |    |      | 26 | 
|           |  | PART II  OTHER
    INFORMATION                                                                                                |    |      |    | 
|Item 1.    |  | Legal Proceedings                                                                                                             |    |      | 26 | 
|Item 2.    |  | Changes in Securities and Use of Proceeds                                                                                     |    |      | 26 | 
|Item 3.    |  | Defaults Upon Senior Securities                                                                                               |    |      | 26 | 
|Item 4.    |  | Submission of Matters to a Vote of Security
    Holders                                                                       |    |      | 27 | 
|Item 5.    |  | Other Information                                                                                                             |    |      | 27 | 
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                              |    |      | 27 | 
|Signatures |  |                                                                                                                               | 29 |     

1



---



##### Table of Contents






PART I  FINANCIAL
INFORMATION




Item 1.Financial
Statements

The accompanying March 31, 2003 and 2002
interim financial statements of the Company required to be filed
with this Form 10-Q Quarterly Report were prepared by
management without audit and commence on the following page,
together with the related Notes. In the opinion of management,
these interim financial statements present fairly the financial
condition of the Company, but should be read in conjunction with
the consolidated financial statements of the Company for the
year ended December 31, 2002 included in our Annual Report
on Form 10-K previously filed with the Securities and
Exchange Commission (SEC).

2



---



##### Table of Contents






T REIT, INC.

CONDENSED CONSOLIDATED BALANCE
SHEETS


|                                                                                                                                                              |                                           |             |            |              |   |   |            |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ----------- | ---------- | ------------ | - | - | ---------- | ---------- | -
|                                                                                                                                                              |                                           | March 31,   |            | December 31,
|                                                                                                                                                              |                                           | 2003        |            | 2002        
|                                                                                                                                                              |                                           |             |            |             
|                                                                                                                                                              |                                           | (Unaudited) |            |             
|ASSETS                                                                                                                                                       
|Real estate investments:                                                                                                                                      |                                           |             |            |              |   |   |            |           
|                                                                                                                                                              | Operating properties                      |             | $          | 15,655,156   |   |   | $          | 37,374,780 |  
|                                                                                                                                                              | Property held for sale                    |             |            | 29,571,280   |   |   |            | 3,917,239  |  
|                                                                                                                                                              | Investments in unconsolidated real estate |             |            | 19,748,604   |   |   |            | 14,499,831 |  
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|                                                                                                                                                              |                                           |             | 64,975,040 |              |   |   | 55,791,850 |           
|                                                                                                                                                              | Less accumulated depreciation             |             |            | (119,872     | ) |   |            | (1,111,856 | )
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|                                                                                                                                                              |                                           |             | 64,855,168 |              |   |   | 54,679,994 |           
|Cash and cash equivalents                                                                                                                                     |                                           |             | 590,620    |              |   |   | 6,129,468  |           
|Accounts receivable, net                                                                                                                                      |                                           |             | 224,372    |              |   |   | 242,587    |           
|Accounts receivable from related parties                                                                                                                      |                                           |             | 672,691    |              |   |   | 593,670    |           
|Real estate deposits                                                                                                                                          |                                           |             | 564,404    |              |   |   | 3,918,743  |           
|Other assets, net                                                                                                                                             |                                           |             | 2,114,974  |              |   |   | 1,617,263  |           
|Note receivable                                                                                                                                               |                                           |             | 585,269    |              |   |   | 587,178    |           
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|Total assets                                                                                                                                                  |                                           | $           | 69,607,498 |              |   | $ | 67,768,903 |           
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                                                                                                     
|                                                                                                                                                             
|Accounts payable and accrued liabilities                                                                                                                      |                                           | $           | 1,000,729  |              |   | $ | 997,870    |           
|Distributions payable                                                                                                                                         |                                           |             | 321,399    |              |   |   | 321,252    |           
|Security deposits and prepaid rent                                                                                                                            |                                           |             | 108,758    |              |   |   | 144,018    |           
|Notes payable                                                                                                                                                 |                                           |             | 9,378,873  |              |   |   | 25,221,036 |           
|Notes payable secured by property held for sale                                                                                                               |                                           |             | 20,759,728 |              |   |   | 2,869,089  |           
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|                                                                                                                                                              |                                           |             | 31,569,487 |              |   |   | 29,553,265 |           
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|                                                                                                                                                             
|Commitments and contingencies                                                                                                                                 |                                           |             |           |              |   |   |           |           
|                                                                                                                                                             
|Shareholders equity:                                                                                                                                         |                                           |             |            |              |   |   |            |           
|Common stock, $.01 par value; 10,000,000 shares
    authorized; 4,720,176 shares issued and 4,696,300
    outstanding at March 31, 2003 and December 31, 2002 |                                           |             | 47,202     |              |   |   | 47,202     |           
|Additional paid-in capital                                                                                                                                    |                                           |             | 41,265,443 |              |   |   | 41,265,443 |           
|Treasury stock, 23,876 shares at March 31, 2003
    and December 31, 2002                                                                                     |                                           |             | (220,653   | )            |   |   | (220,653   | )         
|Distributions in excess of earnings                                                                                                                           |                                           |             | (3,053,981 | )            |   |   | (2,876,354 | )         
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|Total shareholders equity                                                                                                                                    |                                           |             | 38,038,011 |              |   |   | 38,215,638 |           
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           
|Total liabilities and shareholders equity                                                                                                                    |                                           | $           | 69,607,498 |              |   | $ | 67,768,903 |           
|                                                                                                                                                              |                                           |             |            |              |   |   |            |           

The accompanying notes are an integral part of
these condensed consolidated financial statements.

3



---



##### Table of Contents






T REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                                                                     |                                                                  |                    |           |         |  |   |           |         | 
|------------------------------------------------------------------------------------ | ---------------------------------------------------------------- | ------------------ | --------- | ------- |  | - | --------- | ------- | 
|                                                                                     |                                                                  |                   
|                                                                                     |                                                                  | Three Months Ended
|                                                                                     |                                                                  | March 31,         
|                                                                                     |                                                                  |                   
|                                                                                     |                                                                  | 2003               |           | 2002   
|                                                                                     |                                                                  |                    |           |        
|                                                                                     |                                                                  |                   
|                                                                                     |                                                                  | (Unaudited)       
|Revenues                                                                             |                                                                  |                    |           |         |  |   |           |        
|                                                                                     | Rental income                                                    |                    | $         | 492,633 |  |   | $         |        | 
|                                                                                     | Interest income                                                  |                    |           | 24,687  |  |   |           | 109,863 | 
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|                                                                                     |                                                                  |                    | 517,320   |         |  |   | 109,863   |        
|Expenses                                                                             |                                                                  |                    |           |         |  |   |           |        
|                                                                                     | Rental expenses                                                  |                    |           | 164,133 |  |   |           |        | 
|                                                                                     | General and administrative                                       |                    |           | 120,254 |  |   |           | 114,916 | 
|                                                                                     | Depreciation                                                     |                    |           | 68,217  |  |   |           |        | 
|                                                                                     | Interest (including amortization of deferred
    financing fees) |                    |           | 212,972 |  |   |           |        | 
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|                                                                                     |                                                                  |                    | 565,576   |         |  |   | 114,916   |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|Loss before equity in earnings of
    unconsolidated real estate                     |                                                                  |                    | (48,256   | )       |  |   | (5,053    | )      
|Equity in earnings of unconsolidated real estate                                     |                                                                  |                    | 558,161   |         |  |   | 77,993    |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|Income from continuing operations before gain on
    sale of real estate investments |                                                                  |                    | 509,905   |         |  |   | 72,940    |        
|Gain on sale of real estate investments                                              |                                                                  |                    | 23,617    |         |  |   |          |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|Income from continuing operations                                                    |                                                                  |                    | 533,522   |         |  |   | 72,940    |        
|Income from discontinued operationsproperty
    held for sale                       |                                                                  |                    | 253,385   |         |  |   | 257,884   |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|Net income                                                                           |                                                                  | $                  | 786,907   |         |  | $ | 330,824   |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|Earnings per share  basic and diluted                                               |                                                                  |                    |           |         |  |   |           |        
|                                                                                     | Continuing operations                                            |                    | $         | 0.11    |  |   | $         | .03     | 
|                                                                                     | Discontinued operations                                          |                    |           | 0.06    |  |   |           | .09     | 
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|                                                                                     |                                                                  | $                  | 0.17      |         |  | $ | 0.12      |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|Weighted average common shares outstanding                                           |                                                                  |                    | 4,696,300 |         |  |   | 2,822,185 |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        
|Dividends declared per share                                                         |                                                                  | $                  | 0.21      |         |  | $ | 0.21      |        
|                                                                                     |                                                                  |                    |           |         |  |   |           |        

The accompanying notes are an integral part of
these condensed consolidated financial statements.

4



---



##### Table of Contents






T REIT, INC.

CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS EQUITY


For the Three Months Ended March 31,
2003


|                            |  |             |           |           |  |            |        |          |  |               |            |       |  |   |          |   |  |   |            |   |  |   |            |  
|--------------------------- |  | ----------- | --------- | --------- |  | ---------- | ------ | -------- |  | ------------- | ---------- | ----- |  | - | -------- | - |  | - | ---------- | - |  | - | ---------- | -
|                            |  |             |           | Common    |  | Additional |        |          |  | Distributions |            |      
|                            |  | Number of   |           | Stock     |  | Paid-in    |        | Treasury |  | in Excess of  |            |      
|                            |  | Shares      |           | Par Value |  | Capital    |        | Stock    |  | Earnings      |            | Total
|                            |  |             |           |           |  |            |        |          |  |               |            |      
|                            |  |            
|                            |  | (Unaudited)
|BALANCE  December 31, 2002 |  |             | 4,696,300 |           |  | $          | 47,202 |          |  | $             | 41,265,443 |       |  | $ | (220,653 | ) |  | $ | (2,876,354 | ) |  | $ | 38,215,638 |  
|Dividends                   |  |             |          |           |  |            |       |          |  |               |           |       |  |   |         |   |  |   | (964,534   | ) |  |   | (964,534   | )
|Net income                  |  |             |          |           |  |            |       |          |  |               |           |       |  |   |         |   |  |   | 786,907    |   |  |   | 786,907    |  
|                            |  |             |           |           |  |            |        |          |  |               |            |       |  |   |          |   |  |   |            |   |  |   |            |  
|BALANCE  March 31, 2003    |  |             | 4,696,300 |           |  | $          | 47,202 |          |  | $             | 41,265,443 |       |  | $ | (220,653 | ) |  | $ | (3,053,981 | ) |  | $ | 38,038,011 |  
|                            |  |             |           |           |  |            |        |          |  |               |            |       |  |   |          |   |  |   |            |   |  |   |            |  

The accompanying notes are an integral part of
these condensed consolidated financial statements.

5



---



##### Table of Contents






T REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                                                     |                                                                            |                                          |            |                |          |   |             |         |          |  
|------------------------------------------------------------------------------------ | -------------------------------------------------------------------------- | ---------------------------------------- | ---------- | -------------- | -------- | - | ----------- | ------- | -------- | -
|                                                                                     |                                                                            | Three Months                             |            | Three Months  
|                                                                                     |                                                                            | Ended                                    |            | Ended         
|                                                                                     |                                                                            | March 31, 2003                           |            | March 31, 2002
|                                                                                     |                                                                            |                                          |            |               
|                                                                                     |                                                                            |                                         
|                                                                                     |                                                                            | (Unaudited)                             
|CASH FLOWS FROM OPERATING ACTIVITIES                                                 |                                                                            |                                          |            |                |          |   |             |        
|Net income                                                                           |                                                                            | $                                        | 786,907    |                |          | $ | 330,824     |        
|Adjustments to reconcile net income to net cash
    provided by operating activities |                                                                            |                                          |            |                |          |   |             |        
|                                                                                     | Equity in earnings of unconsolidated real estate,
    net of distributions |                                          |            | (223,773       | )        |   |             | (77,993 | )       
|                                                                                     | Gain on sale of real estate investment                                     |                                          |            | (23,617        | )        |   |             |        |         
|                                                                                     | Depreciation  continuing operations                                       |                                          |            | 68,217         |          |   |             |        |         
|                                                                                     | Depreciation  discontinued operations                                     |                                          |            | 98,272         |          |   |             | 210,530 |         
|                                                                                     | Amortization of deferred financing fees                                    |                                          |            | 122,344        |          |   |             | 42,919  |         
|                                                                                     | Change in operating assets and liabilities:                                |                                          |            |                |          |   |             |         |         
|                                                                                     |                                                                            | Accounts receivable                      |            |                | 18,215   |   |             |         | (27,445  | )
|                                                                                     |                                                                            | Accounts receivable from related parties |            |                | (79,021  | ) |             |         | 456,724  |  
|                                                                                     |                                                                            | Other assets                             |            |                | (620,055 | ) |             |         | (135,673 | )
|                                                                                     |                                                                            | Accounts payable and accrued liabilities |            |                | 2,859    |   |             |         | 314,015  |  
|                                                                                     |                                                                            | Security deposits and prepaid rent       |            |                | (35,260  | ) |             |         | (60,424  | )
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|Net cash provided by operating activities                                            |                                                                            |                                          | 115,088    |                |          |   | 1,053,477   |        
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                                 |                                                                            |                                          |            |                |          |   |             |        
|Purchase of real estate operating properties                                         |                                                                            |                                          | (8,911,857 | )              |          |   |            |        
|Purchase of investments in unconsolidated real
    estate                            |                                                                            |                                          | (5,025,000 | )              |          |   | (10,539,131 | )      
|Real estate property improvements                                                    |                                                                            |                                          |           |                |          |   | (31,726     | )      
|Proceeds from disposition of property held for
    sale                              |                                                                            |                                          | 3,842,584  |                |          |   |            |        
|Collections of notes receivable                                                      |                                                                            |                                          | 1,909      |                |          |   | 585         |        
|Collections of notes receivable from related
    parties                             |                                                                            |                                          |           |                |          |   | 229,870     |        
|Decrease in real estate deposits                                                     |                                                                            |                                          | 3,354,339  |                |          |   | 275,653     |        
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|Net cash used in investing activities                                                |                                                                            |                                          | (6,738,025 | )              |          |   | (10,064,749 | )      
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|CASH FLOWS FROM FINANCING ACTIVITIES                                                 |                                                                            |                                          |            |                |          |   |             |        
|Proceeds from issuance of common stock, net                                          |                                                                            |                                          |           |                |          |   | 6,329,532   |        
|Borrowings under notes payable                                                       |                                                                            |                                          | 5,000,000  |                |          |   | 298,707     |        
|Principal payments on notes payable                                                  |                                                                            |                                          | (2,951,524 | )              |          |   | (64,000     | )      
|Distributions paid                                                                   |                                                                            |                                          | (964,387   | )              |          |   | (577,666    | )      
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|Net cash provided by financing activities                                            |                                                                            |                                          | 1,084,089  |                |          |   | 5,986,573   |        
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                            |                                                                            |                                          | (5,538,848 | )              |          |   | (3,024,699  | )      
|CASH AND CASH EQUIVALENTS  beginning
    of period                                  |                                                                            |                                          | 6,129,468  |                |          |   | 3,647,159   |        
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|CASH AND CASH EQUIVALENTS  end of
    period                                        |                                                                            | $                                        | 590,620    |                |          | $ | 622,460     |        
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                    |                                                                            |                                          |            |                |          |   |             |        
|Cash paid during the period for:                                                     |                                                                            |                                          |            |                |          |   |             |        
|                                                                                     | Interest                                                                   |                                          | $          | 424,999        |          |   | $           | 408,832 |         
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|                                                                                     | Income taxes                                                               |                                          | $          | 12,688         |          |   | $           | 1,730   |         
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        
|SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:                                       |                                                                            |                                          |            |                |          |   |             |        
|                                                                                     | Issuance of common stock for dividends reinvested                          |                                          | $          |               |          |   | $           | 206,792 |         
|                                                                                     |                                                                            |                                          |            |                |          |   |             |        

The accompanying notes are an integral part of
these condensed consolidated financial statements.

6



---



##### Table of Contents






T REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

MARCH 31, 2003


(UNAUDITED)




|   |             
|-- | ------------
|1. | ORGANIZATION

T REIT, Inc. (the Company) was
formed in December 1998 in the Commonwealth of Virginia and
operates as a real estate investment trust (REIT)
under the Internal Revenue Code of 1986, as amended. The Company
is in the business of acquiring existing office, industrial,
retail and service properties located in several states. As of
March 31, 2003, the Company owned four properties, five
tenant in common interests and two membership interests in
limited liability companies (see Note 3).

Pursuant to a registration statement on
Form S-11 (the Registration Statement) under
the Securities Act of 1933, as amended, the Company offered for
sale to the public up to 10,000,000 shares of its common
stock (the Shares), and (collectively the
Offering) at an Offering price of $10.00 per Share
and up to 700,000 Shares under the Companys Dividend
Reinvestment Plan (the DRIP). The Registration
Statement was declared effective on February 22, 2000. By
May 31, 2002, when the Offering and the DRIP were
terminated, the Company had sold 4,720,176 shares of common
stock, including 22,100 sold to the Advisor and
69,676 shares sold under the DRIP. Aggregate gross proceeds
before Offering costs and selling commissions were approximately
$46,395,000. Through March 31, 2003, the Company
repurchased 23,876 shares pursuant to its Share Repurchase
Plan (See Note 6). As of March 31, 2003, there were
4,696,300 common shares outstanding.

The Company owns all of its interests in
properties through its majority-owned subsidiary, T REIT,
L.P., a Virginia limited partnership (the Operating
Partnership), and conducts substantially all of its
operations through the Operating Partnership. As of
March 31, 2003, the Company was the sole general partner of
the Operating Partnership and owned substantially all of the
equity interests therein, except for 100 incentive non-voting
ownership units issued to the Companys Advisor. The
incentive units entitle the Advisor to receive certain incentive
distributions of operating cash flow after a minimum 8% return
on invested capital has been paid to the Companys
shareholders (as defined in the Registration Statement). In
addition, the Advisor is entitled to incentive distributions
from net proceeds from the sale of properties after the
Companys shareholders have received distributions equal to
their invested capital, as defined, plus an 8% return on such
invested capital.

The Company is externally advised by Triple Net
Properties, LLC (the Advisor), which is primarily
responsible for managing the day-to-day operations and assets of
the Company. The Advisory Agreement between the Company and the
Advisor, amended effective February 22, 2002 for an
additional one-year term was renewed on a month-to-month basis
effective February 22, 2003 and is subject to further
consideration by the independent members of the Board of
Directors (See Note 7).



|   |                                                                                
|-- | -------------------------------------------------------------------------------
|2. | INTERIM FINANCIAL STATEMENTS AND SUMMARY OF
    SIGNIFICANT ACCOUNTING POLICIES



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

The accompanying condensed consolidated financial
statements include the accounts of the Company, T REIT,
L.P. and the wholly owned subsidiaries of T REIT, L.P. All
material intercompany transactions and account balances have
been eliminated in consolidation. All references to the Company
include the Operating Partnership and its subsidiaries.

The information furnished has been prepared in
accordance with accounting principles generally accepted in the
United States of America for interim financial reporting, the
instructions to Form 10-Q, and Rule 10-01 of
Regulation S-X. Accordingly, certain information and
disclosures have been condensed or omitted. In the opinion of
management, all adjustments considered necessary for the fair
presentation of the Companys financial position, results
of operations and cash flows have been included and are only of
a normal recurring

7



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)


nature. The results of operations for the three
months ended March 31, 2003 are not necessarily indicative
of the results that may be expected for the year ending
December 31, 2003.

These financial statements should be read in
conjunction with the Companys audited December 31,
2002 consolidated financial statements included in
Form 10-K previously filed with the Securities and Exchange
Commission.



| |                        
| | -----------------------
| | Real Estate Investments



| |                     
| | --------------------
| | Operating Properties

Operating properties are held for investment and
carried at cost less accumulated depreciation. Cost includes the
cost of land and completed buildings and related improvements.
Expenditures that increase the service life of properties are
capitalized; the cost of maintenance and repairs is charged to
expense as incurred.

Depreciation is generally provided on a
straight-line basis over the estimated useful lives of the
buildings and improvements, ranging primarily from 15 to
39 years. When depreciable property is retired or disposed
of, the related costs and accumulated depreciation are removed
from the accounts and any gain or loss reflected in operations.

Impairment losses are recorded on long-lived
assets used in operations when indicators of impairment are
present and the assets carrying amount is greater than the
sum of the future undiscounted cash flows, excluding interest,
estimated to be generated by those assets. As of March 31,
2003, no indicators of impairment existed and no impairment
losses have been recorded.

The Company follows the provisions of
EITF 97-11, Accounting for Internal Costs Related to
Real Estate Property Acquisitions. Accordingly, the
Company does not capitalize acquisition costs incurred in
conjunction with the identification and acquisition of
properties to be held for operations.



| |                       
| | ----------------------
| | Property Held for Sale

Property held for sale is carried at the lower of
cost or estimated fair value less cost to sell and such property
is no longer depreciated. The Company adopted the Financial
Accounting Standards Boards Statement of Financial
Accounting Standards (SFAS) 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, on January 1, 2002. SFAS 144 supersedes
SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. The
primary objectives of SFAS 1144 are to develop one
accounting model based on the frame work established in
SFAS 121 for long-lived assets to be disposed of by sale
and to address significant implementation issues regarding
impairment of long-lived assets held for use. In accordance with
SFAS 144, the Company classifies operating properties as
property held for sale in the period in which all of the
following criteria are met:



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | management, having the authority to approve the
    action, commits to a plan to sell the asset;                                                       
|
| |  | the asset is available for immediate sale in its
    present condition subject only to terms that are usual and
    customary for sales of such assets;
|
| |  | an active program to locate a buyer and other
    actions required to complete the plan to sell the asset have
    been initiated;                     
|
| |  | the sale of the asset is probable and the
    transfer of the asset is expected to qualify for recognition as
    a completed sale within one year;    

8



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)




| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the asset is being actively marketed for sale at
    a price that is reasonable in relation to its current fair
    value; and                                  
|
| |  | actions required to complete the plan indicate
    that it is unlikely that significant changes to the plan will be
    made or that the plan will be withdrawn.

The application of SFAS 144 resulted in:
(i) the presentation of the net operating results of
certain properties held for sale as described below, less
allocated interest expense and depreciation, as income from
discontinued operations for all periods presented (See
Note 3). Interest and depreciation expense was allocated
based on specific identification. Implementation of
SFAS 144 impacted income statement classification only and
had no effect on total results of operations. Properties sold
prior to January 1, 2002 are required to be presented as a
component of continuing operations.

As of March 31, 2003, two properties were
classified as held for sale. As of December 31, 2002, one
property was classified as held for sale.



| |                                              
| | ---------------------------------------------
| | Investments in Unconsolidated Real
    Estate

Investments in unconsolidated real estate are
accounted for using the equity method of accounting. Disposition
of investments accounted for using the equity method are
classified within continuing operations in conformity with
APB No. 18.



| |                    
| | -------------------
| | Revenue Recognition

Real estate property is leased to tenants under
leases with terms exceeding one year. Revenues from these
leases, which are accounted for as operating leases, are
recognized on a straight-line basis over the related term. Cost
recoveries from tenants are included in rental income in the
period the related costs are accrued.



| |                                            
| | -------------------------------------------
| | Allowance for Uncollectible
    Receivables

When needed, the Company maintains an allowance
for estimated losses resulting from the inability of tenants to
make required payments, which results in a reduction of income.
Management determines the adequacy of this allowance by
continually evaluating individual tenant receivables considering
the tenants financial condition, security deposits,
letters of credit, lease guarantees and current economic
conditions. Management has established an allowance for
uncollectible accounts of $67,759 at March 31, 2003, to
reduce receivables to recoverable amounts.



| |                   
| | ------------------
| | Stock Option Plans

The Company follows the disclosure only
provisions of Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based
Compensation (SFAS 123). For employee
compensatory stock options that will eventually vest,
compensation expense is recognized during the periods in which
the related employee services are rendered. Such expense is
generally measured by determining the excess, if any, of the
grant date estimated fair market value of the underlying stock
over the amount to be paid by the employee in conformity with
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees
(APB 25). Compensatory stock options and
similar equity instruments issued to non-employees in exchange
for goods or services are accounted for based on the estimated
fair market value of (1) the goods or services received or
(2) the equity instrument issued, whichever is more
reliably measurable. This accounting policy is in conformity
with SFAS 123.

9



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)


Effective with the Offering, the Company
authorized and reserved a total of 100,000 shares of common
stock for issuance under the Independent Director Stock Option
Plan and 700,000 shares of common stock for issuance under
the Officer and Employee Stock Option Plan. Options awarded
under these plans are not exercisable until such plans have been
approved by a majority of the Companys shareholders. As of
March 31, 2003 neither plan has been submitted to
shareholders for their approval. Options awarded under these
plans will vest when and if such shareholder approval is
obtained, provided such approval is two years after the option
grant date.

No options were granted or forfeited under either
of these plans during the quarter ended March 31, 2003. As
of March 31, 2003, stock options for a total of
155,000 shares were authorized under both plans; however,
these options are not considered outstanding since the option
plans remain subject to shareholder approval.



| |                        
| | -----------------------
| | Qualification as a REIT

The Company elected to be taxed as a REIT in
2000. As of March 31, 2003, the Company meets the
compliance tests required to maintain its REIT status.



| |                                              
| | ---------------------------------------------
| | Recently Issued Accounting
    Pronouncements

The Financial Accounting Standards Board issued
Statements No. 143, Accounting for Asset Retirement
Obligations (SFAS 143) and No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144). SFAS 143
addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and
the associated asset retirement costs, and is effective for
financial statements issued for fiscal years beginning after
June 15, 2002. SFAS 144 supersedes Statement
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of,
addresses financial accounting and reporting for the impairment
or disposal of long-lived assets, including accounting for a
segment of a business accounted for as a discontinued operation.
SFAS 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001. The
adoption of SFAS 144 resulted in the presentation of
discontinued operations in 2002 and all prior periods presented
related to property held for sale.

In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13
and Technical Corrections. SFAS No. 145 rescinds
three existing pronouncements (relating to the intangible assets
of motor carriers and certain debt extinguishments), amends
SFAS No. 13 (Accounting for Leases), and
makes technical corrections that are not substantive in nature
to several other pronouncements. The amendment of
SFAS No. 13, which is effective for transactions
occurring after May 15, 2002, requires sale-leaseback
accounting by lessees for certain lease modifications that are
economically similar to sale-leaseback transactions.
SFAS No. 145 did not affect the accompanying 2003
financial statements, and is not presently expected to have a
significant impact on the Companys future financial
statements.

In June, 2002, the FASB approved for issuance
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, SFAS No. 146
is effective for such activities initiated after
December 31, 2002. Activities of this type include
restructurings (such as relocation of a business and fundamental
reorganizations of a business itself), which may give rise to
costs such as contract cancellation provisions, employee
relocation, and one-time termination costs.
SFAS No. 146 prohibits liability recognition based
solely on managements intent, and requires that
liabilities be measured at estimated fair value. The adoption of
SFAS No. 146 did not have a material effect on the
Companys financial statements.

10



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)


In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an
amendment of FASB Statement No. 123. The disclosure
requirements of Statement 123, Accounting for
Stock-Based Compensation, which apply to stock
compensation plans of all companies, are amended to require
certain disclosures about stock-based employee compensation
plans in an entitys accounting policy note. Those
disclosures include a tabular format of pro forma net income
and, if applicable, earnings per share under the fair value
method if the intrinsic value method is used in any period
presented. Pro forma information in a tabular format is also
required in the notes to interim financial information if the
intrinsic value method is used in any period presented. Before
amendment by Statement 148, Statement 123 required
entities changing to the fair value method of accounting for
stock-based employee compensation to account for the change in
method prospectively. The Board decided to provide a choice
among three transition methods (the prospective method
originally required by Statement 123, the modified
prospective method, and the retroactive restatement method) for
entities voluntarily adopting the fair value method in periods
beginning before December 16, 2003.
Statement 123s original prospective transition method
will not be available to entities changing to the fair value
method in fiscal years beginning after December 15, 2003.
The amendments to the disclosure and transition provisions of
Statement 123 are effective for fiscal years ending after
December 15, 2002. The disclosure requirement for interim
financial information is effective for interim periods beginning
after December 15, 2002. The Company has adopted the
disclosure requirements of SFAS 148 in the accompanying
financial statements. The implementation of this standard did
not have a material effect upon the Companys financial
statements.

The FASB issued Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an interpretation of
FASB Nos. 5, 57 and 107 and rescission of FASB
Interpretation No. 34. This Interpretation elaborates on
the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a
guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and
measurement provisions of this Interpretation are applicable on
a prospective basis to guarantees issued or modified after
December 31, 2002. Implementation of these provisions of
the Interpretation is not expected to have a material impact on
the Companys consolidated financial statements. The
disclosure requirements of the Interpretation are effective for
financial statements of interim or annual periods ended after
December 15, 2002, and have been adopted in the
accompanying consolidated financial statements and the
additional disclosures required have been included.

The FASB issued Interpretation No. 46,
Consolidation of Variable Interest
Entities an interpretation of Accounting
Research Bulletin (ARB) No. 51. This
Interpretation defines a variable interest entity and provides
that if a business enterprise has a controlling financial
interest in a variable interest entity, the assets, liabilities,
and results of the activities of the variable interest entity
should be included in consolidated financial statements with
those of the business enterprise. Furthermore, the Board
indicates that the voting interest approach of
ARB No. 51 is not effective in identifying controlling
financial interests in entities that are not controllable
through voting interest or in which the equity investors do not
bear the residual economic risk. This Interpretation applies
immediately to variable interest entities created after
January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It
applies in the first fiscal year or interim period beginning
after June 15, 2003, to variable interest entities in which
an enterprise holds a variable interest that it acquired before
February 1, 2003. The Interpretation applies to public
enterprises as of the beginning of the applicable interim or
annual period. The implementation of this Interpretation did not
have a material effect upon the Companys financial
statements.

11



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)




| |                  
| | -----------------
| | Reclassifications

Certain reclassifications have been made to the
prior year financial statements in order to conform to the
current year presentation.



|   |                        
|-- | -----------------------
|3. | REAL ESTATE INVESTMENTS

The Companys real estate investments are
comprised of (i) wholly owned properties including
operating properties and properties held for sale and
(ii) investments in unconsolidated real estate.



| |                        
| | -----------------------
| | Wholly Owned Properties



| |                     
| | --------------------
| | Operating Properties

At March 31, 2003, the Companys
operating properties were as follows:

|                                    |  |            |       |      |  |               |           |       |  |   |            |   |  |   |            |  
|----------------------------------- |  | ---------- | ----- | ---- |  | ------------- | --------- | ----- |  | - | ---------- | - |  | - | ---------- | -
|                                    |  | Percentage |       |      |  | Buildings and |           |      
|                                    |  | Ownership  |       | Land |  | Improvements  |           | Total
|                                    |  |            |       |      |  |               |           |      
|University Heights, San Antonio, TX |  |            | 100.0 | %    |  | $             | 1,011,100 |       |  | $ | 5,796,451  |   |  | $ | 6,807,551  |  
|Gateway Mall, Bismarck, ND          |  |            | 100.0 | %    |  |               |          |       |  |   | 8,847,605  |   |  |   | 8,847,605  |  
|                                    |  |            |       |      |  |               |           |       |  |   |            |   |  |   |            |  
|                                    |  |            |       |      |  |               | 1,011,100 |       |  |   | 14,644,056 |   |  |   | 15,655,156 |  
|Less: accumulated depreciation      |  |            |       |      |  |               |          |       |  |   | (119,872   | ) |  |   | (119,872   | )
|                                    |  |            |       |      |  |               |           |       |  |   |            |   |  |   |            |  
|                                    |  |            |       |      |  | $             | 1,011,100 |       |  | $ | 14,524,184 |   |  | $ | 15,535,284 |  
|                                    |  |            |       |      |  |               |           |       |  |   |            |   |  |   |            |  

On January 29, 2003, the Company purchased
the Gateway Mall, a multi-tenant regional mall of approximately
333,210 square feet on a 45-acre site located in Bismarck, North
Dakota. The property was purchased from an unaffiliated
third-party for a purchase price of $9,000,000, less a $150,000
credit received from the seller at closing. The property is
subject to a ground lease expiring in 2028 with 10 five-year
option periods thereafter. The Company financed the purchase
price with a $5,000,000 loan from American Express Financial
Corporation. The seller paid a sales commission to Triple Net
Properties Realty, Inc. (Realty), an affiliate of
the Company and the Advisor, of $180,000, or approximately 2.0%
of the purchase price.



| |                         
| | ------------------------
| | Properties Held for Sale

On January 13, 2003, the Company sold the
Northstar Crossing Shopping Center in Garland, Texas to an
unaffiliated third-party for $4,200,000. The Company realized
proceeds of $3,842,584 before repayment of debt and a net gain
of $23,617. No fees were earned by the Advisor or any affiliate
from this sale.

On February 25, 2003, management of the
Company made a decision to sell the following properties and
commenced active marketing:



| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Thousand Oaks Shopping Center, a shopping center
    located in San Antonio, Texas containing 162,864 square feet.
    The property was purchased in December 2000 from an unaffiliated
    third-party for a purchase price of $13,000,000.  
|
| |  | Pahrump Valley Junction Shopping Center, a retail
    property located in Pahrump, Nevada containing 105,721 square
    feet. The property was purchased in May 2001 from an
    unaffiliated third-party for a purchase price of $17,150,000.

These properties have been reclassified as held
for sale and are carried at March 31, 2003 at their net
historical cost basis, which is not in excess of estimated fair
value less cost to sell. The Company ceased

12



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)


depreciation upon its decision to sell each of
the properties and the accumulated depreciation has been
reclassified against the cost basis. Prior to February 25,
2003, Thousand Oaks and Pahrump were classified as operating
properties.

SFAS No. 144 requires the operating
results of any property with their own identifiable cash flows
that is held for sale to be removed from income from continuing
operations and reported as discontinued operations for the
current period and all prior periods presented. Summarized
operating information for the properties held for sale and sold
in the first quarter of 2003 referred to above which are
included in discontinued operations follows:

|                                    |  |                         |           |      |  |   |           | 
|----------------------------------- |  | ----------------------- | --------- | ---- |  | - | --------- | 
|                                    |  |                        
|                                    |  | Quarter Ended March 31,
|                                    |  |                        
|                                    |  | 2003                    |           | 2002
|                                    |  |                         |           |     
|Revenues                            |  | $                       | 1,070,318 |      |  | $ | 1,233,293 | 
|Income from discontinued operations |  | $                       | 253,385   |      |  | $ | 257,884   | 



| |                                              
| | ---------------------------------------------
| | Investments in Unconsolidated Real
    Estate

Investments in unconsolidated real estate consist
of the Companys investments in undivided tenant in common
interests and limited liability companies. At March 31,
2003, the Company had the following investments in
unconsolidated real estate.

|                                    |  |          |                                |                      |  |   |            | 
|----------------------------------- |  | -------- | ------------------------------ | -------------------- |  | - | ---------- | 
|Entity Name                         |  | Property |                                | Companys Investment
|                                    |  |          |                                |                     
|T REIT  Reno Trademark, LLC        |  |          | Trademark Building             |                      |  | $ | 1,118,560  | 
|NNN County Center  12, LLC         |  |          | County Center Building         |                      |  |   | 531,833    | 
|T REIT  City Center West A, LLC    |  |          | City Center West A Building  |                      |  |   | 8,093,589  | 
|NNN Pacific Corporate Park 1, LLC   |  |          | Pacific Corporate Park         |                      |  |   | 2,400,107  | 
|NNN Congress Center, LLC            |  |          | Congress Center                |                      |  |   | 4,980,925  | 
|T REIT  Titan Plaza, L.P.          |  |          | Titan Building and Titan Plaza |                      |  |   | 1,765,226  | 
|T REIT  Saddleback Financial, L.P. |  |          | Saddleback Financial           |                      |  |   | 858,364    | 
|                                    |  |          |                                |                      |  |   |            | 
|                                    |  |          |                                |                      |  | $ | 19,748,604 | 
|                                    |  |          |                                |                      |  |   |            | 

On January 9, 2003, the Company purchased an
approximately 38% limited liability company membership interest
in NNN Congress Center, LLC, an affiliate of the Company
and the Advisor, which simultaneously purchased an approximately
62% undivided tenant in common interest in Congress Center, a
16-story Class A office building of approximately 525,000
square feet built in 2001 and located in Chicago, Illinois.
Affiliates of the Company and the Advisor,
G REIT  Congress Center, LLC and WREIT-Congress
Center, LLC, simultaneously purchased undivided tenant in common
interests totaling approximately 38% ownership of the property.
Simultaneous with and subsequent to the purchase of Congress
Center, NNN Congress Center, LLC sold undivided tenant in
common interests at cost to unaffiliated third parties totaling
approximately 35% of Congress Center, lowering its percentage
ownership to approximately 27%. The seller of Congress Center
was an unaffiliated third-party. The total purchase price for
Congress Center was $136,108,000. The seller paid a sales
commission to Realty of $2,000,000, or approximately 1.50% of
the purchase price. The Companys total investment was
approximately $5,025,000 in cash.

The Company is jointly and severally liable for
the entire amount of the debt in connection with the above
properties (See Note 8).

13



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)


Unaudited condensed combined historical financial
information for the Companys investments in unconsolidated
real estate as of and for the quarters ended March 31, 2003
and 2002 is as follows:

|                               |  |                |             |                |  |   |            | 
|------------------------------ |  | -------------- | ----------- | -------------- |  | - | ---------- | 
|                               |  | March 31, 2003 |             | March 31, 2002
|                               |  |                |             |               
|Assets (primarily real estate) |  | $              | 205,031,799 |                |  | $ | 58,983,059 | 
|                               |  |                |             |                |  |   |            | 
|Mortgage notes payable         |  | $              | 133,320,373 |                |  | $ | 34,376,836 | 
|Other liabilities              |  |                | 1,838,364   |                |  |   | 188,698    | 
|Equity                         |  |                | 69,873,062  |                |  |   | 24,417,525 | 
|                               |  |                |             |                |  |   |            | 
|                               |  | $              | 205,031,799 |                |  | $ | 58,983,059 | 
|                               |  |                |             |                |  |   |            | 
|Companys share of equity      |  | $              | 19,748,604  |                |  | $ | 14,499,831 | 
|                               |  |                |             |                |  |   |            | 
|                              
|Revenues                       |  | $              | 5,342,548   |                |  | $ | 523,772    | 
|Expenses                       |  |                | 3,967,578   |                |  |   | 350,117    | 
|                               |  |                |             |                |  |   |            | 
|                               |  |                | 1,374,970   |                |  | $ | 173,655    | 
|                               |  |                |             |                |  |   |            | 
|Companys equity in earnings   |  | $              | 558,161     |                |  | $ | 77,993     | 
|                               |  |                |             |                |  |   |            | 



|   |                
|-- | ---------------
|4. | NOTE RECEIVABLE

In November 2001, the Company advanced $595,000
to the buyer of the Christie Street Building. The note is
secured by a first deed of trust, with interest at 8.5% per
annum maturing in December 2006. Interest income earned in
connection with this note for the quarter ended March 31,
2003 was approximately $12,600.



|   |                                                       
|-- | ------------------------------------------------------
|5. | ACCOUNTS AND NOTES RECEIVABLE FROM RELATED
    PARTIES

Accounts receivable from related parties at
March 31, 2003 consist primarily of $120,000 of
reimbursements from the Advisor for offering costs in excess of
2.5% of gross offering proceeds and a $440,000 receivable from
the Advisor for amounts due related to an indemnification
agreement associated with the sale of the Christie Street
Building in 2001.

The Company made no related party loans during
the quarter ended March 31, 2003 and had no related party
loans outstanding as of March 31, 2003 or December 31,
2002.

Section 6.4 of Article 6 of the
Companys Articles of Incorporation prohibits the Company
from making any loans or advances to its Advisor, directors,
officers or any affiliated entities; however, during 2001 and
2000, the Company made such loans or advances to affiliates, all
of which have been collected in full prior to December 31,
2002. Management does not believe that these past violations of
the Articles of Incorporation will impact future operations of
the Company.



|   |                     
|-- | --------------------
|6. | SHAREHOLDERS EQUITY

At the conclusion of its Offering in May 2002,
the Company had sold 4,720,176 shares of common stock at $10.00
per share, including 22,100 shares issued to the Advisor and
69,676 shares sold under the DRIP.

Through December 31, 2002, the Company had
repurchased 23,876 shares pursuant to its Share Repurchase Plan.
During the quarter ended March 31, 2003, the Company did
not repurchase any additional shares of its common stock.

14



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)




|   |                                                      
|-- | -----------------------------------------------------
|7. | ADVISORY AGREEMENT AND RELATED PARTY
    TRANSACTIONS



| |              
| | -------------
| | Advisory Fees

The Company is externally advised by Triple Net
Properties, LLC (the Advisor), which is primarily
responsible for managing the day-to-day operations and assets of
the Company. The Advisory Agreement between the Company and the
Advisor, amended effective February 22, 2002 for an
additional one-year term was renewed on a month-to-month basis
effective February 22, 2003 and is subject to further
consideration by the independent members of the Board of
Directors. The Company compensates the Advisor for its services
through a series of fees pursuant to the Advisory Agreement. No
amounts are currently due the Advisor under this agreement.



| |                         
| | ------------------------
| | Property Management Fees

The Company pays Realty property management fees
equal to 5% of the gross income of each property managed by
Realty. All of the Companys properties are managed by
Realty. For the quarters ended March 31, 2003 and 2002, the
Company paid Realty approximately $88,000 and $59,000,
respectively, in property management fees.



| |                        
| | -----------------------
| | Incentive Distributions

The Advisor owns 100 non-voting incentive
performance units in T REIT, L.P., the Companys Operating
Partnership and is entitled to incentive distributions of
operating cash flow after the Companys shareholders have
received an 8.00% annual return on their invested capital. No
incentive distributions were made to the Advisor for the quarter
ended March 31, 2003.

The Company compensates the Advisor for its
services through a series of fees pursuant to the Advisory
Agreement. No amounts were incurred during the first quarter of
2003 and no amounts are currently due the Advisor under this
agreement.



|   |                              
|-- | -----------------------------
|8. | COMMITMENTS AND CONTINGENCIES



| |                       
| | ----------------------
| | Master Lease Agreement

In connection with the sale of the Christie
Building in November 2001, the Company agreed as part of the
sale transaction, to guarantee the lease payment in the amount
$20,000 per month for a period of five years under a master
lease agreement. Under this agreement, the Company is obligated
to make lease payments to the lessor only in the event the
sub-lessee fails to make the lease payments. In addition, the
Company is also obligated to pay a pro rata share of lease
commissions and tenant improvements in the event the premises
are re-leased prior to November 13, 2006. Concurrent with
the issuance of the guarantee, the Advisor agreed to indemnify
the Company against any future losses under the master lease
agreement with the indemnification evidenced by an indemnity
agreement dated November 13, 2001. The Christie Building is
a single tenant office building. The current tenants lease
expired on August 31, 2002 and the tenant vacated the
property in October 2002. Accordingly, the Company has accrued
$440,000 related to its obligations under the guaranty, of which
$120,000 has been paid through March 31, 2003. The
Companys accrual assumes a new tenant will occupy the
property beginning in the third quarter of 2003 and has been
calculated assuming a discount rate of 10% per annum. The
Company has no collateral, however it has recourse against the
Advisor under the indemnity agreement. At April 3, 2003,
the Company has been reimbursed by the Advisor for all amounts
paid under the guarantee and expects to be reimbursed by the
Advisor in connection with the indemnity agreement for the full
amount of its obligation.

15



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)




| |                            
| | ---------------------------
| | Contingent Loan Obligations

The Company has the following contingent loan
obligations at March 31, 2003, which it discloses under
FIN 45. None of these liabilities are carried on the
consolidated balance sheets as the Company accounts for related
real estate investments using the equity method of accounting.

The Company is jointly and severally liable for
the entire $4,600,000 balance of a mortgage loan in connection
with the refinancing of the Trademark Building. The note is
secured by a deed of trust with a fixed interest rate of 6.35%,
amortized on a 30-year schedule, with a due date of
January 1, 2013. The Companys 40.0% proportionate
share of this debt was approximately $1,840,000.

In connection with the acquisition of the County
Center Building, the Companys wholly owned subsidiary,
NNN County Center Drive  12, LLC, is jointly and
severally liable on a $3,210,000 mortgage loan on the property
payable to a bank. The loan terms include a variable rate of
4.125% over 6-month LIBOR, subject to an 8.00% floor rate, with
a 20-year amortization period due September, 2011.

In connection with the acquisition of the City
Center West A Building, the Companys wholly
owned subsidiary, T REIT  City Center West
A, LLC, is jointly and severally liable on a
$13,000,000 mortgage loan on the property payable to a bank. The
loan terms include a 6.5% fixed interest rate with a 27-year
amortization period due in five years.

In connection with the acquisition of the
membership interest in NNN Pacific Corporate Park ,
LLC, such entity is jointly and severally liable on an
approximately $5,683,000 mortgage loan (originally $15,500,000
and reduced by subsequent sales of buildings in the office park)
on Pacific Corporate Park from a financial institution. The loan
terms include a spread of 3.25% over LIBOR, with interest-only
payments for two years and two six-month extensions at the
borrowers election upon payment of a 0.25% fee upon each
extension. The initial interest rate was locked for 60 days
at a spread of 3.25% over 60-day LIBOR. After the initial 60-day
rate lock period, the borrowers locked $2,000,000 of the loan at
a spread of 3.25% over 30-day LIBOR and the balance of the loan
at a spread of 3.25% over 60-day LIBOR.

In connection with the acquisition of the Titan
Building and Titan Plaza, the Companys wholly-owned
subsidiary, T REIT  Titan Plaza, L.P., is
jointly and severally liable on a $6,000,000 mortgage loan
payable to a bank. The loan terms include a variable rate of
3.25% over 30-day LIBOR, subject to a 5.25% floor rate, with a
30-year amortization period due May 2004.

In connection with the acquisition of the
Saddleback Financial Center, the Companys wholly-owned
subsidiary, T REIT  Saddleback Financial L.P.,
is jointly and severally liable on a $7,650,000 mortgage loan
payable to a bank. The loan terms include a variable rate of
0.5% over the Wall Street Journal Prime Rate, subject to a 5.00%
floor rate, with a 30-year amortization period due September
2007.

In connection with the acquisition of Congress
Center, the Company, through its membership interest in NNN
Congress Center, LLC, is jointly and severally liable on a
$95,950,000 mortgage loan payable to a bank and any subsequent
increases in the total debt. The loan terms include an
$80,950,000, 36-month senior mortgage bridge loan and a
$15,000,000, 36-month mezzanine loan.

In the event of default on the above loans by
other property owners, the Company may be required to fully
repay a defaulted loan and accrued interest thereon. In such
event, the Company would have recourse against the other owners
and would then be able to proportionally increase its ownership
interest in the respective property.

16



---



##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

MARCH 31, 2003


(UNAUDITED)




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

The Companys other commitments and
contingencies include the usual obligations of a real estate
company in the normal course of business. In the opinion of
management, these matters are not expected to have a material
adverse effect on the Companys financial position and/or
results of operations.



|   |                  
|-- | -----------------
|9. | SUBSEQUENT EVENTS

On April 2, 2003, the Company entered into a
letter of intent with an unaffiliated third-party to sell
Thousand Oaks Shopping Center for $15,880,000. The Company
expects to enter into an agreement to sell the property in the
second quarter of 2003.

On April 22, 2003, the Company entered into
a letter of intent with an unaffiliated third-party to sell
Pahrump Valley Shopping Center for $19,000,000. The Company
expects to enter into an agreement to sell the property in the
second quarter of 2003.

17



---



##### Table of Contents








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

Overview

The following discussion should be read in
conjunction with the condensed consolidated financial statements
and notes thereto of the Company appearing elsewhere in this
report. Such financial statements have been prepared to reflect
the Companys financial position as of March 31, 2003
and December 31, 2002, together with the results of
operations and cash flows for the periods ended March 31,
2003 and 2002.

Forward-Looking Statements

Historical results and trends are not necessarily
indicative of future operations. Managements statements
contained in this report that are not historical facts are
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results may differ materially from those
included in the forward-looking statements. The Company intends
such forward-looking statements to be covered by the safe-harbor
provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and is
including this statement for purposes of complying with such
provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and
expectations of management, are generally identifiable by use of
the words believe, expect,
intend, anticipate,
estimate, project,
prospects, or similar expressions. The
Companys ability to predict results or the actual effect
of future plans or strategies is inherently uncertain. Factors
which could have a material adverse affect on the operations and
future prospects of the Company include, but are not limited to:
changes in general economic conditions and in the real estate
market specifically (including those in the local economy of the
regions where the Companys properties are located),
legislative/regulatory changes (including changes in Federal
and/ or state laws governing the taxation of REITs),
availability of capital, interest rates, competition, supply and
demand for operating properties in the Companys current
and proposed market areas, and generally accepted accounting
principles applicable to REITs. These risks and uncertainties
should be considered in evaluating forward-looking statements,
and undue reliance should not be placed on any such statements.
Further information concerning the Company and its business,
including additional factors that could materially affect the
Companys financial results, is included herein and in the
Companys other filings with the Securities and Exchange
Commission. The Company does not intend to update any of the
forward-looking statements after the date this report is filed
to conform these statements to actual results, unless required
by law.

Public Offering of Equity Securities

On February 22, 2000, the Company commenced
its initial public offering of up to 10,000,000 shares of
common stock at $10.00 per share pursuant to a Registration
Statement on Form S-11 filed under the Securities Act of
1933, as amended. The Company commenced its active operations on
September 26, 2000 when it completed its first property
acquisition. The Company terminated its initial public offering
on May 31, 2002 at which time gross proceeds of
approximately $46,395,000 had been received from the sale of
4,720,176 shares. Through December 31, 2002, the
Company had repurchased 23,876 shares pursuant to its Share
Repurchase Plan. No additional shares were repurchased during
the quarter ended March 31, 2003. As a result,
4,696,300 shares were outstanding at March 31, 2003.

Critical Accounting Policies

The preparation of these financial statements in
accordance with accounting principles generally accepted in the
United States of America requires us to make estimates and
judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. The Company believes that its
critical accounting policies are those that require significant
judgments and estimates such as those related to revenue
recognition and allowance for uncollectible receivables,
impairment of real estate assets, deferred assets, and
qualification as a REIT. These estimates are made and evaluated
on an on-going basis using information that is currently
available as well as various other assumptions believed to be

18



---



##### Table of Contents



reasonable under the circumstances. Actual
results could vary from those estimates and those estimates
could be different under different assumptions or conditions.




| |                                                                    
| | -------------------------------------------------------------------
| | Revenue Recognition and Allowance for
    Uncollectible Receivables

Base rental income is recognized on a
straight-line basis over the terms of the respective lease
agreements. Differences between rental income recognized and
amounts contractually due under the lease agreements are
credited or charged, as applicable, to rent receivable. The
Company maintains, as necessary, an allowance for doubtful
accounts for estimated losses resulting from the inability of
tenants to make required payments which will result in a
reduction to income. Management determines the adequacy of this
allowance by continually evaluating individual tenant
receivables considering the tenants financial condition,
security deposits, letters of credit, lease guarantees and
current economic conditions.

Impairment of
Real Estate Assets

The Company assesses the impairment of a real
estate asset when events or changes in circumstances indicate
that the net book value may not be recoverable. Indicators
management considers important which could trigger an impairment
review include the following:



| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | significant negative industry or economic trend;                                                    
|
| |  | a significant underperformance relative to
    historical or projected future operating results; and
|
| |  | a significant change in the manner in which the
    asset is used.                                  

Deferred
Assets

Costs incurred for debt financing and property
leasing are capitalized as deferred assets. Deferred financing
costs include amounts paid to lenders and others to obtain
financing. Such costs are amortized over the term of the related
loan. Amortization of deferred financing costs is included in
interest expense in the Companys statements of operations.
Deferred leasing costs include leasing commissions that are
amortized using the straight-line method over the term of the
related lease. Deferred leasing costs are included in the basis
when a property is sold and therefore reduce the gain on sale.
Unamortized financing and leasing costs are charged to expense
in the event of debt prepayment or early termination of the
lease.

Qualification
as a REIT

The Company has made an election to be taxed as a
REIT in 2000. If the Company was to fail to qualify as a REIT,
it would be, among other things, required to provide for federal
income taxes on its income and reduce the level of distributions
made to its shareholders. Critical estimates include the
allocation of cost between personal and real property, and the
calculation of earnings and profits for tax purposes, among
others.

Real Estate Investments

Through March 31, 2003, the Company, through
the Operating Partnership, had purchased interests in 15 real
estate properties, including six operating properties, seven
undivided tenant in common interest properties and limited
liability membership interests in two properties. Through
March 31, 2003, the Company had sold two operating
properties and two undivided tenant in common interest
properties. In addition, two of its operating properties were
held for sale at March 31, 2003.

19



---



##### Table of Contents



The following table presents a summary of the
Companys wholly-owned properties and properties in which
it owned undivided tenant in common and limited liability
company membership interests as of March 31, 2003:

|                                              |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                
|--------------------------------------------- |  | -------- | ---------------- | ----------- |  | ------- | ------ | -------- |  | --------------- | --------- |  |  |  | -------- |  |  | -------------------------------
|                                              |  |          |                  | Company     |  | GLA(1)  |        | Date     |  |                
|Property Name                                 |  | Location |                  | Ownership % |  | (Sq Ft) |        | Acquired |  | Major Tenant(2)
|                                              |  |          |                  |             |  |         |        |          |  |                
|Operating Properties                          |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                
|University Heights                            |  |          | San Antonio, TX  |             |  |         | 100.00 | %        |  |                 | 68,400    |  |  |  | 08/22/02 |  |  | US Geological Survey           
|Gateway Mall                                  |  |          | Bismarck, ND     |             |  |         | 100.00 |          |  |                 | 333,210   |  |  |  | 01/29/03 |  |  | Sears Roebuck                  
|                                              |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                
|                                              |  |          |                  |             |  |         |        |          |  |                 | 401,610   |  |  |  |          |  |  |                                
|Investments in Unconsolidated Real
    Estate |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                
|Trademark Building                            |  |          | Reno, NV         |             |  |         | 40.00  | (3)      |  |                 | 75,257    |  |  |  | 09/04/01 |  |  | Memec, Inc.                    
|County Center Drive                           |  |          | Temecula, CA     |             |  |         | 16.00  | (3)      |  |                 | 77,582    |  |  |  | 01/11/02 |  |  | FFF Enterprises                
|City Center West A                          |  |          | Las Vegas, NV    |             |  |         | 89.13  | (3)      |  |                 | 105,964   |  |  |  | 03/15/02 |  |  | Citadel Broadcasting           
|Pacific Corporate Park                        |  |          | Lake Forest, CA  |             |  |         | 22.76  | (4)      |  |                 | 167,486   |  |  |  | 03/25/02 |  |  | Open Bid Exch Corp             
|Titan Building & Plaza                        |  |          | San Antonio, TX  |             |  |         | 48.50  | (3)      |  |                 | 131,527   |  |  |  | 04/17/02 |  |  | St. Paul Fire & Marine         
|Saddleback Financial                          |  |          | Laguna Hills, CA |             |  |         | 25.00  | (3)      |  |                 | 72,711    |  |  |  | 09/25/02 |  |  | CA Bank & Trust                
|Congress Center                               |  |          | Chicago, IL      |             |  |         | 10.26  | (4)      |  |                 | 525,000   |  |  |  | 01/09/03 |  |  | General Services Administration
|                                              |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                
|                                              |  |          |                  |             |  |         |        |          |  |                 | 1,155,527 |  |  |  |          |  |  |                                
|Properties Held for Sale                      |  |          |                  |             |  |         |        |          |  |                 |           |  |  | 
|Thousand Oaks                                 |  |          | San Antonio, TX  |             |  |         | 100.00 |          |  |                 | 162,864   |  |  |  | 12/06/00 |  |  | H. E. Butt                     
|Pahrump                                       |  |          | Pahrump, NV      |             |  |         | 100.00 | %        |  |                 | 105,721   |  |  |  | 05/11/01 |  |  | Albertsons                    
|                                              |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                
|                                              |  |          |                  |             |  |         |        |          |  |                 | 268,585   |  |  |  |          |  |  |                                
|                                              |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                
|                                              |  |          |                  |             |  |         |        |          |  |                 | 1,825,722 |  |  |  |          |  |  |                                
|                                              |  |          |                  |             |  |         |        |          |  |                 |           |  |  |  |          |  |  |                                



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | GLA unadjusted for the Companys percentage
    undivided tenant in common interest.
|   
|(2) | Tenant occupies largest space of property.                                          
|   
|(3) | Undivided tenant in common interest.                                                
|   
|(4) | Limited liability company membership interest.                                      

Acquisitions

On January 9, 2003, the Company purchased an
approximately 38% limited liability company membership interest
in NNN Congress Center, LLC, an affiliate of the Company and the
Advisor, which simultaneously purchased an approximately 27%
undivided tenant in common interest in Congress Center, a
16-story Class A office building of approximately 525,000
square feet built in 2001 and located in Chicago, Illinois. The
Companys total investment was approximately $5,025,000 in
cash. Affiliates of the Company and the Advisor, G REIT-Congress
Center, LLC and WREIT-Congress Center, LLC, simultaneously
purchased undivided tenant in common interests totaling
approximately 38% ownership of the property. Simultaneous with
and subsequent to the purchase of Congress Center, NNN Congress
Center, LLC sold undivided tenant in common interests at cost to
unaffiliated third parties totaling approximately 35% of
Congress Center, lowering its percentage ownership to
approximately 27%. The property was purchased from an
unaffiliated third party for a total purchase price of
$136,108,000. The seller paid a sales commission to Realty of
$2,000,000, approximately 1.50% of the purchase price.

On January 29, 2003, the Company purchased
the Gateway Mall, a multi-tenant regional mall of approximately
333,210 square feet on a 45-acre site located in Bismarck,
North Dakota. The property was purchased from an unaffiliated
third-party for a purchase price of $9,000,000, less a $150,000
credit received from the seller at closing. The property is
subject to a ground lease expiring in 2028 with
10 five-year option

20



---



##### Table of Contents



periods thereafter. The Company financed the
purchase price with a $5,000,000 loan from American Express
Financial Corporation. The seller paid a sales commission to
Realty of $180,000, or approximately 2.0% of the purchase price.


Dispositions

On January 13, 2003, the Company sold the
Northstar Crossing Shopping Center in Garland, Texas to an
unaffiliated third-party for $4,200,000. The Company realized
net proceeds of $3,842,584 before repayment of debt associated
with the property and a net gain of $23,617. No fees were earned
by the Advisor or any affiliate from this sale.

Discontinued Operations

On February 25, 2003, management of the
Company approved plans to sell Thousand Oaks Shopping Center and
Pahrump Valley Shopping Center and commenced active marketing of
the properties. Current and prior net operating income related
to these properties is classified as discontinued operations for
all periods presented.

Results of Operations

The comparability of the financial information
discussed below is limited by acquisitions and dispositions
completed during the year ended December 31, 2002 and the
quarter ended March 31, 2003. During the quarter ended
March 31, 2002, the Company purchased 16% and 89.125%
tenant in common interests in a 77,582 square foot office/
distribution building and a 105,964 square foot office
building, respectively, and also purchased a 38% membership
interest in an LLC owning a 60% tenant in common interest in a
166,785 square foot, six-building office park. During the
quarter ended June 30, 2002, the Company purchased a 48.50%
tenant in common interest in a 131,527 square foot office
building. During the quarter ended September 30, 2002, the
Company purchased a 68,400 square foot flex/service center
and a 25% undivided tenant in common interest in a
72,711 square foot office building and sold 26% and 16.5%
undivided tenant in common interests in two shopping centers
containing 21,455 square feet and 126,322 square feet,
respectively. During the quarter ended March 31, 2003, the
Company purchased a 333,210 square foot regional mall and a
38% limited liability company interest in an LLC owning
approximately 27% of a 525,000 square foot office building
and sold a 67,560 square foot shopping center. For more
information on the Companys acquisitions and dispositions,
see Note 3 to the Condensed Consolidated Financial
Statements accompanying this Quarterly Report on Form 10-Q.

Comparability is also impacted due to the
presentation of two properties, Thousand Oaks Shopping Center
and Pahrump Valley Shopping Center for the three months ended
March 31, 2003, and the Northstar Shopping Center for the
three months ended March 31, 2002 as discontinued
operations.



| |                                                         
| | --------------------------------------------------------
| | Three Months Ended March 31, 2003 and
    March 31, 2002

As previously noted, comparability of the
financial information discussed below, including rental income,
rental expenses, mortgage interest, depreciation and
amortization, general and administrative expenses and other
items, is materially impacted by the property acquisitions and
dispositions during the year ended December 31, 2002 and
the quarter ended March 31, 2003.

The following discussion excludes the impact of
the reclassification of the previously mentioned shopping
centers as discontinued operations, except as noted.

Rental Income.Rental income consists of straight-line monthly base rent,
percentage rental income, if applicable, due pursuant to tenant
leases and property operating expenses recovered from tenants.
Rental income increased to $492,633 for the quarter ended
March 31, 2003 due to the University Heights and Gateway
Mall acquisitions.

Interest Income.Interest income consists of interest
earned from short-term money market investments and loans that
are held by the Company. Interest income decreased by $85,176 to
$24,687 for the quarter

21



---



##### Table of Contents



ended March 31, 2003 compared to $109,863
for the quarter ended March 31, 2003. This decrease was due
primarily to a decrease in cash and cash equivalents awaiting
investment during the quarter ended March 31, 2003.


Rental Expenses.Rental expenses consist of the costs
of owning and maintaining the Companys properties
including primarily property management fees, real estate taxes,
insurance, maintenance to the exterior of the buildings and the
parking lots. These expenses $164,133 for the quarter ended
March 31, 2003 were attributable to the University Heights
and Gateway Mall properties.

General and Administrative Expenses.General and administrative expenses
consist primarily of third party legal and accounting fees and
the cost of computerized information services and related office
expenses required to maintain the Companys accounting and
investor records. These expenses increased $5,338 to $120,254
for the quarter ended March 31, 2003 compared to $114,916
for the quarter ended March 31, 2002. Management
anticipates lower legal and accounting expenses during the
remainder of 2003 relative to 2002 due to the end of the
Companys offering, however, this reduction will be
partially offset by increased general and administrative
expenses related to expanded audit and SEC compliance
requirements mandated by the Sarbanes-Oxley Act.

Depreciation.Depreciation expense of $68,217 for
the quarter ended March 31, 2003 was attributable to the
University Heights and Gateway Mall properties.

Interest Expense.Interest expense consists of mortgage interest paid on the
Companys properties and the amortization of deferred
financing fees. Interest expense of $212,972 for the quarter
ended March 31, 2003 was due to the University Heights and
Gateway Mall properties.

Equity in Net Earnings of Unconsolidated Real
Estate.The Companys equity in
earnings of unconsolidated real estate increased $480,168 to
$558,161 for the quarter ended March 31, 2003 compared to
$77,993 for the quarter ended March 31, 2002. The majority
of the increase was due to increased equity in the net earnings
of City Center West A totaling approximately $307,000
relative to the prior period. In addition, the Companys
limited liability company membership interests in Pacific
Corporate Park and Congress Center contributed to the remaining
increase in 2003 compared to the quarter ended March 31,
2002.

Sales of Real Estate.During the quarter ended
March 31, 2003, the Company realized total net gain on the
sale of the Northstar Shopping Center of $23,617. There were no
sales of real estate operating properties or investments in
unconsolidated real estate during the quarter ended
March 31, 2002.

Income From Discontinued
Operations  Property Held For Sale.Income from discontinued operations
represents the net operating results of two properties held for
sale for the three months ended March 31, 2003 and three
properties for the three months ended March 31, 2002,
including interest expense and depreciation related to these
properties. Revenues decreased by $162,975 to $1,070,318 for the
quarter ended March 31, 2003 compared to $1,233,293 for the
quarter ended March 31, 2002 primarily as a result of the
sale of the Northstar Shopping Center during the quarter ended
March 31, 2003. The decrease in revenues was offset by a
decrease in depreciation expense and rental expenses resulting
from the sale of Northstar Shopping Center during the quarter
ended March 31, 2003.

Net Income.Net
income was $786,907 or $0.17 per share  basic and
diluted  for the quarter ended March 31, 2003
compared to a net income of $330,824 or $0.12 per
share  basic and diluted  for the quarter
ended March 31, 2002.



| |                                    
| | -----------------------------------
| | Liquidity and Capital
    Resources



| |                  
| | -----------------
| | Capital Resources

At March 31, 2003, the Company had $590,620
of cash and cash equivalents as compared to $6,129,468 of cash
and cash equivalents at December 31, 2002 to meet its
immediate short-term liquidity requirements. Management expects
that future short-term liquidity requirements will be financed
by net cash flow from operations, existing working capital and
proceeds from the sale of properties. Operating cash flows are
expected to increase as additional properties and investments in
unconsolidated real estate are added to the

22



---



##### Table of Contents



Companys portfolio. Cash and cash
equivalents decreased since December 31, 2002 principally
as a result of acquisition of real estate investments.


The Company anticipates that adequate cash will
be generated from operations to fund its operating and
administrative expenses, continuing debt service obligation and
the payment of dividends in the foreseeable future.

The Company operates as a real estate investment
trust for federal income tax purposes. As a REIT, the Company is
generally not subject to income taxes. To maintain its REIT
status, the Company is required to distribute annually as
dividends at least 90% of its REIT taxable income, as defined by
the Code, to its shareholders, among other requirements. The
Company expects to continue to use its cash flow from operating
activities to pay dividends to shareholders and to support the
operating activities of the Company. The Company maintains
amounts accumulated for the payment of dividends in
interest-bearing money market accounts.

Dividends paid for the quarter ended
March 31, 2003 were $964,387 compared to $577,666 for the
quarter ended March 31, 2002. The Company currently pays
cash dividends monthly at an annual rate of $0.825 per share.
For the quarter ended March 31, 2003 approximately 24% of
dividends declared and paid represented a return of capital for
federal income tax purposes. Dividends are determined by the
Companys Board of Directors and are dependent on a number
of factors, including the amount of funds available for
distribution, the Companys financial condition, any
decision by the Board of Directors to reinvest funds rather than
to distribute the funds, the Companys capital
expenditures, the annual distribution required to maintain REIT
status under the Internal Revenue Code of 1986, as amended, and
other factors the Board of Directors may deem relevant.



| |                                     
| | ------------------------------------
| | Cash Flows From Operating Activities

Net cash provided by operating activities was
$115,088 for the three months ended March 31, 2003 compared
to net cash provided by operating activities of $1,053,477 for
the three months ended March 31, 2002. The decrease in cash
provided by operating activities relative to the prior period
was primarily due to a $620,055 increase in other assets
resulting from tenant improvement and other lender-required
reserves totaling approximately $403,000 associated with the
Gateway Mall and University Heights properties. In addition, the
Companys purchase of several undivided tenant in common
interests in properties resulted in a net $145,780 increase in
the adjustment for the Companys equity in earnings of
unconsolidated real estate to $223,773 for the quarter ended
March 31, 2003 from $77,993 for the quarter ended
March 31, 2002. Partially offsetting these reductions in
cash provided by operating activities was the $456,083 increase
in the Companys net income to $786,907 for the quarter
ended March 31, 2003 from $330,824 for the quarter ended
March 31, 2002 resulting primarily from the increased size
and performance of its real estate portfolio during the quarter
ended March 31, 2003.

Management expects cash flows from operating
activities to increase due to the acquisitions of Gateway Mall
and the limited liability company membership interest in
Congress Center completed during the quarter ended
March 31, 2003 and the acquisition of additional properties
and investments in unconsolidated real estate during the
remainder of the year as the Company strategically redeploys its
capital. Management is currently considering other potential
opportunities to reinvest proceeds from real estate
dispositions. The decision to acquire one or more properties or
investments in unconsolidated real estate will generally depend
upon (i) receipt of a satisfactory environmental survey and
property appraisal, (ii) an absence of any material adverse
change relating to the property, its tenants, or local economic
conditions, and (iii) adequate financing. There is no
assurance that any of these conditions will be satisfied or, if
satisfied, that the Company will purchase any additional
properties or make any further investments in unconsolidated
real estate.



| |                                            
| | -------------------------------------------
| | Cash Flows Used In Investing
    Activities

Net cash used in investing activities amounted to
$6,738,025 for the three months ended March 31, 2003
compared to $10,064,749 for the three months ended
March 31, 2002. The Company invested $13,936,857 in real
estate investments ($5,025,000 for investments in unconsolidated
real estate operating properties and

23



---



##### Table of Contents



$8,911,857 for the purchase of real estate
operating properties) during the quarter ended March 31,
2003 as compared to $10,539,131 in real estate investments
consisting solely of investments in unconsolidated real estate
operating properties during the quarter ended March 31,
2002. During the quarter ended March 31, 2003, the
Companys application of its $3,000,000 real estate deposit
on Congress Center partially offset net cash used in investing
activities. There was no corresponding offset of similar
magnitude for the quarter ended March 31, 2002.


At March 31, 2003, the Company does not have
any material planned capital expenditures resulting from any
known demand based on existing trends. However, management may
conclude that expenditures to improve properties are necessary
and/or desirable.



| |                                     
| | ------------------------------------
| | Cash Flows From Financing Activities

Cash provided by financing activities amounted to
$1,084,089 for the three months ended March 31, 2003
compared to $5,986,573 for the three months ended March 31,
2002. The primary reason for the decline was the end of the
Companys Offering on May 31, 2002. In comparison,
during the quarter ended March 31, 2002, the Company raised
$6,329,532 through its Offering (net of offering costs). Cash
provided by financing activities for the quarter ended
March 31, 2003 increased by $5,000,000 as a result of
borrowings related to the acquisition of Gateway Mall compared
to $298,707 borrowed under notes payable for the quarter ended
March 31, 2002. The major offsetting use of cash in
connection with financing activities included $2,951,524 in
principal payments on notes payable, primarily related to the
repayment of the mortgage loan on Northstar Shopping Center upon
the sale of the property. In addition, the Company paid $964,387
in cash dividends to shareholders during the three months ended
March 31, 2003 compared to $577,666 for the three months
ended March 31, 2002. The increase in dividends paid was
the result of additional shares issued after the quarter ended
March 31, 2002.

The Company intends to acquire additional
properties and make additional investments in unconsolidated
real estate and may seek to fund these acquisitions through
proceeds received from a combination of subsequent equity
offerings, debt financings or asset dispositions.

Management believes that, to the extent, if any,
that the Company is not successful in generating cash flow from
operations sufficient to meet its cash flow requirements, the
Company can secure a line of credit to finance any cash flow
deficits. Additionally, the Companys current cash position
of $590,620 at March 31, 2003 could be used to compensate
for cash flow deficits, if any.



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

On April 2, 2003, the Company entered into a
letter of intent with an unaffiliated third-party to sell
Thousand Oaks Shopping Center for $15,880,000. The Company
expects to enter into an agreement to sell the property in the
second quarter of 2003.

On April 22, 2003, the Company entered into
a letter of intent with an unaffiliated third-party to sell
Pahrump Valley Shopping Center for $19,000,000. The Company
expects to enter into an agreement to sell the property in the
second quarter of 2003.



| |                      
| | ---------------------
| | Funds From Operations

Due to the unique operating characteristics of
certain real estate companies, the National Association of Real
Estate Investment Trusts (NAREIT), an industry trade
group, has promulgated a standard known as funds from operations
(FFO) which it believes more accurately reflects the
operating performance of a REIT. As defined by NAREIT, FFO
equals net income or loss determined in accordance with
accounting principles generally accepted in the United States
(GAAP) less extraordinary, unusual and non-recurring
items, excluding gains/losses from debt restructuring and sales
of property, plus depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures
in which the REIT holds an interest.

The Company computes FFO in accordance with the
April 2002 White Paper on Funds From Operations, and
National Policy Bulletin published by NAREIT. The
Company generally considers FFO

24



---



##### Table of Contents



to be a relevant and meaningful supplemental
measure of the performance of an equity REIT because it is
predicated on a cash flow analysis, as contrasted with net
income/loss determined on a GAAP basis that gives effect to
non-cash items such as depreciation. However, FFO is not
intended to be an alternative to net income or loss as an
indicator of the Companys performance, nor to cash flow
provided by/used in operating activities (based on GAAP) as a
measure of liquidity. In addition, FFO is not necessarily
indicative of cash available to pay distributions or finance
other operating requirements. Since the aforementioned NAREIT
publications only provide general guidelines for computing FFO,
the computation thereof may vary from one REIT to another
because capitalization and expense accounting policies may
differ from entity to entity.


As stated in its April 5, 2002 National
Policy Bulletin (the Bulletin), NAREIT believes that
since SFAS No. 144 does not change bottom-line net income,
it should not change bottom-line FFO. Thus, the
Bulletin states that relevant financial items from
income-producing properties whether currently in use, held for
sale, sold or otherwise transferred should be included in FFO
for both current and prior periods.

The Companys FFO reporting complies with
NAREITs policy described in the preceding paragraph.

As noted in Funds From Operations
above, management considers FFO to be one measure of the
performance of a REIT. FFO were $953,396 for the quarter ended
March 31, 2003 compared to FFO of $541,354 for the quarter
ended March 31, 2002. The Companys FFO were
calculated according to the table below:

|                                                                   |                       |                    |           |         |  |   |           |         | 
|------------------------------------------------------------------ | --------------------- | ------------------ | --------- | ------- |  | - | --------- | ------- | 
|                                                                   |                       |                   
|                                                                   |                       | Three Months Ended
|                                                                   |                       | March 31,         
|                                                                   |                       |                   
|                                                                   |                       | 2003               |           | 2002   
|                                                                   |                       |                    |           |        
|Net income                                                         |                       | $                  | 786,907   |         |  | $ | 330,824   |        
|Add:                                                               |                       |                    |           |         |  |   |           |        
|                                                                   | Depreciation          |                    |           | 166,489 |  |   |           | 210,530 | 
|                                                                   |                       |                    |           |         |  |   |           |        
|                                                                   | Funds from operations |                    | $         | 953,396 |  |   | $         | 541,354 | 
|                                                                   |                       |                    |           |         |  |   |           |        
|Weighted average common shares
    outstanding  basic and diluted |                       |                    | 4,696,300 |         |  |   | 2,822,185 |        
|                                                                   |                       |                    |           |         |  |   |           |        

25



---



##### Table of Contents








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

The Company is exposed to interest rate changes
primarily as a result of its long-term debt used to maintain
liquidity, fund capital expenditures, and finance expansion of
the Companys operations and real estate portfolio. In
managing the Companys interest rate risk,
managements objectives are to limit the impact of interest
rate changes on operations and cash flows, and to lower its
overall borrowing costs. To achieve these objectives, the
Company borrows primarily at interest rates with the lowest
margins available and, in some cases, with the ability to
convert variable interest rates to fixed rates. In the future,
the Company may enter into derivative financial instruments such
as interest rate swaps, caps and treasury locks in order to
mitigate its interest rate risk on a given financial instrument.
The Company does not enter into derivative or interest rate
transactions for speculative purposes.

The table below presents the principal amounts
and weighted average interest rates of fixed and variable
interest rate debt by year of scheduled maturity to evaluate the
expected cash flows and sensitivity to interest rate changes.

|                                       |  |                      |         |      |  |      |           |      |  |      |         |            |  |   |           |   |  |   |         |   |  |   |            |  
|-------------------------------------- |  | -------------------- | ------- | ---- |  | ---- | --------- | ---- |  | ---- | ------- | ---------- |  | - | --------- | - |  | - | ------- | - |  | - | ---------- | -
|                                       |  |                      |         |     
|                                       |  | As of March 31, 2003 |         |     
|                                       |  |                      |         |     
|                                       |  | 2003                 |         | 2004 |  | 2005 |           | 2006 |  | 2007 |         | Thereafter
|                                       |  |                      |         |      |  |      |           |      |  |      |         |           
|Fixed rate debt                        |  | $                    | 178,442 |      |  | $    | 257,980   |      |  | $    | 277,596 |            |  | $ | 298,702   |   |  | $ | 321,415 |   |  | $ | 10,675,591 |  
|Average interest rate on maturing debt |  |                      | 7.25    | %    |  |      | 7.25      | %    |  |      | 7.25    | %          |  |   | 7.25      | % |  |   | 7.25    | % |  |   | 7.25       | %
|Variable rate debt                     |  | $                    | 138,142 |      |  | $    | 8,942,112 |      |  | $    | 200,270 |            |  | $ | 4,678,517 |   |  | $ | 72,731  |   |  | $ | 4,072,071  |  
|Average interest rate on maturing debt |  |                      | 4.13    | %    |  |      | 7.42      | %    |  |      | 4.15    | %          |  |   | 3.63      | % |  |   | 5.25    | % |  |   | 5.25       | %

The estimated fair value of the Companys
variable-rate debt approximates its March 31, 2003 carrying
amount. Variable-rate debt secured by the Companys
properties bears interest at approximately 5.89% as of
March 31, 2003.






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

Senior management, including the Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness
of the Companys disclosure controls and procedures as of
March 31, 2003. Based on this evaluation process, the Chief
Executive Officer and Chief Financial Officer have concluded
that the Companys disclosure controls and procedures are
effective. Since that evaluation process was completed, there
have been no significant changes in internal controls or in
other factors that could significantly affect these controls.




Part II  Other
Information






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

None.






|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

(a)     None.

(b)     None.

(c)     None.

(d)     N/ A






|        |                                    
|------- | -----------------------------------
|Item 3. | Defaults Upon Senior
    Securities

None.

26



---



##### Table of Contents








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

None.






|        |                  
|------- | -----------------
|Item 5. | Other Information

None.






|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) The following documents are filed as
part of this report:

|         |    |             |  |                                                                                                                                                                                                                                                                                                                
|-------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item No. |    | Description
|         |    |            
|         | 3  | .1          |  | Articles of Incorporation of the Company
    (included as Exhibit 3.1 to the Companys Registration
    Statement on Form S-11 filed on April 28, 1999 (File
    No. 333-77229) and incorporated herein by this reference)                                                                                     
|         | 3  | .2          |  | Form of Amended and Restated Articles of
    Incorporation of the Company (included as Exhibit 3.2 to
    Amendment No. 3 to the Companys Registration
    Statement on Form S-11 filed on November 22, 1999
    (File No. 333-77229) and incorporated herein by this
    reference)                          
|         | 3  | .3          |  | Form of By-Laws of the Company (included as
    Exhibit 3.3 to the Companys Registration Statement on
    Form S-11 filed on April 28, 1999 (File
    No. 333-77229) and incorporated herein by this reference)                                                                                               
|         | 3  | .4          |  | Form of Amended By-Laws of the Company (included
    as Exhibit 3.4 to Post-Effective Amendment No. 2 to
    the Companys Registration Statement on Form S-11
    filed on July 17, 2001 (File No. 333-77229) and
    incorporated herein by reference.)                                                      
|         | 4  | .1          |  | Form of Share Certificate (included as
    Exhibit 4.1 to Amendment No. 4 to the Companys
    Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by this reference)                                                                           
|         | 10 | .1          |  | Form of Agreement of Limited Partnership of
    T REIT, L.P. (included as Exhibit 10.1 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-11 filed on October 13, 1999 (File
    No. 333-77229) and incorporated herein by this reference)                                           
|         | 10 | .2          |  | Dividend Reinvestment Program (included as
    Exhibit C to the Companys Prospectus filed as part of
    the Companys Registration Statement on Form S-11 on
    April 28, 1999 (File No. 333-77229) and incorporated
    herein by this reference)                                                          
|         | 10 | .3          |  | Independent Director Stock Option Plan (included
    as Exhibit 10.3 to Amendment No. 4 to the
    Companys Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by this reference)                                                             
|         | 10 | .4          |  | Employee and Officer Stock Option Plan (included
    as Exhibit 10.4 to Amendment No. 4 to the
    Companys Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by this reference)                                                             
|         | 10 | .5          |  | Advisory Agreement between the Company and the
    Advisor (included as Exhibit 10.5 to Amendment No. 2
    to the Companys Registration Statement on Form S-11
    filed on October 13, 1999 (File No. 333-77229) and
    incorporated herein by this reference)                                             
|         | 10 | .6          |  | Purchase and Sale Agreement, dated June 5,
    2000, by and between Robert C. Parker and Carolyn
    De La Fuente Parker and Triple Net Properties, LLC
    (included as Exhibit 10.1 to Form 10-Q filed by the
    Registrant with the SEC on November 14, 2000 and
    incorporated herein by this reference)
|         | 10 | .7          |  | Purchase and Sale Agreement, dated
    October 25, 2000, by and between CMF Capital Company
    LLC and TREIT, L.P. (included as Exhibit 10.1 to
    Form 8-K filed by the Registrant with the SEC on
    November 13, 2000 and incorporated herein by this reference)                                         
|         | 10 | .8          |  | Purchase and Sale Agreement, dated
    October 26, 2000, by and between CMF Capital Company
    LLC and TREIT L.P. (included as exhibit 10.1 to
    Form 8-K filed by the Registrant with the SEC on
    December 20, 2000 and incorporated herein by this reference)                                          

27



---



##### Table of Contents



|         |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item No. |    | Description
|         |    |            
|         | 10 | .9          |  | Purchase and Sale Agreement, dated
    August 24, 2000, as amended, by and between Drummer Boy
    Holdings, LLC and Triple Net Properties, LLC (included as
    Exhibit 10.9 to Post Effective Amendment No. 2 to the
    Companys Registration Statement on Form S-11 filed on
    July 17, 2001 (File No. 333-772229) and incorporated
    herein by this reference)                                 
|         | 10 | .10         |  | First Amendment to Advisory Agreement between the
    Company and the Advisor (included as Exhibit 10.10 to
    Post-Effective Amendment No. 1 to the Companys
    Registration Statement filed on Form S-11 on July 17,
    2001 (File No. 333-772229) and incorporated herein by this
    reference)                                                                                                  
|         | 10 | .11         |  | Purchase and Sale Agreement, dated April 16,
    2001, by and between Kilroy Realty, L.P. and Triple Net
    Properties LLC (included as Exhibit 10.11 to Post Effective
    Amendment No. 3 to the Companys Registration
    Statement on Form S-11 filed on October 19, 2001 (File
    No. 333-772229) and incorporated herein by reference)                                                          
|         | 10 | .12         |  | Purchase and Sale Agreement dated
    October 30, 2001, by and between Triple Net Properties, LLC
    and City Center West Development, LLC (included as
    Exhibit 10.1 to Form 8-K/ A filed by the Company on
    May 14, 2002 and incorporated herein by reference)                                                                                                                                  
|         | 10 | .13         |  | Purchase and Sale Agreement dated
    November 9, 2001, by and between Triple Net Properties, LLC
    and United States Fidelity and Guaranty Company (included as
    Exhibit 10.1 to Form 8-K/A filed by the Company on
    May 14, 2002 and incorporated herein by reference)                                                                                                                         
|         | 10 | .14         |  | Amended and Restated Real Estate Purchase and
    Sale Agreement dated as of July 24, 2002 by and between
    Transwestern Heights, L.P. as seller and Triple Net Properties,
    LLC, as assigned to TREIT  University Heights, LP, a
    Texas limited partnership (included as Exhibit 10.14 to the
    Form 8-K filed by the Company on September 5, 2002 and
    incorporated herein by reference).
|         | 10 | .15         |  | Purchase Agreement dated October 10, 2002
    between Congress Center, LLC and Triple Net Properties, LLC as
    assigned to NNN Congress Center, LLC, GREIT  Congress
    Center, LLC, and WREIT  Congress Center, LLC
    (included as Exhibit 10.14 to the Form 8-K filed by
    the Company on January 24, 2003 and incorporated herein by
    reference).                                         
|         | 10 | .16         |  | Operating Agreement of NNN Congress Center
    Member, LLC dated January 1, 2003 (included as
    Exhibit 10.15 to the Form 8-K filed by the Company on
    January 24, 2003 and incorporated herein by reference).                                                                                                                                                                                      
|         | 99 | .1          |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                           
|         | 99 | .2          |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                           

(b) The following 8-K Reports were
filed during the quarter ended March 31, 2003:

On January 24, 2003, the Company filed a
Current Report on Form 8-K dated January 9, 2003
describing the Companys purchase of an interest in the
Congress Center building in Chicago, Illinois and the proposed
acquisition of Gateway Mall in Bismarck, North Dakota. No
financial statements were filed as part of this report.

On February 13, 2003, the Company filed a
Current Report on Form 8-K dated January 29, 2003
describing the Companys purchase of the Gateway Mall in
Bismarck, North Dakota. No financial statements were filed as
part of this report.

28



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



| |             
| | ------------
| | T REIT, INC.
| |             
| | (Registrant)



| |     |                        
| | --- | -----------------------
| | By: | /s/ ANTHONY W. THOMPSON

| |                        
| | -----------------------
| |                        
| | Anthony W. Thompson    
| | Chief Executive Officer



| |     |                      
| | --- | ---------------------
| | By: | /s/ WILLIAM C. DANIEL

| |                        
| | -----------------------
| |                        
| | William C. Daniel      
| | Chief Financial Officer

Date: May 15, 2003

29



---



##### Table of Contents



CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Anthony W. Thompson, certify that:

1.     I have reviewed
this quarterly report on Form 10-Q of T REIT, Inc.;

2.     Based on my
knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3.     Based on my
knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act rules 13a-14 and
15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                     
|
| | c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                               

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of the
registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weakness in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                  

6.     The
registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.



| |                        
| | -----------------------
| | /s/ ANTHONY W. THOMPSON
| |                        
| | Anthony W. Thompson    
| | Chief Executive Officer

Date: May 15, 2003

30



---



##### Table of Contents



CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, William C. Daniel, certify that:

1.     I have reviewed
this quarterly report on Form 10-Q of T REIT, Inc.;

2.     Based on my
knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3.     Based on my
knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act rules 13a-14 and
15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                     
|
| | c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                               

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of the
registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weakness in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                  

6.     The
registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.



| |                        
| | -----------------------
| | /s/ WILLIAM C. DANIEL  
| |                        
| | William C. Daniel      
| | Chief Financial Officer

Date: May 15, 2003

31



---



##### Table of Contents



EXHIBIT INDEX

|         |       |             |  |                                                                                                                                                                                                                                                                                                                                                                         
|-------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item No. |       | Description
|         |       |            
|         | 3.1   |             |  | Articles of Incorporation of the Company
    (included as Exhibit 3.1 to the Companys Registration
    Statement on Form S-11 filed on April 28, 1999 (File
    No. 333-77229) and incorporated herein by this reference)                                                                                                                                              
|         | 3.2   |             |  | Form of Amended and Restated Articles of
    Incorporation of the Company (included as Exhibit 3.2 to
    Amendment No. 3 to the Companys Registration
    Statement on Form S-11 filed on November 22, 1999
    (File No. 333-77229) and incorporated herein by this
    reference)                                                                                   
|         | 3.3   |             |  | Form of By-Laws of the Company (included as
    Exhibit 3.3 to the Companys Registration Statement on
    Form S-11 filed on April 28, 1999 (File
    No. 333-77229) and incorporated herein by this reference)                                                                                                                                                        
|         | 3.4   |             |  | Form of Amended By-Laws of the Company (included
    as Exhibit 3.4 to Post-Effective Amendment No. 2 to
    the Companys Registration Statement on Form S-11
    filed on July 17, 2001 (File No. 333-77229) and
    incorporated herein by reference.)                                                                                                               
|         | 4.1   |             |  | Form of Share Certificate (included as
    Exhibit 4.1 to Amendment No. 4 to the Companys
    Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by this reference)                                                                                                                                    
|         | 10.1  |             |  | Form of Agreement of Limited Partnership of
    T REIT, L.P. (included as Exhibit 10.1 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-11 filed on October 13, 1999 (File
    No. 333-77229) and incorporated herein by this reference)                                                                                                    
|         | 10.2  |             |  | Dividend Reinvestment Program (included as
    Exhibit C to the Companys Prospectus filed as part of
    the Companys Registration Statement on Form S-11 on
    April 28, 1999 (File No. 333-77229) and incorporated
    herein by this reference)                                                                                                                   
|         | 10.3  |             |  | Independent Director Stock Option Plan (included
    as Exhibit 10.3 to Amendment No. 4 to the
    Companys Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by this reference)                                                                                                                      
|         | 10.4  |             |  | Employee and Officer Stock Option Plan (included
    as Exhibit 10.4 to Amendment No. 4 to the
    Companys Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by this reference)                                                                                                                      
|         | 10.5  |             |  | Advisory Agreement between the Company and the
    Advisor (included as Exhibit 10.5 to Amendment No. 2
    to the Companys Registration Statement on Form S-11
    filed on October 13, 1999 (File No. 333-77229) and
    incorporated herein by this reference)                                                                                                      
|         | 10.6  |             |  | Purchase and Sale Agreement, dated June 5,
    2000, by and between Robert C. Parker and Carolyn De La
    Fuente Parker and Triple Net Properties, LLC (included as
    Exhibit 10.1 to Form 10-Q filed by the Registrant with
    the SEC on November 14, 2000 and incorporated herein by
    this reference)                                                         
|         | 10.7  |             |  | Purchase and Sale Agreement, dated
    October 25, 2000, by and between CMF Capital Company LLC
    and TREIT, L.P. (included as Exhibit 10.1 to Form 8-K
    filed by the Registrant with the SEC on November 13, 2000
    and incorporated herein by this reference)                                                                                                  
|         | 10.8  |             |  | Purchase and Sale Agreement, dated
    October 26, 2000, by and between CMF Capital Company LLC
    and TREIT L.P. (included as exhibit 10.1 to Form 8-K
    filed by the Registrant with the SEC on December 20, 2000
    and incorporated herein by this reference)                                                                                                   
|         | 10.9  |             |  | Purchase and Sale Agreement, dated
    August 24, 2000, as amended, by and between Drummer Boy
    Holdings, LLC and Triple Net Properties, LLC (included as
    Exhibit 10.9 to Post Effective Amendment No. 2 to the
    Companys Registration Statement on Form S-11 filed on
    July 17, 2001 (File No. 333-772229) and incorporated
    herein by this reference)
|         | 10.10 |             |  | First Amendment to Advisory Agreement between the
    Company and the Advisor (included as Exhibit 10.10 to
    Post-Effective Amendment No. 1 to the Companys
    Registration Statement filed on Form S-11 on July 17,
    2001 (File No. 333-772229) and incorporated herein by this
    reference)                                                                 
|         | 10.11 |             |  | Purchase and Sale Agreement, dated April 16,
    2001, by and between Kilroy Realty, L.P. and Triple Net
    Properties LLC (included as Exhibit 10.11 to Post Effective
    Amendment No. 3 to the Companys Registration
    Statement no Form S-11 filed on October 19, 2001 (File
    No. 333-772229) and incorporated herein by reference)                         



---



##### Table of Contents



|         |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item No. |       | Description
|         |       |            
|         | 10.12 |             |  | Purchase and Sale Agreement dated
    October 30, 2001, by and between Triple Net Properties, LLC
    and City Center West Development, LLC (included as
    Exhibit 10.1 to Form 8-K/ A filed by the Company on
    May 14, 2002 and incorporated herein by reference)                                                                                                                                  
|         | 10.13 |             |  | Purchase and Sale Agreement dated
    November 9, 2001, by and between Triple Net Properties, LLC
    and United States Fidelity and Guaranty Company (included as
    Exhibit 10.1 to Form 8-K/ A filed by the Company on
    May 14, 2002 and incorporated herein by reference)                                                                                                                        
|         | 10.14 |             |  | Amended and Restated Real Estate Purchase and
    Sale Agreement dated as of July 24, 2002 by and between
    Transwestern Heights, L.P. as seller and Triple Net Properties,
    LLC, as assigned to TREIT  University Heights, LP, a
    Texas limited partnership (included as Exhibit 10.14 to the
    Form 8-K filed by the Company on September 5, 2002 and
    incorporated herein by reference).
|         | 10.15 |             |  | Purchase Agreement dated October 10, 2002
    between Congress Center, LLC and Triple Net Properties, LLC as
    assigned to NNN Congress Center, LLC, GREIT  Congress
    Center, LLC, and WREIT  Congress Center, LLC
    (included as Exhibit 10.14 to the Form 8-K filed by
    the Company on January 24, 2003 and incorporated herein by
    reference).                                         
|         | 10.16 |             |  | Operating Agreement of NNN Congress Center
    Member, LLC dated January 1, 2003 (included as
    Exhibit 10.15 to the Form 8-K filed by the Company on
    January 24, 2003 and incorporated herein by reference).                                                                                                                                                                                      
|         | 99.1  |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                           
|         | 99.2  |             |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002